Our esteemed Treasury Spokesperson Daisy Cooper recently announced plans to replace the Treasury with a Department of Growth tasked with promoting economic growth and ending the cost-of-living crisis and a Department of Expenditure. The very first event of Spring 2026 Conference in York is the Consultative Session for the Thriving Economy Policy Working Group, doubtless where many members plan to contribute other inspired and radical proposals to boost our economy.
I write to make one such proposal: the establishment of a Bank of the United Kingdom with a complete monopoly on banknote issuance, principally by rescinding the issuing power of the six authorised banks.
Some of you, dear readers, may question the point of this proposal in light of digital payments. With 61% of Britons making cash payments at least once a week, there is still a place for physical payments in our society, especially for use by vulnerable people and in the eventuality of digital system failures.
How banknotes are issued in the UK makes little to no sense. Bank of England notes are not accepted in Scotland or Northern Ireland, and Scottish and Northern Irish notes are generally not accepted in England or Wales by virtue of being promissory notes. Bank of England notes are the only ones that may be traded internationally, included via bureaux de change. This system of barriers helps contribute to the weighting of our economy towards London.
In response to the Great Recession, the 2009 Banking Act required the authorised banks to hold in reserve the same value of Bank of England notes or gold as banknotes they have in circulation, amounting to over a billion. In effect, while a Bank of England £5 note cannot be used in Scotland or Northern Ireland, an authorised bank would need to possess one to ensure the value of every one of its own £5 notes. This leads us to the oddities of £1,000,000 (‘Giant’) and £100,000,000 (‘Titan’) notes which cannot be spent as even readers of Mark Twain may attest.
It should be reiterated that in the mainland UK, issuing powers not held by the Bank of England a privilege held by six ‘authorised’ private banks. While four of these banks are British, one is Irish and one is Danish. Given concerns over how much of our critical infrastructure is owned by nations such as China, we should consider ourselves lucky that some of our currency is being managed by companies from nations friendly to the UK.
Under the 2009 Banking Act, it is possible for a bank to lose its issuing powers, as had occurred with the First Trust Bank – the former seventh authorised bank – in 2020. As these notes are not legal tender, this puts the people of Scotland and Northern Ireland in a perilous position where they may find themselves with no form of currency. This jeopardy was a major factor during the 2014 Scottish independence referendum.
The Bank of England gained a monopoly on banknote issuance in 1844 after private banks in England and Wales were denied this power under that year’s Bank Charter Act. Continued issuance by private banks in Scotland can be attributed to a letter campaign by Sir Walter Scott under the pseudonym Malachi Malagrowther, for which he appears on all Bank of Scotland notes. Does this sound like a firm basis for economic policy?
In nations or currency unions with great, even discontiguous territorial extents, such as the United States and the Eurozone, coins and notes are the same from one end to the other. Within the UK, we have the same system of coinage without much controversy. Given these facts, why not have a single system of banknotes?
As Ms Cooper has proposed that the Department of Growth be situated in Birmingham and as the Bank of England has offices in Leeds, it would not be beyond the realms of possibility for offices of a new Bank of the UK to be situated in Edinburgh, Cardiff and Belfast. Naturally, in our support for a more equitable, less London-centric economy, we should support the banking sectors outside of the Square Mile.
* Samuel James Jackson is the Chair of the Policy Committee of the Yorkshire and the Humber Liberal Democrats and had served as the Liberal Democratic candidate in Halifax during the 2024 general election.
Follow @libdemvoice.org on Bluesky
Like us on Facebook
Subscribe to our feed
Sign-up for our daily email digest
Northern Ireland debates the future of its railways in 1957
Church Green video
Thinking of standing for election or re-election next year? Helpful questions to consider
Endometriosis and acetylation
Jeff
Nonconformistradical
John Peters
David Raw
Henry
15 Comments
I could be wrong, but is the reason that printing of Scottish banknotes in Scotland was allowed to continue not due to Article 16 of the Treaty of Union (1706) which specified the continuation of a Mint in Scotland?
It is not good politics to propose ignoring a commitment made in an international treaty.
I think there should be a Bank of the United Kingdom..
It is wrong that the central bank of the UK is named the Bank of England.
England is a part of the UK, not another name for the UK.
The UK central bank should have a name involving all four UK nations.
Change the name of the Bank of England to the Bank of the United Kingdom.
But I still think there ahould be Scottish, Welsh, and English notes. Even Cornish notes would be cool. But all using the UK pound.
There’s no particular reason, other than the normal checks to ensure financial solvency, why any bank shouldn’t be able to issue their own notes. Neither is there a reason why any bank needs to hold BoE reserves to the value of any issued notes. They are effectively creating their own money, anyway, except in digital form, whenever they process a transaction electronically.
It doesn’t really matter whether the bank issues IOUs in paper form of digitally – providing they are good for them.
Incidentally I’ve never had a problem spending BoE notes in Ireland, Wales or Scotland. I don’t live too far from the Scottish border and Scottish notes are accepted for the most part locally. There’s no real problem with them being Scottish. It’s more that many people, south of the border, are unfamiliar with them and are more concerned with the possibility they may not be genuine.
This seems incorrect in almost every element.
