It is big news when an issue to which this blog has contributed makes it to be an FT headline, but it happened this morning:
Of course, the credit goes to Dr Tim Rideout who spearheaded this campaign, and got the resolutions passed with a majority of 418 to 37, despite warnings being given to the conference that a country having its own currency as a 'dangerous experiment'.
Tim has shared his speech with me. This is it:
The Scottish Reserve Bank (Establishment) Bill
Conference,
In April 2019 you rejected the Growth Commission sterlingisation proposal in Appendix C.
You voted instead that Scotland should start the preparations for our own currency.
You wanted that to happen as soon as possible after a vote for independence.
The aim was to introduce our new currency as soon as practicable after Independence Day.
This recognised the fact that no advanced economy has ever sought to use the currency of another nation. To try to do so would be to start probably the most dangerous experiment in global monetary history.
So, we need to follow the tried and trusted safe route taken by almost every country to become independent, and that is to have our own currency.
We will use the Scottish Pound – and not the English one.
Having a central bank is a key component of having our own currency. It is also a pre-requisite for applying to rejoin the European Union. Using sterling rules out any EU membership application. So we must plan for that too.
Planning is key. After the Brexit vote London was in a ‘what do we do now' state of total unpreparedness. It would be inexcusable for us to find ourselves in a similar position when we win Independence, however that is achieved. We will need to be ready, so we hit the ground running. Two years, or whatever it turns out to be, for a transition to Independence Day will go very quickly.
On the currency front there are things we can do now. One of those is to draft the bill to establish the Scottish Reserve Bank as the new central bank of Scotland. That gets us to the point where we are ready to introduce that legislation the day after we vote. Bear in mind it will likely take six months to be approved by Parliament.
The resolution before you is a very truncated version of what Dalkeith Branch submitted. Conference Committee deleted two thirds, namely clauses A to F of the principles for that draft bill. As those are the key elements, I will explain them briefly to you. They are important.
Critically, the Reserve Bank will be owned and controlled by the Scottish Government. It will be the monetary authority, meaning it will create Scottish pounds. It will own the Scottish payments system, and it will be banker to the State.
Vitally, we need to ensure it is under the control of Parliament and answerable at all times to us and our elected representatives. That means things like US style confirmatory hearings for the appointment of the Governor, annual reports, and appearances before parliamentary committees. Accountability is key.
That is because as the monetary authority it will establish and issue the new Scottish currency. It will also set interest rates for lending to commercial banks, and it will work in collaboration with other international central banks. That means it will hold and manage our foreign reserves on behalf of the Finance Ministry.
At home, it will maintain the Scottish Government's accounts and will provide such loan and overdraft facilities as are required to achieve the government's fiscal policies, such as full employment and the Green New Deal.
Lastly, as envisaged by Douglas Chapman MP, it could manage a Scottish Sovereign Wealth Fund.
The Amendment to the resolution provides a forum to discuss those principles and I would urge you to support that.
In nearly 50 talks around Scotland, it is clear to me that you, Delegates, know that there is only one choice. That is our own currency. Let us start that process now, by voting in favour of the resolution.
Warm congratulations to Tim.
But, I also note that the FT reports:
Asked after the vote, the SNP said: “The currency of an independent Scotland will continue to be the pound sterling until a new currency can be safely and securely established in the interests of the whole economy. A Scottish currency will be introduced as soon as practicable after independence.”
That is not exactly a warm endorsement of what the SNP membership had clearly indicated to be their wish.
I leave the last word to Tim though. As he noted in a Tweet:
I hope the sterlingisation zombie now has a stake through the heart.
I can but agree.
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If only I could move and go and live in Scotland and change my nationality!
Why on earth would you want to do that? Most Scots see nationalism as ugly and divisive which is why the good guys won the Partition vote in 2014.
But not only is it – in its very essence – factionalistic, we’ve also had a preview – since 2014 – of what it would look like in practise and that is deeply unappealing. The Scottish Government is highly authoritarian, clumsily incompetent and frequently lacking in scruples and integrity.
Above all, Partition is based on various lies, the most damning of all being that people living above a line drawn from the Tweed to the Solway are different to those living below that line. After being a unitary nation-state for 314 years and having enjoyed much free movement both north and south that is arrant nonsense.
