I have an article with the above title on CommonSpace - the blog of the CommonWeal think tank in Scotland this morning.
It's not fair to reproduce the whole article here: this was my introduction:
I read Derek Mackay's article about Scotland's future currency in The National on Saturday with interest. What Mackay had to say was predictable given the suggestions made by the Growth Commission. But I also have to suggest it is wrong. More than that, I think it dangerous for an independent Scotland, where only an independent currency from day one will deliver the promise of true independence.
And this my conclusion:
I would have thought Mackay would be frustrated enough with the absurd constraints he has to live with now. But to use sterling would make his life nigh on impossible. Why then does he want to go down that route? I wish I knew. Economically it makes no sense. The political economy of it is disastrous. It would tear the SNP apart after independence. And it would guarantee a crisis-strewn start for the new nation as it failed to deliver on any promise and all its potential.
If Scotland wants to be free it has to have its own currency. Nothing less will do.
And in between I point out why the current SNP plan to use sterling in Scotland after independence delivers just what I suggest in the title - rule of Scotland by London bankers. It's hard to imagine a worse outcome, barring rule by London's politicians I suspect.
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I exactly agree and I think a lot of other SNP members do too. Dalkeith Branch has submitted my comprehensive set of amendments to this motion. I know a lot of others have done similar including the campaign that George Kerevan is running. I have no idea why the leadership are being so feart about the issue of currency. Nobody will be forced to exchange their money if they don’t want to, shares, UK gilts, etc will still be quoted in Sterling whatever Scotland might decide, financial products from English providers (e.g. a Nationwide credit card) will stay as they are unless both parties agree to a change, etc. So once this is properly explained to the voters I am sure folk will soon see there is nothing to be alarmed about, and indeed the S£ will probably have a tendency to rise against Sterling.
It is also worth noting that the Scottish Government should and indeed must start off by running a substantial deficit with corresponding issue of bonds. If it does not then Scottish individuals, pension funds, etc who don’t want to be exposed to exchange rate risk will be stuck. Thus holders of UK gilts who wish to sell them, repatriate the funds to Scotland and buy Scottish gilts instead will not be able to do that if there are no Scottish gilts to buy. At the moment there are none as the Scottish Government has been prohibited from borrowing up until last year.
All noted and re the details, true
What does the amendment say?
In response to Tim’s post at the top of this blog, I agree with his analysis and would only add that Robin McAlpine’s excellent work ‘How to Start a New Country’ deals with the whole process of creation of a new currency and management of the transition period, including the right to hold dual bank accounts in both GBP and Pound Scots, with great clarity and admirable brevity for such a complex topic. Indeed the book is in effect an outline project plan for all the diverse processes of creating a new sovereign state. Basically Robin has done the research, the thinking and the compilation into a logical format so that the SNP simply has to follow the templates he’s set out and they’re off to a flying start.
Elsewhere in the same post by Tim he opines that “….the S£ will probably have a tendency to rise against Sterling.” Well, I’ve already seen that happen! Back in the mid-1990s I was working on a corporate turnround in Germany and “commuted” back to Scotland at the weekends. On the Monday mornings I was on the first flight out of Glasgow to Dusseldorf and would change Bank of England notes into Euros in a bank in Dusseldorf Airport as their rate was better than I could get at Glasgow Airport. One morning when I went in I noticed the bank’s rates board showed a small Union flag alongside GBP and the rate, but further down the board was a Saltire alongside ‘£SCT’ and a slightly more advantageous exchange rate. Naturally intrigued, I asked if I could change Scottish bank notes into Euros, the answer was ‘yes’, so I asked how this had come about and was told the bank’s Head Office had instructed it. I was, to put it mildly, astonished and didn’t let on that Scottish banknotes were denominated in Sterling. The differential rates continued until the turnround was completed and that meant I didn’t have the extra job of getting English notes and I was getting more Euros for my Scottish notes. Win, win!
Interesting. My parents-in-law lived in Mainz and insisted on only Scottish notes from their Bank in Mainz whenever they were coming to visit us. In fact to the point where the bank routinely asked anyone travelling to the UK whether they needed Scottish notes for Scotland or English notes for England. They always came by car and on their first trip when confronted with the toll booths on the Tyne Tunnel they duly handed over their passports. Mind you they would have been right in the past as under King Robert (the Bruce or de Brus as he was part-Norman) the border was pushed a long way south after the treaty that ended the Wars of Independence (for those not familiar with this the wars ended with Bannockburn in 1314 and a peace treaty was signed about a decade later).
I am pleased to say the German tendency to talk about ‘England’ when they meant UK has now almost entirely been cured.
