The Anglo-Scots Monetary Union of 1707

Pages360-387
Date01 September 2019
DOI10.3366/elr.2019.0573
Author
Published date01 September 2019
INTRODUCTION

Debates over currency, monetary sovereignty and monetary unions have loomed large in European and British politics over the past two decades. The cession of national sovereignty needed to join a monetary union was seen, by the United Kingdom at least, as a step too far when formation of the euro-area was debated in the 1990s. More recently, the question of the currency that might be used by an independent Scotland has become a point of contention in the debates over Scottish independence.

The recent debates in Scotland have an historical backdrop which is the subject of this article. The existing monetary system of the United Kingdom results from at least two monetary unions and one partial dis-union in modern times. The monetary system of Scotland was merged with that of England and Wales by Article XVI of the two Acts of Union of 1707, which enacted the Treaty negotiated the previous year.1 Northern Ireland belongs to the United Kingdom monetary system as the remaining part of a monetary union in 1826 between Ireland and the United Kingdom of Great Britain, as it then was.2 The rest of Ireland gained its monetary sovereignty, along with its political independence, in 1922.

The Anglo-Scots monetary union has almost entirely escaped historians' attention. They have tended to concentrate instead on the political union of 1707 and its significance in ensuring a protestant succession north and south of the border. They have analysed the economic drivers for the union, such as access to England's overseas trading networks, the abolition of customs barriers and the harmonisation of tax regimes between the two countries.3 A pair of papers by Dr Athol Murray, published in 1997 and 2002, stands as the sole exception.4 But as detailed numismatic studies of the re-coinage process, Dr Murray's papers had no reason to touch on the constitutional significance of the union or on the technical questions of law raised by it. The historians' silence can be partly explained by the relative dearth of the contemporary documentary sources related to Article XVI. That paucity of evidence matches the slight attention that the English and Scottish Commissioners who negotiated the Treaty gave to the question of monetary union. Compared with the other economic issues that occupied them, the incorporation of Scotland into the English monetary system did not seem to strike them as contentious.

The present article attempts a legal history of the 1707 monetary union. The task requires a contextual interpretation of Article XVI but, more especially, a fine analysis of the accounting and administrative documents that implemented the union as a numismatic process. Only when these are understood do the legal questions emerge from the interstices. Those questions depend as much on the complex arithmetic of metal-based monetary valuation as they do on large constitutional questions of monetary sovereignty.

Section B of the article considers the wording of Article XVI against the background of early eighteenth-century understandings of money. Section C turns to the monetary co-ordination between Scotland and England after the regal union of 1603. Article XVI only makes sense when read against the hundred years of Scottish monetary regulation that preceded it. This sheds light on why the Scottish and English commissioners who negotiated the union might have found the merger of their monetary systems an uncontentious step to take. Section D considers the heterogeneous state of the circulating coinage in Scotland in the decades before 1707 and the legal measures needed to make it work as a single currency system. Section E describes how the monetary systems of Scotland and England were actually combined. The transition from the old to the combined system raised legal problems that the union Commissioners and mint authorities deftly avoided. Section F considers the aftermath of the monetary union, which casts some light on the different degrees of legal coordination that are possible between countries that link their currencies in an international system. In that way, the article adds to the emerging literature on the economic history of monetary integration.

One theme in that literature is the relationship between political and monetary union between states. Political union usually requires monetary union. But states that prefer to avoid the full consequences of political union they may nonetheless accept some measure of monetary integration to facilitate the trade relations between them.5 One reason why the monetary union of 1707 seemed uncontentious is that it was incidental to the more difficult question of political union between the two kingdoms. Unlike the formation of the euro-area nearly 300 years later, it did not involve the cession of monetary sovereignty by states that, notionally at least, retained their political sovereignty. The main effect of the arrangements implemented in 1707 was simply to rebase the monetary standard of the currency in Scotland with the currency in England, which had been the goal of the Scottish monetary authorities for at least a century. The study reveals that the legal conception of monetary union means different things in different historical periods. Modern-day understandings of monetary union – with their emphasis on the establishment of a common unit of account and a central bank – cannot be projected into the past.