You probably live in England and are unhappy with this Tory government and with Brexit. Well so am I. I’ve lived about 30 years in Scotland and about 30 years in England – though not consecutively in either region – and Scotland and England are almost indistinguishable.
Partition is the answer to nothing.
With respect Alan, if you can’t spot the differences the problems are all yours
But you will be given a chance to vote No
Now go and play with The Coast Guy. I think you will get on
“having enjoyed much free movement both north and south”
This is the only specific, substantive point you make. Unfortunately we have lost our freedom of movement to 26 countries in Europe, that we have benefited hugely from, for well over 40 years; and in the process Britain has, to a notable degree, undermined or attempted to undermine the best attempt to build a unified, free, peaceful and prosperous Europe, in the last 300++ years. I know where my hopes for the future rest – for us all.
Everything else you wrote is generalised, hyterical, outraged waffle. If I was prone to hysterical, generalised, outraged waffle I could make the same point, ‘a fortiori’; about Britain.
I think it is pretty clear that when the SNP leadership say a new currency will be “safely and securely established in the interests of the whole economy” what they really mean is that the interests of the oversized Scottish financial sector, primarily asset management firms, have to be protected. It is that factor which underlies the sterlingisation policy.
“ safely and securely established in the interests of the whole economy” as determined by the experts in the financial sector, in other words sterlingisation. SNP leadership has been captured.
A breath of fresh in what has been for years now, a very stale SNP. However it sounds very much like the SNP Leadership may try to just ignore or actively block what the members clearly want and more importantly, have voted for. Maybe this issue will finally bring the gradualist approach of Sturgeon’s SNP to a head and the members will fight back against Sturgeon’s undemocratic approach to leading the SNP (eg manipulation of the NEC).
Well done, Tim. One would hope that such a resounding conference vote would allow the debate to move on but it appears that there is still a rear-guard action to preserve Sterling in Scotland. If the intention of SNP leadership is “not to frighten the horses” in a referendum debate then they will be disappointed. The fudge that is the current policy will melt under the spotlight of a Referendum campaign.
Now the question is what should a new currency look like. Canada and Hong Kong have their own currencies – but they look quite different. Voters need to have a vision of where they are heading and, personally, Canada gets my vote.
Once that is decided then the detailed work on transition arrangements can start. This is not easy and needs time.
First, there are political questions (eg. what level of compulsion will be used to bring about conversion)
Second, there are technical questions (eg with no Scottish government bonds in existence, how will the SRB conduct monetary policy)
Third, there are diplomatic questions (eg. will the BoE “play nicely”? What role for the ECB)
Tim has laid out his ideas and these should now be at the centre of the debate…. not a re-hash of the SCP or GBP debate.
We still need that discussion and I am inundated with work……
1) “The fudge that is the current policy will melt under the spotlight of a Referendum campaign.”
2) “[T]he detailed work on transition arrangements can start. This is not easy and needs time.
First, there are political questions (eg. what level of compulsion will be used to bring about conversion)
Second, there are technical questions (eg with no Scottish government bonds in existence, how will the SRB conduct monetary policy)
Third, there are diplomatic questions (eg. will the BoE “play nicely”? What role for the ECB).
3) From Richard “We still need that discussion and I am inundated with work……”
Three crucial points. The SNP currency policy melted in the spotlight fast enough in 2014; and that policy was created by a leader who was a banker. The problem is that the “discussion” not only requires urgently to begin; some of the specific issues were aired here in an earlier thread but that debate has failed even to be adequately started in Scotland, – over the seven years since 2014; seven years, and nothing convincing on the detail; the devil is in the detail. Why so little forensic attention to the detail? A kind of catatonic trance has frozen thought about monetary policy in Scotland; in Scotland of all countries! It becomes very, very difficult if nobody is addressing the tough questions.
I wish I knew the answer to that
Down to the Dear Leader. No interest in economics and would rather pursue social issues. A bit like Sir Keir probably.
To be fair, I think there are people looking at these issues but in the “political space” it is still all about GBP or SCP so it is hard to dig too deep into detail while there is no commitment to a SCP. There are considerable transitional issues that are not without cost and voters need to see what the upside is that makes it worth the hassle. I would argue on two fronts…..
(a) Independence without your own currency is an illusion
(b) Canada is what we aspire to be (currency/monetary policy-wise)… ie. there are “working models” out there.
