Currency and legal tender

All Scottish banks have the right to print their own notes. Three choose to do so: The Bank of Scotland (founded 1695), The Royal Bank of Scotland (founded 1727) and the Clydesdale Bank (owned by National Australia Bank). Only the Royal Bank prints pound notes. All the banks print 5,10,20 and 100 notes. Only the Bank of Scotland and Clydesdale Bank print 50 pound notes.

Scottish bank notes are not legal tender in Scotland. English bank notes of denomination less than 5UKP were legal tender in Scotland under Currency and Bank Notes Act 1954. Now, with the removal of BoE 1UKP notes, only coins constitute legal tender in Scotland. English bank notes are only legal tender in England, Wales, The Channel Islands and the Isle of Man. In Scotland, 1 pound coins are legal tender to any amount, 20ps and 50ps are legal tender up to 10 pounds; 10p and 5ps to 5 pounds and 2p and 1p coins are legal tender to 20p (separately or in combination). 2 pounds coins and (if you can get hold of one) 5 pound coins are also legal tender to unlimited amounts, as are gold coins of the realm at face value (in Scotland at least).

Northern Irish notes are not legal tender anywhere, a situation similar to Scottish notes. Whether Scottish notes are legal tender or not does not change or alter their inherent value but it dictates their legal function. Credit cards, cheques and debit cards are not legal tender either but it doesn't stop them being used as payment. Only a minuscule percentage of Scottish and British trading is carried out using legal tender. Just because something is not legal tender certainly doesn't imply it's illegal to use.

The lack of a true legal tender in Scotland does not cause a problem for Scots Law which is flexible enough to get round this apparent legal nonsense, as was demonstrated some time ago when one local authority tried to refuse a cash payment (in Scottish notes) on the grounds it wasn't "legal tender", but lost their case when the sheriff effectively said that they were obliged to accept anything which was commonly accepted as "money", and that should their insistence on "legal tender" have been supported, it would have resulted in the bill being paid entirely in coins, which would have been a nonsense; stopping short of saying that the council would have been "cutting off their nose to spite their face", but seeming to hint at it.

For tourists: You can spend Scottish notes in England and they are exactly equivalent to their English counterpart on a one for one commission free basis. If changing Sterling abroad, do not accept an inferior rate for changing Scottish notes than is being offered for English notes as the two are equivalent. You are very unlikely to encounter problems spending Scottish money in England, I did it for many years and was never refused.

The definition of legal tender is something which is acceptable as payment of a debt. If you pay using legal tender, the other person has no recourse to chase you for payment. As part of the Skye Road Bridge tolls protest, people have paid in small coins using the greatest number of small denomination coins which constituted legal tender. Using entirely 1ps for instance would not have been legal tender and could have been refused. (This definition is a simplification, see the Currency section of "Halsbury's Laws of England" for a full legal definition.)

Britain came off the Gold Standard more than 60 years ago. The Scottish banks are allowed to issue a relatively small amount without backing, and the remainder of their issue has to be backed by Bank of England notes to the same value. So the BofE goes bust, the others go with it.

There is some info on monetary history at
http://www.ex.ac.uk/~RDavies/arian/other.html

More info on legal tender is at
http://www.bankofengland.co.uk/banknotes/about/faqs.htm

pictures of Scottish currency are at
http://www.scotbanks.org.uk/

The following discussion with the Secretary of State for Scotland occurred on 23rd Jan 2008 re Scottish Banknotes and should be available via Hansard.

Banknotes

Malcolm Bruce (Gordon) (LD): What recent discussions he has had with the Chancellor of the Exchequer on the acceptance of Scottish banknotes outside Scotland. [179988]

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The Secretary of State for Scotland (Des Browne): I have regular discussions with Cabinet colleagues on a range of issues.

Malcolm Bruce: May I suggest that the Secretary of State impress on the Chancellor and the Governor of the Bank of England that it is high time Scottish banknotes were fully legally acceptable throughout the UK? They are authorised by the Bank of England and should have exactly the same status. If dollars and euros are acceptable to traders in England, surely Scottish notes can and should be, too. Will the Secretary of State endeavour to ensure that this anomaly is brought to an end?

Des Browne: I am delighted to have the opportunity to expand a little on the status of Scottish banknotes.

Andrew Mackinlay (Thurrock) (Lab): And Irish ones.

Des Browne: And, indeed, banknotes from Northern Ireland. One of the great successes of the very successful financial services sector in Scotland is the privilege enjoyed by commercial banks to publish banknotes when other banks, including commercial banks in England, do not. The fact is that under the law Scottish banknotes enjoy exactly the same status as all other methods of payment throughout the United Kingdom, although that is not widely known. They are perfectly legal, and people should know and respect that. I know that on occasion some of my countrymen have had their banknotes refused, but I have been in London a great deal over the past 11 years, and in connection with my ministerial responsibilities have periodically had Northern Ireland banknotes in my wallet. No one has ever refused to accept one of them.

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Mr. Alistair Carmichael (Orkney and Shetland) (LD): The Secretary of State says it is a matter of fact that Scottish banknotes can be accepted throughout the United Kingdom, and he is right, but it is also a matter of fact that often they are not. That was highlighted in an excellent article in the Sunday Mail on 6 January. The paper conducted a random sample, and found that it was difficult to get notes accepted in Liverpool, Tadcaster, Coventry, Manchester, Ashton-under-Lyne and London, where even the railway ticket vending machines would not accept them. Will the Secretary of State acknowledge that although this may not be a massive problem, it is a source of embarrassment and irritation to many of our constituents every year, and will he use his office to address the problem?

Des Browne: I welcome the opportunity to repeat what I have already said. Scottish banknotes are legal, and enjoy exactly the same status as any other method of payment. The fundamental problem is that the law of contract throughout the United Kingdom allows people not to engage in a transaction at the point of payment if they do not wish to do so. I should be happy to join the hon. Gentleman and his party in a
discussion about reforming the law of contract if that is what he wishes to do, although I suspect that we would find it difficult to obtain the necessary legislative time or the necessary support. But he is right: in the 21st century, this irritation should not exist for people who are tendering legal notes in payment. I think the best thing for us all to do is to take every opportunity to tell people that those notes are as good as anyone else's, and should be accepted.

More info on the Scottish legal system in general is at [1.8]

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