ARTICLE XVI, “REAL” MONEY AND “IMAGINARY” MONEY BEFORE 1707

We begin with Article XVI of the two Acts of Union and explain some of the monetary background to it. The provision was identical in the two statutes. It was remarkably brief, one short phrase being enough to provide for the monetary union: “That, from and after the Union, the Coin shall be of the same Standard and Value throughout the united Kingdom, as now in England”.6

Coin as “Real” Money

The first legal question is why Article XVI should be expressed in terms of “Coin”. In 1707 coins minted from precious metals remained the foundation of the Scottish and English monetary systems so the word “Coin” could be used as a practical synonym for “money”. But the reference to “Coin” has a deeper significance which only becomes apparent if Article XVI is read by the usage of its own time. The reference to “Coin” shows that the provision was solely concerned with what was called in eighteenth century “real” rather than “imaginary” money.7 It was concerned with the very res, the things put into circulation as means of payment. Imaginary money was the term used to describe the modern concept of a monetary unit of account.8 It was the counting system used to express the value of prices, debts and real coins.

Real money consisted of coins struck from intrinsically valuable precious metals. It functioned as money rather than bullion because the King ascribed to each denomination of coin an official value in the local money of account. Scots law, in common with all other Western systems, recognised the right to strike coin and to ascribe it a monetary value as pertaining exclusively to the sovereign.9 Thomas Craig's Jus Feudale (c 1600) considered the legal process of monetary valuation and the discharge of debts as part of his chapter on the regalia of the King.10 Legislation on coinage came from the Estates in Parliament or from the King's Privy Council. Coins struck in the King's own mints and proclaimed at an official money of account value had a special status in law as the King's “proper money”.11 The public was legally obliged to accept them at the rates fixed in the proclamation.

It also lay in the King's prerogative to raise or lower the value of his own proper money. He could adopt foreign coins into the local monetary system by proclaiming that they would pass at official rates in Scots money of account. This was a common practice internationally. It was especially prevalent in Scotland during the seventeenth century where the total stock of real money comprised a great diversity of coins, both foreign and locally-minted.12

“Imaginary” Money or Money of Account

“Imaginary” money was the name given to abstract systems of counting units. Before 1707 Scotland used two main systems of money of account. One was a version of the libra system based on the pound unit. The libra system was used in England and in most European countries,13 although the Scots and English methods of counting the libra units differed. Each pound (libra, abbreviated to l) was divisible into 20 units of one shilling (solidus or s), which were then divisible into 12 units of one penny (denarius or d). Alongside this was the merk, one unit of which corresponded to two thirds of a pound, and was equivalent to 13 s 4 d or 160 d.

The libra system of pounds, shillings and pence was the more commonly used of the two. Government agencies in Scotland used it for keeping their accounts,14 and the Scottish mint and Privy Council used it for ascribing official values to coins. The advantage of having a parallel system of counting in merks was that sums could be expressed in clean units corresponding to 1/3 or 2/3 fractions of a pound. It is apparent from some entries in the government accounts that certain customary dues were levied in merks even when they were recorded as the corresponding sum in pounds.15 A sum of 6 l 13 s 4 d or 33 l 6 s 8 d in government accounts must have been reckoned by the parties as a clean sum of 10 or 50 merks. Customary rents were often quoted in merks, a practice that continued long after the union.16

Different counting systems could be applied to the same debts and coins. Alexander Justice, the early eighteenth-century English writer on foreign exchange, noted that the Scots kept their accounts “in three several ways”: Scots pounds, shillings and pence; Scots merks; and English (or sterling) pounds, shillings and pence.17 Although the nominal units used in the Scots and English libra systems were the same, the values...

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