Will Scotland hold the consultative referendum on its future that Nicola Sturgeon promised yesterday? Combined legal weight of opinion suggests that this is unlikely as the Westminster government opposes it and it is thought that the Supreme Court will side with them. Joanna Cherry QC MP and others disagree, saying that the Scottish parliament does have the necessary powers to proceed on this issue. Time will tell who is right: I am not going to judge on that one.
What I do know are three things. The first is that when a body of people in a defined geographic area have a different sense of political priorities to those from another area that seek to govern them then the resulting conflict does eventually usually lead to a parting of the ways because the tension of staying together eventually becomes too much for those seeking to hold on to power from a distance. The process of attrition becomes too wearing to continually tolerate. So, I do think that Scotland will, as Ireland did, regain its independence and without violence, I am sure.
Second, I am certain that Scotland can be a successful mid-sized European nation, which is what it would be after independence. If so many other countries of around 6 million people can survive in Europe so too can Scotland, very well. Those arguing otherwise have not got evidence on their side. The Scottish government was right to point this out in its very first publication that opened this round of debate.
Third, to succeed the Scottish government needs to be honest about the biggest issues. None is bigger than the currency an independent Scotland will use. I have little doubt it will be called the pound. The only question is whether that is sterling or a Scottish pound. On this one, I have no doubt. I set out the arguments here:
This issue killed the Yes movement last time. Honesty this time is essential. I hope there is the courage to do that.
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“This issue killed the Yes movement last time.”
It is much misunderstood. The key problem, it seems to me is not the one on which people focus. Let me be clear; I am not sure the Scottish people consciously realise how central the currency is – to them. The old roots of Unionism, in religion, monarchy, or empire have all gone. There is no substance to them beyond a hazy wash of of nostalgic romanticism; often dressed as common sense. The real common sense is that consciously or not the Union has a single effective hold over the Scottish people: the pound sterling.
The logic of the argument for a Scots pound is theoretically sound, but it has no purchase on the support or loyalty of the Scottish people; precisely none. The pound sterling,I propose is far more important to Scots than anything; anything at all the Union can offer; it is all that is left that still represents real “value” in the Union to Scots; in spite of the Union (and Margaret Thatcher’s Big Bang) wrecking the principled and successful independent banking system in 1986. Confidence in the pound sterling is that resilient. The Scots know perfectly well the Union, save for Sterling is a busted flush; all other defences of the Union are so much guff.
There is the problem. It isn’t fixed by theory.
May I add: Scotland developed the idea of ‘commercial society’ in parallel with the comprehensive monetisation of Scotland following the Union. The pound sterling was built into the fabric of modernising, commercialising Scotland, at precisely the same time as sterling developed into the leading world, commercial currency. For the Scots that began with the Union negotiations before 1707 over ‘the Equivalent’; a seminally important stage in the self-development of sterling as a monetary power (read William Deringer, ‘Calculated Values’, 2018). Sterling is to Scotland (not least politically), something a little like dark matter; an imponderable ether.
Well put
Perhaps I am biased because I am so completely for independence, but I find myself asking if we are overthinking peoples attachment to Sterling. I believe that attachment simply stems from fear that the value in a S£ may be less than our current Sterling. People work hard for every penny they have and there will of course be real fear that they will be left with less than they have now. For that reason it is imperative that the SG is able to demonstrate exactly how our own Currency will not only sustain our current wealth-or lack of-but how and where it will allow personal growth. Peoples access to Pensions and benefits and what they will receive on day one along with a clear demonstration of the value in their pocket of money earned in the S£ is crucial with a capital C. It’s easy to talk to people and harvest their opinions at Indy events but there would be more value if we could find a less biased source of opinion which could give us a clearer understanding of the ‘real,’ attachment to Sterling.
Noted
I have been trying to tackle these issues – have you found those materials?
Your statement of the issue reveals the difficulty; because it rests on ordinary people’s fundamental approaches to risk, not only as it affects their assests and liablities; but the money they use. This is not just rational, but visceral. Here the long history of sterling in Scotland has established a deep, powerful senes of assumed (taken-gor-granted) confidence. This is not easily measured on a graph; but try ignoring it.
If Sterling was just another (relatively, and without condescenion), modestly traded European currency on world markets, like the Czech koruna; then the problem would probably be relatively easily managed. But sterling in Scotland isn’t just another currency. It is still one of the most significant currencies in world trade, and was the leading world currency until well into the twentieth century (the processes that made sterling the leading currency – in which Scots played a significant role – were followed by the US in its own rise to dollar hegemony; see once again Mehrling, on Bagehot et al). Sterling is a currency in which Scotland invested its future long ago, and I submit it remains the glue that effectively holds the decaying Union together; for better or worse.