(a) is a rather “negative” argument so perhaps (b) needs to be pushed as a “vision” of the destination (if a consensus can agree Canada as a model).
There are some tricky transition decisions to take but if there is consensus on where we want to go then they can be dealt with.
Mr Parry,
I am pleased you highlighted Canada (and if there is work going on it is peculiarly secretive). The issues require aeration, discussion and dispersion. May I suggest those interested read this link, to Gordon Thiessen, ex-Governor of the Bank of Canada, writing about Canada’s long commitment to floating exchange rates, at: https://www.bis.org/review/r001208a.pdf
“Why a Floating Exchange Rate Regime Makes Sense for Canada”
“I think there are people looking at these issues but in the “political space” it is still all about GBP or SCP so it is hard to dig too deep into detail while there is no commitment to a SCP.”
The issues require to be widely aired and circulated, because my proposition is that Scots’ commitment to the Union following the end of Empire and the fading lustre of the UK (and its institutions) is, above everything else, a commitment to sterling (whether conscious or unconscious); as Scotland’s long-established currency, which is a rational response, when the currency still functionally does its work (at least with greater stability and less dysfunctionality than everything else in the UK), and that still has real Global reach. This should not be underestimated as a serious issue. It can’t be fudged, nor brushed aside because something else has sound theoretical credentials; that alone will cut no ice.
You are winning the argument John
“Now the question is what should a new currency look like. Canada and Hong Kong have their own currencies – but they look quite different. Voters need to have a vision of where they are heading…”
I think this is precisely the conversation that the SBFG series of articles in The National over the last 8 months has been trying to start. The independence movement seems to be pretty united around the belief in creating a “fairer and more equal society” and a “well being economy”. Good propositions in my opinion but there is insufficient discussion about what this actually means and, more importantly, how it will be delivered. The answers to the latter question concern the currency question but also what our banking and financial system should look like. It is the design of the financial system that will shape what the currency looks like.
As I understand it, Canadian banking avoided getting caught up in the GFC in 2008 so that makes Canadian banking worth understanding but a word of caution is required because those banks are supporting the Canadian oil sands industry. Scotland not only needs to create a “well being economy” but has to decarbonise as well in order to deliver well being in the context of a climate and bio-diversity crisis so we are going to have to design a bespoke banking and financial system – draw on best practice yes, but lets not get dogmatic about everything and reduce the discussion to template replication.
So the idea is for Scotland to have its own currency so it can rejoin the EU and then NOT have it’s own currency. Have I missed something?
No
I reiterate tor the umpteenth thousand time, Scotland must have its own currency to join the EU
It must also promise to join the euro
But as Sweden has proved, there is n o time limit on that
So in effect it need never join
I am torn on this one….…….
Scottish Chancellors show-boating over interest rate changes will not be very edifying…. or would the SCB be operationally independent. This debate could get worse than now! Would a Scottish Chancellor know enough to counter HMT orthodoxy or would the SCB merely be replaced by the dead hand of the Holyrood Treasury?
In practice, the best we can ask for is a more diverse group of monetary policy setters. Could we not have specific seats on the committee for representatives nominated by particular groups? (Eg. Trade Unions, Pensioners, Small business owners, Charities and more?). At the very least, the minutes of meetings would be a a bit more interesting.
Why do you think Scottish Chancellors should be stupid?
And what have you against democracy?
I recognise this comment…..I originally made in regard to the BoE and its “independence”.
My point about the UK set up was that, given the current arrangements, the best hope for better policy making is to change the way the policymakers are chosen – hence representatives of Trade Unions etc.
Scotland starts with a blank sheet so it is not clear that the SRB should have the same institutional arrangements as rUK. Their electoral system would, I presume, not be First Past The Post so that would take some of the excessive politiking out of rate setting decisions and they do not have the baggage of the 70s and 80 policy setting in the UK (The Ken and Eddie Show etc.). More importantly, I hope that Scotland would recognise that close coordination of fiscal and monetary policy is essential and that whatever the institutional set up, politicians must have ultimate control over all policy levers.
I think you should use Finance Ministry and Finance Minister, and not chancellor or treasury. And there won’t be any top hats in the Scottish Reserve Bank. I think a Monetary Policy Committee will be advising the Finance Minister on interest rates, but I like Clive’s idea of reserving seats for e.g. the STUC, Education, Universities, CBI Scotland, FSB, the Farmers Union, Charity sector and the like.