Bravo, Richard. I’m in complete agreement – though it is never wise to underestimate Derek Mackay’s skills as a political communicator. He’s a man who can make a U turn look like the very image of the skillful driving that made Jim Clkark famous – and he can make people laugh with him while he does it. 🙂 I’m hoping that the SNP conference will go some way to encourage the fundamental shift you seek. There are many branch motions on the subject and the conference, contrary to the MSM/BBC myths about it as a ‘rally’, has got teeth and does, when it reckons it really matters, use them. I’m not a delegate this time but I’ll be watching with more than interest – and this does, I think, really matter.
True, Nigel. It seems to me it’s the “don’t scare the horses” syndrome, or the voters, or the bankers, or the press. I begin to wonder just how much the SNP hierarchy really understand about fiscal and monetary matters.
I couldn’t possibly comment
I see the final Conference Agenda has been published and that the Dalkeith Branch amendment to replace Clause 33 has been accepted for a discussion and vote. The replacement clause would simply be to the effect a new currency would be introduced as soon as practicable after Independence Day. I have always referred to the new currency as the Scottish Pound, but I guess if you look back at history then there would be a good case to call it the Merk (former Scottish silver coin) if we want a name that won’t get mixed up with Sterling.
Is that it?
No others?
Hi Richard, can I send you stuff privately please? I am not sure the final agenda is particularly a secret but it is supposed to be for SNP members so I don’t want to get clobbered for anything and put my and the other amendments at any risk. You have my email address.
richard.murphy[at]taxresearch.org.uk
Merks and bawbees?
More seriously, might Scotland have to adopt the Euro? If it has to apply for entry on its own account.
In the same way that Sweden did and never adopted it, yes
It has to commit to joining without ever saying when
So no issue at all
So if we leave and then have to rejoin, we can (not) adopt the Euro in the same way?
Yes
“[Scotland] has to commit to joining without ever saying when”
…and it makes perfect sense to do so. There may come a time when the Eurozone is worth joining. It is not in the foreseeable future and there is real risk that the Euro will have disintegrated, and ceased to exist before it ever gets to that stage.
Gordon Brown never said the UK shouldn’t join the Euro project, he merely, and correctly, insisted the conditions had to be right. And although unlikely, it is not impossible that the EU will eventually accept that fiscal aswell as monetary union is necessary and desirable to run a common currency area.
Germany and Greece have a long way to come together before that looks to be on the cards. Come to that Germany and France are fair and far off that sort of political compatibility and co-operation.
Joining the Euro requires the applicant to join the ERM first, and demonstrate financial stability within the ERM for two years. At the same time, it is not compulsory to join the ERM. The requirement is a circular illusion. The rules could have been written by Lewis Caroll.
The requirement to express an intent to join the Euro is, in the strict sense of the term; a polite, but empty promise.
Agreed
If that is the case, they’re ALL DOOMED, DOOMED I tell ye!!!
Don’t do it – please!!
For those still operating under the misapprehension that Scotland can be forced to join the Euro, please read here -:
https://theferret.scot/independent-scotland-join-the-euro/
https://wingsoverscotland.com/when-fact-checks-fail/
Thanks Richard.
Yesterday, Judy Murray (yes Andy’s mum) tried to buy doughnuts in London with a Scot’s £10 note and was refused.
This perfectly highlights the public perception of money, and what it is.
And apparently, Scot’s notes aren’t ‘legal tender’, not even in Scotland.
So for a public framing of the narrative, we should start a campaign to make Scot’s notes ‘legal tender’, so that, come independence, we already have our own legal currency and just need to set up our own Central Bank to supervise.
Currency issue solved.
I think you really are missing the essence of the currency issue
Scottish notes do not make the English pound acceptable
You may need to read rather more widely
Dan macauley
I assume your comment intended to be taken as tongue in cheek. (I do hope so :-))
As regards recognition of currency it is amusing that a recent image of a spoof fifty pence piece celebrating Brexit, showing the Queen with her hand across her face in an expression of despair……. has her facing the wrong way and nobody seems to bat an eyelid.
Relatively few people could tell you what and who is depicted on the currency notes they are prepared to accept without question. This applies both sides of the border. Try it in the pub or other social setting sometime. It’s quite an amusing game.
dan macaulay says:
“Yesterday, Judy Murray (yes Andy’s mum) tried to buy doughnuts in London with a Scot’s £10 note and was refused.”
FFS how much are they charging for doughnuts in England these days ?? 🙂
…..anyway if Brexit goes through they’ll be unobtainable….they’ll all be ‘donuts’. (Chlorinated at source of course)
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