I do not claim the matter cannot be resolved; I am simply waiting to see the nature of the major plan to ensure a transition works well. I have not seen it; I am not sure the SNP can deliver it, on current evidence; and I remain sceptical of the outline plans by proponents I have seen so far – not solely whether they are technically sound, but whether they will inspire the required level of confidence among Scots).
What would Bexit have been like if the Brexiteers (who failed to deliver a convincing economic case to Scots), had needed to change Britain’s currency from Sterling to win (I am simply offering a thought experiment here, I know it did not actually arise)? Do you think that would have worked?
Could I be wrong? Of course, but somebody has to ask the tough questions. This is the tough question; if you can solve it, you can win. But you haven’t solved it yet,
One important lesson from Brexit is the need for the consequences of both yes and no results to be clearly defined -I recognise it cannot be done 100%.
With Brexit, there were several types of relationship we could have had with Europe, but no one type was specified. There was a lot of ‘not revealing our hand’ talk, which was nonsense as the EU were clear there only a few relationships they were prepared to offer, because they did not want to renegotiate all the treaties which define the Union.
After the result a part of the ruling party ( I gather with minimal consultation with the rest of it, let alone other parties or assemblies in the other nations of the UK ) decided what they would go for. They ruled out a confirmatory referendum once the terms were known. Not at all democratic IMHO.
The SNP must make clear what sort of Scotland will emerge from independence if that is what they decide.
As an aside, it strikes me the Conservative party over the past 12 years, has been a major reason for the Scottish desire for independence.
There is little or no distinction in Scotland between Tories and Labour. In 2015 Labour lost 40 of its 41 Scottish constituencies at the UK election. In the 2019 UK election, Labour won 1 seat. It’s not hard to see why this happened. Labour had acted as the lead in the 2014 Better Together group because the Tories knew that any appearance that they made in Scotland would have only increased support for independence. Just ponder that for a moment, a UK Government unwilling to make a case for the UK in Scotland, relying instead on the opposition to do so. It won’t matter who represents the UK next time, the lack of a substantive case for Scotland to remain in the UK will be the key when the time comes. That is what is at the heart of independence.
I think that a good point
But NO did win, remember
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However, there will be few memorable Scottish Labour figures to call on next time
Ian
You are saying that the Lib Dems and Labour advocated staying in the Union in 2014, more strongly than the Conservatives. And the Unionists won 55% to 45%.
Yet in 2015 50% of the votes were cast for the SNP. A shift of 5 percentage points. You might know better than me what caused that as I live in the South West of England , though, with a brother in Edinburgh. I am not in a position to judge why there was the swing.
There are lots of reasons I can see why many Scots want out with a Right wing government like we have. I have every sympathy. I suspect the Conservative/Unionist argument in the next referendum will be less about the advantages of staying and more about the dangers of leaving. Negative campaigning can be very effective. However, this means the SNP needs some well constructed polices to counter this.
Having had my doubts initially, I have now heard and read many of your, Tim Rideout’s and others’ contributions on this matter and am convinced about the absolute need for an independent Scotland to have its own currency.
I have just heard a Conservative MP on BBC 5 live (I think Kelly tolhurst, but may stand to be corrected), arguing the Scottish Government is not providing sufficient resources in various ares, because it is failing to manage its budget. This is not just false, but outrageous. Scotland is virtually the only part of the UK which does manage its budget*. It has to, because unlike Westminster it has virtually no borrowing powers; so, unlike the UK it has to meet its budget, and has done so for fourteen years under the SNP; and presumably since devolution. There is the problem; it is hamstrung from acting because the budget is not just a priority, but the only standard of Government.
The ignorance of Conservative politicians is breath-taking; and they wonder why Scotland is running for the exit, away from incapable people who make blasé decisions over Scotland from a position of the deepest ignorance. Tolhurst is a Johnson supporter. Heaven help us.
* I except Wales, which may be in the same boat; but Wales does not support the range of services supplied by the Scottish Government
Agreed
Scotland cannot achieve independence without our own currency and cannot have our own currency without independence. They are inextricably intertwined. That means there must be a purpose – they are a means to an end, not ends in themselves.
If there is a sufficiently compelling “vision” or purpose which appeals to the dominant social and cultural values of the people of Scotland then this would overcome the strong attachment to sterling which John W describes. People will need to be persuaded to “take the risk” necessary to fulfil their values and aspirations.
There will be caution and a new currency will have to prove itself before people accept it. People will continue to hang on to at least some of their sterling until they are confident that the Scottish government and its central bank can fulfil their “promise to pay” – that actually means that Scotland can meet the material and cultural needs of its people by developing the productive capacity of the economy. The process for introducing a new currency in Scotland proposed by the Scottish Currency Group provides for a voluntary exchange of sterling for the new currency – people can exchange their sterling at the time of their own choosing.