Wow – I expected the worst to be honest so I am very glad.
Now the hard work begins I think?
The BoE playing nicely? In this political climate? No chance. Whoever deals with the HM Treasury has going to have to be a tough cookie as well as having the negotiation skills to deal with the weasels that dominate in Whitehall.
I wonder how the BoE would respond….??
It is responsible for ALL UK citizens. If a significant group of those citizens (Scots) want to discuss things about future arrangements I think they have a duty to do so in a constructive manner. In any sensible world everyone would like to see that the proposals put to the electorate are fully formed and realistic…. and that must involve the BoE….. if the UK government will permit it.
They are also responsible for financial stability….. and an adversarial relation with a close neighbour is not conducive to stability.
So, I would like to see discussions start now between an SRB (or a forerunner of such a body) to look at key issues of regulation, capital and stability etc..
I would suggest that you are both right and wrong. I think you may have overlooked the history. Britain, England/rUK has two modes of operation (this has a very, very long history, I promise); what I would term the B&A (‘before and after’) strategy. First prevent an event happening; typically but not exclusively independence (USA, pre-‘Winds of Change’ round the Empire, Darien etc., etc), fight dirty or treacherously if necessary (we are going through this phase still with the EU, but then Europe=Universal Monarchy).
After the event? Sweetness and light; rationality is all, and what was impossible is now routine.
The obvious comment I might make is does Scotland (or anywhere else for that matter) need a financial sector larger than is needed to service the needs of the ‘real’ economy?
After Independence there will be a new parliament which will have to work together, and along with Sterlingisation drive a stake through Unionism. (what will be the purpose of the Conservative and Unionist party?) There will be realignments, maybe new parties, the SNP may dissolve into its constituent parts, perhaps the Greens will have more representation, ALBA may have some MSP’s. Who will be voted First Minister. I think, and hope, there will be many more voices calling for a Scottish currency.
Much of the thinking is being done by Tim Rideout, Jim Osborne & others in the Scottish Currency Group, as well as Common Weal, which should serve as a blueprint. The SNP Leadership really need to take note of the members, or come the revolution they may find themselves in the metaphorical tumbril.
“…despite warnings being given to the conference that a country having its own currency as a ‘dangerous experiment’.”
Who said that ?
Dr Tim said “……..no advanced economy has ever sought to use the currency of another nation. To try to do so would be to start probably the most dangerous experiment in global monetary history.”
It was Andrew Wilson in the Times a week past Monday warning delegates to vote for our own currency at their peril.
@Timothy Rideout
Andrew Wilson eh? I suppose I could have guessed.
Be great to have a Scottish pound. Given that we will need a new symbol to replace the £, there should be a competition for what it is. My vote is something based on the Loch Ness monster like .
For reasons I gave in respose to Richard’s previous blog on Scottish currency, I fully expect that Sturgeon will just ignore this vote, just as she has ignored previous conference votes on currency, land reform and countless other issues.
No doubt about that, but I have been told the only thing politicians take any notice of is power, which can be a rich corporate or a block of voters. In the Scottish Currency Group we now have 3000 members, and a lot of prominent experts and other people of interest. For example the past Chair of the Icelandic Central Bank joined us recently. We are making as much noise as we can. There will probably be an Exocet missile heading my way following the Lesley Riddoch podcast out today, and directed from the bunker in the Bute House basement – https://www.lesleyriddoch.com/podcast. There was a comment on twitter that I would ‘wreck my political career’, but I do not have one to worry about. Anyway if you have not already joined the Facebook Scottish Currency Group then please do. We could also do with help from anybody who could set us up a membership section of the http://www.reservebank.scot web site. You can’t email the members or collect things like addresses from a Facebook group, nor it is easy to collect donations or possible to set up a subscription fee.
I will listen to Lesley later
That we do not have political ambition helps us
I am always amazed by the amount of people that raise questions about problems that are already operating in the current situation, namely the Bank Of England issues the British currency, and no one asks how they manage it. Put into context what is the problem if Scots model their currency on the English pound with tweaks, such as the government spending directly into the economy rather than issuing the currency as debt.
I also feel it would be the biggest mistake ever if Scotland chose to join the EU, exchanging one Neo-Liberal form of government for an even worse one. They would even have to give up their own currency for the failing Euro.
Scotland would be jumping from the frying pan and into the fire.