Commons clash over Scottish banknotes
They are accepted generally as payment but do not have the legal backing that Bank of England ones enjoy.
The term legal tender is only used in contract law and provides protection in limited cases where debtors have paid debts using "legal tender".
In every other way, the legal tender of a banknote does not affect its use. But the Lib Dems say there have been instances when traders in England have refused Scottish notes, claiming they were not "legal tender" and this could not happen if the notes were given the same legal backing as Bank of England ones.
Malcolm Bruce (Gordon) said at Commons question time: "It is high time that Scottish banknotes were legally acceptable throughout the UK."
He told Mr Browne: "If dollars and euros are acceptable to traders, surely Scottish notes should be.
"Will you endeavour to make sure this position is brought to an end?"
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.
"That is not widely known but people should know that and accept that.
"I know some of my fellow countrymen have experienced on occasion the refusal of these banknotes. But I have been in London a lot over the last 11 years and because of ministerial responsibilities I have also had Northern Irish banknotes sometimes in my wallet and I have never experienced anyone refusing to accept them."
Alistair Carmichael (Lib Dem, Orkney and Shetland) told MPs that research had shown Scottish banknotes are often not accepted. It was "a source of embarrassment and irritation to many of our constituents".
Mr Browne said: "The fundamental problem here is that the law of contract across the UK allows people not to engage in a transaction at the point of payment if they don't want to.
"This irritation in the 21st century shouldn't be here. The best thing to do is to take every opportunity to tell people that these notes are as good as anybody else's."
WHAT'S LEGAL TENDER?
ALL Scottish banks have the right to print their own notes, but these notes are not officially legal tender in Scotland or England.
English banknotes of denominations less than 5 were legal tender in Scotland under the Currency and Bank Notes Act 1954. But now, with the removal of Bank of England 1 notes, only coins constitute legal tender in Scotland.
English banknotes are legal tender only in England, Wales, the Channel Islands and the Isle of Man. Credit cards, cheques and debit cards are not legal tender either, but it doesn't stop them being used as payment.
Legal tender has a very narrow technical meaning in relation to the settlement of debt.
In ordinary, everyday transactions, it has very little practical application.
Only a small percentage of Scottish and British trading is carried out using legal tender. Just because something is not legal tender certainly doesn't imply it is illegal to use.