1) “Bank of England notes are not accepted in Scotland or Northern Ireland,” I dont know about NI but i have ceetainly used Bank of England Notes in scotland on numerous occasions
2) “Scottish and Northern Irish notes are generally not accepted in England” I have similary used Scottish notes in england
3) “This system of barriers helps contribute to the weighting of our economy towards London.” No it doesnt – it has no effect whatsover on our economy being London centrc
4) “n response to the Great Recession, the 2009 Banking Act required the authorised banks to hold in reserve the same value of Bank of England notes or gold as banknotes they have in circulation, amounting to over a billion.” why do you think this is a problem
5) “As these notes are not legal tender, this puts the people of Scotland and Northern Ireland in a perilous position where they may find themselves with no form of currency. This jeopardy was a major factor during the 2014 Scottish independence referendum.” No it wasnt . thats a complete misundertanding of the issue about what cureency would use
6) Naturally, in our support for a more equitable, less London-centric economy, we should support the banking sectors outside of the Square Mile.
It seems a curious argument for taking away powers of banks outside London that we wish to make the UK mor equitable .
“ replace the Treasury with a Department of Growth tasked with promoting economic growth ‘
An obviously daft idea as any one who has been in business would attest to: let’s replace Finance by making it part of Sales, what could possibly go wrong…
If you want a really radical idea then why not make the Euro legal tender in the UK as an additional currency?
Might we have detailed definition of “Growth” inluding its purposes and consequences, positive to negative, for regular citizens and their children?
Simon McGrath got in before me about acceptance of Bank of England notes in Scotland and Northern Ireland. I think you would have to find an unusually bloodyminded trader in either who would refuse to accept them in payment, whatever the legal small print. When I worked for the Beeb, BBC canteens everywhere would accept notes from all three jurisdictions and a lot of other major retailers did the same. In Northern Ireland, there are some ATMs that dispense Bank of England notes for the convenience of travellers going to the mainland.
I agree with Simon and Ian that the economic substance of Samuel’s argument is incorrect.
But, politically, he does have a point. As Joey says the central bank of the UK should not be called the Bank of England.
Lib Dems might want to suggest a name change to promote the concept of National Unity.
Aa someone who has lived in Scotland for the last twenty years but used to live near Halifax, I agree with Simon McGrath – ‘incorrect in almost every detail’.
And. has Mr Jackson even considered that closing down the three Scottish printing firms that produce the Scottish notes is a gift to the SNP before the May elections ?
The term “legal tender” is somewhat misunderstood: it means those tokens (such as coins, notes and postage stamps) that a creditor is obliged to accept in settlement of a (pre-existing) debt. It therefore is not directly relevant to paying for goods in a shop, because the shopkeeper is legally entitled to refuse a sale. Many merchants don’t accept £50 notes (even though they are “legal tender”) because of the high rate of forgery.
Alax MacFie is correct in that “legal tender” has a fairly technical definition which has little effect on the use of banknotes in various parts of the UK. It is an odd legal quirk that Scottish banknotes are not legal tender – not even in Scotland. The only banknotes that have ever been legal tender in Scotland are pound notes and ten shilling notes issued by the Bank of England. This arose because originally only Bank of England notes with a value of £5 or more were legal tender in England and Wales. Just after the second world war legislation was passed to extend legal tender status to £1 and 10s notes, but nobody spotted at the time that this new legislation did not exclude Scotland.
At one time many banks throughout the UK issued their own banknotes. The practice started to die out as people travelled more and found that local banknotes were increasingly not accepted and their own customers resisted them. I believe that the last English bank to issue its own notes was somewhere in the South-West which stopped doing so in the 1920s. Scottish and Northern Irish banks did not face the same resistance.
Bank of England notes (and coins) also circulated in the Republic of Ireland up until the ROI joined the EU’s Exchange Rate Mechanism.
@Peter Martin. It was at one time Lib Dem policy to rename the Bank of England just as you suggest. For all I know it may still be party policy, albeit one that the party has forgotten about.
@ Alex,
The term legal tender, at least in terms of notes and coins, doesn’t have much, if any, relevance at all any longer. We all run up bills for our gas and electricity. We can’t, though, pay in cash any longer. We’ll still likely end up being disconnected even if we try. We can’t pay a tax bill with HMRC in cash.
This all seems a bit odd when the pound is best understood as a tax voucher. We all have to pay our taxes in pounds and this is what gives them a value now that they aren’t backed by gold or any precious metal.
The government wants digital pounds and not paper ones though.
Simon McGrath in the comments is quite right. The article is staggeringly ill-informed and has several red herrings. It really should not have got past the editorial team. Up here in Scotland BoE notes are accepted and in 23 years living here I have never known them to be refused – and when English traders have rarely but occasionally refused Scottish notes I offered it was either from ignorance about what they were or because these notes (until recently) were considered easier to forge. There is a good case for the Bank of the UK, but this article does not make it. And any such institution ought to have one of the home nations allocated to each of the £5 to £50 notes in some symbolic fashion.
Just one final comment to emphasise that Samuel (sorry Samuel 🙂 ) hasn’t quite got it right:
We already do have a “singular pound sterling”. 95% or so of all transactions are conducted digitally. When we pay a bill using our phones, a plastic card, or a Bank transfer we are using the IOUs of our bank which are referenced against the pound IOUs of the BoE.
This is the one and only pound sterling. Even the so-called local currencies like the now defunct Bristol Pound were only IOUs that were guaranteed against the BoE pound.
They were meant to encourage local spending but they were never going to be able to do that.
https://en.wikipedia.org/wiki/Bristol_pound