I share this blog post from Craig Dalzell, head of research at the Common Weal think tank in Scotland, addressed to Derek Mackay, the SNP's Scottish finance minister, for three reasons. First because I agree with it, as my own post for Common Weal this week revealed. Second, because the issue is fundamental to Scotland's future, and so the well-being of all who live there. And third, because I have had enough of politicians deferring difficult decisions that it is their job to embrace and take, all in the interests of pandering to the powerful financial interests, which are behind the SNP's disastrous plan for the Scottish currency.
Dear Derek Mackay
I read your recent article in The National (6th April) with interest. Particularly your endorsement of the motion being put to the SNP conference this month as “your” plan, building on the Growth Commission. This direct endorsement gave me hope that you would have taken the opportunity in your article to tackle the now widespread critiques of that plan.
Your direct endorsement of the Growth Commission proposals also led me to the realisation that unless things change, you as Finance Secretary will be personally responsible for this plan and its consequences. In this spirit, I would like to address you directly regarding some of the critiques raised.
The big one, as raised by Robin McAlpine in The National last week (30th March), is the problem of what happens to the Scottish economy if we're Sterlingised — that is, we continue to use the pound without a formal currency union — and the rUK economy tanks.
Without the powers to create (or destroy) money, apply Quantitative Easing, adjust interest rates, adjust exchange rates and, crucially, without the Bank of England having a legal remit over Scotland to do it for us, what powers would a Sterlingised Scotland actually have to shield us from the effects of an rUK crash?
This is not merely a hypothetical. The UK has suffered a recession in every decade of the past the century bar one (the 1940s) and we're still suffering the “lost decade” from the 2008 Financial Crisis. Let's be honest, your plan isn't going to meet the “six tests” within the first Parliamentary term and we all know it so the results of the vote at the end of that term is a foregone one. Following the Growth Commission model of not having a currency for the decade or more that those tests imply presents a major systemic risk to the Scottish economy. You will surely understand that this is not a problem that can be solved by tweaking tax rates.
Derek, you are quite correct to point out that currency is a servant of the economy but it's not true to say that the reverse doesn't also apply. The relationship is one of mutual feedback. The currency shapes what kind of economy is possible. It's notable that you and the Growth Commission are keen to point out that many of our comparator countries don't have their own currency. What you seem less keen to point out is that all of them are Eurozone members. None of the comparator countries cited in the Growth Commission report unilaterally use the pound, euro, dollar or another currency. Read section A3.21 of the report if you don't believe me.
It's the placing of limits on that range of economic possibility that is proving concerning to many. Under the Growth Commission's wider economic proposals, there are measures to keep Scotland's financial regulations tightly tied to the UK's failed model — not just at the point of independence but as the UK continues to make changes to their regulations afterwards. Scotland's political input into the Union may be slight at the moment. We may so often be ignored. But at least, on paper, UK-wide regulations are made with Scotland's say and to cover Scotland's needs. Post-independence, your plan makes as much political and economic sense as unilaterally adopting changes to the financial regulations of Singapore. It is a plan built to appease those who would be loaning Scotland the money that we couldn't print on our own. They will not easily give up such a ‘valued client' - hence why the “six tests” take the nigh-impossible-to-meet form that they do.
I understand the desire by some to campaign for a “soft independence” model. It's not my preferred model. It's not the model favoured by just about any SNP member I've ever met. It's certainly not a model anywhere near compatible with the “Scotland in Europe” policy espoused by the SNP. Put aside the “we'll be forced into the euro” arguments. We won't be getting back into the EU at all if we don't have control of our own currency nor if we follow the rUK's “Global Britain” financial regulations into an ERG-led tax haven on (non-EU compliant) steroids. Such a “soft independence” was compatible with “Scotland in Europe” in 2014 but that compatibility ended in June 2016. Scotland doesn't necessarily have to choose between the UK and the EU, but we can no longer have both.
This all said I do understand the desire for the “soft independence” model. If this truly is the economic path that you want to follow then, by all means, launch a Scottish currency and peg it to the pound. Maintain that close link to rUK and make the case to the Scottish people for the need to mirror changing rUK financial regulations. A Scottish currency pegged to the pound would be easy to change in a crisis (or outwith one) compared to moving from Sterlingisation to a Scottish currency. The experience of Switzerland and the Czech Republic during the Eurozone crisis makes that clear. Our own currency allows Scotland to actually harness the powers of independence to forge the Scotland that we want to see, not to be trapped in one defined by the arbitrary tests we apply to it. Do this in a democratic way and you'll build the Growth Commission vision of an independent Scotland. But do not do this at the expense of other voices and other visions. Allow them the space to campaign alongside yours and let the Scottish people decide which journey they want to take.
The time for discussion within the SNP is almost over. The party will soon have to bring the wider public into this discussion. I have every confidence that the party will make its decision this month with the full knowledge of the consequences of it. If we want to build the fairer, more equal country that we all want, then we have to make sure that Scotland has the tools at its disposal to be able to do so. To have the best economic case to put to the people, then win, we HAVE to secure the powers necessary to deliver the more prosperous and fairer Scotland we seek. An independent Scotland needs its own currency.
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Thank you for sharing this Richard. Glad you found it useful.
It’s very good Craig
… watching the Scottish Growth Commission is like watching prison chess… every move is one of safety… people thirst for radical ideas to inspire the requisite change… a green New Deal demands nothing less…
Can’t argue with that.
