On Wednesay during the UK House of Commons question time, Malcolm Bruce (Lib. Dem. – Gordon, Scotland) called on the UK governmentto “change the law and reclassify Scottish notes, which are currently not officially legal tender anywhere in the United Kingdom” so that English sellers are no longer free to refuse Scottish notes.

The Scotsman quotes Bruce’s exchange with the Scottish Secretary Des Browne:

[Bruce:] “It is high time that Scottish banknotes were legally acceptable throughout the UK. … If dollars and euros are acceptable to traders, surely Scottish notes should be. “

The Scottish Secretary replied: "The law is that Scottish banknotes as a method of payment enjoy exactly the same status as all other methods of payment across the United Kingdom.”

Bruce is misrepresenting the case. In fact, it is fully legal to accept Scottish banknotes throughout the UK. It is, however, rightly not compulsory. Scottish banknotes are thus on a par with dollars and euros, not to mention debit cards: neither legal tender nor forced tender. The term “legal tender” is a bit misleading here in that it actually means that a creditor must accept it for a debt denominated in the relevant unit of account. Spot-transaction sellers are usually free to refuse even legal tender, e.g. cabdrivers may legally refuse large-denomination legal tender notes. A note that is not “legal tender” in the debt-clearing sense can still be fully legal to use, and can in fact still be universally accepted in practice, as Scottish banknotes are in Scotland despite not being legal tender even there. (Nor, remarkably, are Bank of England notes legal tender in Scotland. Only coins are legal tender in Scotland.)

Secretary Browne is also slightly misrepresenting the case, in that Scottish notes don’t enjoy exactly the same status as Bank of England notes, which are legal tender in England and Wales.

The Scotsman article goes on the clear up the confusion, but makes one slip when it says:

ALL Scottish banks have the right to print their own notes, but these notes are not officially legal tender in Scotland or England.

In fact, only three Scottish banks retain the right to print their own notes: the Bank of Scotland, the Royal Bank of Scotland, and the Clydesdale Bank. Banks formed after 1844 are denied the right.