It really is very simple. No Scottish currency = No Scottish independence.
I won’t vote for Independence without the assurance that independence is going to be meaningful. There would be no point to it. None whatsoever.
You are absolutely spot on with your observations Andy.
We can talk until the cows come home but we need independence before we can make decisions about anything, and that includes the currency question.
Personally? I would like to see something similar to that which I understand the Isle of Man has, a local currency which, come independence, would already be in place. (No doubt that will get shot down in a hurry with many reasons why it would not be possible!)
Willie john, I agree, I have been wondering for some time if it was possible to have our own currency in use alongside the £pound ( parity? ), perhaps as some form of barter? until we gain Independence. Leaving Scottish finances in the hands of the city and westminster would be a disaster ( well, maybe not for the 1% )
We also need some form of non-profit state bank, similar to the old giro bank, operating out of the post office network, to handle our money, I simply don’t trust the profit driven criminal organisations we are currently forced into. Debit cards/cheques should not be able/allowed to take us into unorthorised overdraft, british banks make 2-3 £BILLION from that each year….when did we allow that to happen, hmm.
Willie John says:
“… we need independence before we can make decisions about anything, and that includes the currency question.”
I think that’s not right. I regard it as dangerously vague and ‘flabby’.
Brexit should have taught us that to have a referendum without voters understanding what they are voting for is a recipe for disaster. If we are going to ask for support for Independence voters really need to know what that means. Having been inveigled into voting for a blind and undeliverable Brexit who will be stupid enough to support Independence for Scotland on such vacuous fantasies ?
If Scotland does not commit to the currency there will be no independence worth having. A Scottish currency is not a nice-to-have vanity project it’s fundamental to being able to control the economy and thus have any control of policy, beyond damage limitation of the will of City Bankers and Westminster.
Let’s not mess about. 2014 showed what happens when the plan looks half-baked. If the SNP doesn’t have what it takes to shape an Independent Scotland we’d be better to wait until we find some political leadership that does.
Just try and get as many folk as possible as delegates at Conference to vote for Amendments A to D to the HQ motion. Amendment D is mine, and I gather I will get 5 minutes to present the case.
D)
Delete 33) and replace with:
“Conference considers that an SNP Government should take the steps necessary to enable the Scottish Parliament to authorise the preparation of a Scottish Currency as soon as practicable after a vote for Independence with the aim that the currency be ready for introduction as soon as practicable after Independence Day.”
DALKEITH BRANCH
As soon as practicable has to be independence day
While I agree with your sentiments, Andy, and when the GC report came out I wrote to my MSP’s and MEP saying exactly that – no currency we might as well stay in the UK – I will, however, still be voting for Independence, in just the same way I voted to stay in the EU.
Changing minds and structures is, has to be, possible. The big difference between the UK and Scottish Parliamentary elections is that with a degree of PR in the voting system we do at least get some sensible people elected, amongst the dross, such as the Greens, who I will probably vote for after I-day. At Westminster with FPTP there’s too much dross and blind tribalism.
Of course, PR means endless compromise (sigh) while FPTP gives us “strong & stable” (lol).
This is an excellent letter and puts the case forward clearly.
I would say it’s the BEST option to have a new currency in place – along with the myriad of other things to have in place – tax collection systems for instance? – it’s going to be a tough timetable, if it’s to be done in reasonable time (2 years?).
But I understand why the SNP had been taking the softly-softly approach, they are trying to compromise before any vote, to win as many people over as possible – we don’t have a host of parties in favour of independence to give everyone a choice in visions, so they are stretching themselves to appeal to a large number of different ideologies.
As for the comments – when did it become acceptable to discuss things in Westminster-style rhetoric of red-lines and ‘my way or no way’? He’ll mend you if having your own currency is a red line for having independence, you need to get the majority votes in first, and if that means compromising on anything that’s fine as far as I’m concerned – we’d be currency-independent soon enough anyway (it’d be madness otherwise). There is also the assumption here that everything that belongs to the uk now, will belong to the non-Scottish parts when Scotland is independent,,, hold on, we’ve paid our fair share (and more), a proportion of all that is ours – including the debt, yes – but all things are open to negotiation. Defence? We’ll be getting a bit of that, thank you. Bank of England isn’t the bank of ENGLAND, it’s the bank of the uk, so we’ll have a bit of that too thank you. (Rubs hands together thinking of the treasury). Wonder what the uk is going to do about the arms manufacturers based in Scotland? The SNP were right to say it IS our pound too back in 2014, because it is. And even the name, United Kingdom, a signatory to all those international institutions – well, it wouldn’t really exist any more would it? There are only two kingdoms in the United Kingdom, and they won’t be united anymore. I guess we could sell the rights to the name even though it’s hardly accurate. All this might seem like semantics and not picking, but if you are going to be negotiating, who knows what might be useful.
Get your negotiating hats on! Get some nous, stay canny. If there is leverage anywhere, it should be used. If we are to have an independent economy, then we must have a separate currency – but who is to say it isn’t the non-Scottish parts of the U.K. that should change?!
Contrary says:
“…..but who is to say it isn’t the non-Scottish parts of the U.K. that should change?!….”
Weight of numbers I think. And the centre of political gravity.
I love the idea of Scotland, NI (and Wales if they were up for it) allowing England to drift off into independence, but it really is just a fantasy, (I think). There might even be support for migrating the Anglo-Scottish border closer to the Hadrian’s Wall line, but………… it’s not going to happen is it ?