For me now, what trumps the currency as the key issue for independence is the vision – the purpose of it all. And that means that the incorporation of fundamental rights of citizens in a written constitution is the most important step. The kind of rights I have in mind include rights to food, energy, housing, health, education, work, a pension and so on.
Having these rights built into the Constitution will go along way to reducing the scope for short termism and political expediency. Of course having rights written into a Constitution is not a guarantee for the future – democracy ultimately depends upon having an active and engaged population.
Having our own currency will be crucial for the state to deliver on these rights but so will the need to bring the banking and financial sector into the service of the common good by reform and a new regulatory framework.
I appreciate you considered comment. Neverthless I do not think it adequately recognises the depth of the relationship with sterling, woven into the fabric of Scottish society. Rehearsing the theory will not cut it. Nor do I see an adequate understanding by the SNP of the currency and monetary issues (that would help). It is not a ‘strong-suit’ of the FM. The SNP banking and economic politicians or advisers have proved hopeless. Richard is right: “This issue killed the Yes movement” in 2014. Salmond mishandled it (another banker), but I suspect his acute, basic political intuition was right: don’t mess with the Scottish relationship with the pound sterling. So far as I can see, it is inadequately thought through and we are currently merely re-rehearsing the same outcome.
Can it be fixed? Fine: show me how. You haven’t done so.
I am closer to your opinion John, because people tell me that (and I do talk to people to find out what they think, including in Scotland).
Alex regretted the way he handled that, I know, because he told me so.
I am aware Tim is moving on this issue a bit
The one thing we can’t rely on is the FM to make the moves: your assessment there is right John
I can’t show you how John and probably nobody else can – the point I am trying to make is that there has to be a sufficiently compelling “vision” of what Scotland can become by independence which can overcome popular reluctance to abandon sterling. Because we cannot be absolutely clear on “how” does not mean that we should avoid taking the journey if there is clarity about the “why”.
Thanks Richard, appreciated. I do not believe the immovable centrality of this issue is yet adequately understood or addressed, even among informed activists. It is not mere boilerplate, at the back of the prospectus. It is not glamorous, but it can kill the project; stone dead.
It may even be that the policy insiders are aware of the problem (they should); and simply do not know what to do about it. At least that, unreassuringly would make some sense of official policy.
I strongly tend to agree with you
Absolutely agree with all of that!
We in the Scottish Currency Group invite anyone in the SNP and any MPs, MSPs, Branches and CAs that have not already done so, to support the following resolution for the October SNP Conference. This will have the effect of disposing of any reference to ‘Tests’ and will re-affirm the April 2019 view of Conference that we must complete the preparations and be ready to introduce our own currency as soon as practicable after Independence Day. It is simply a matter of fact that the exact date, how long a one-to-one period there should be, and how fast we transition to a floating currency will be decided by the post-Independence government (which might not be SNP, of course, as there is almost certain to be an election around Independence Day). As the supporting statement says, we have worded things as we have so that what is essential does get done: establishing the Scottish Reserve Bank (www.reservebank.scot), designing and printing bank notes, setting up the S£ payments network, etc) so that the post-Independence government is able to introduce the S£ and not end up in a Slovak style chaotic emergency currency introduction. The wording will, we hope, get the SNP Leadership on board and put an end to any further discussion of sterlingisation, or using the ‘just use the English pound for decades in the campaign. The SCG has absolutely not changed its view that ‘as soon as practicable’ means a few months, and we shall be continuing to make that clear, especially after the Indy Vote is won. We have no doubt that the macro-economic realities of actual Independence will ensure those future Ministers push the button to launch the new currency within those few months after Independence.
CURRENCY IN AN INDEPENDENT SCOTLAND
Conference notes that significant changes have occurred since the Sustainable Growth Commission report was prepared and resolutions on its currency proposals debated by Conference: specifically, Scotland’s exclusion from the European Single Market following Brexit; and the massive government spending response to stabilise the economy during the Covid pandemic, only available to states with their own currency.
Conference further notes that, while acknowledging the need for responsible economic management, there are compelling advantages to Scotland having its own currency after independence: in particular, giving the government of Scotland as much freedom as possible in formulating economic policy; avoiding any reliance on borrowing in a foreign currency; and applying to re-join the EU should that be the wish of the people of Scotland.
Conference believes that changing circumstances, and the clear advantages from Scotland issuing its own currency justify a further refinement of the Party’s policy on currency, so that a post-independence Government would be able to introduce a new Scottish currency as soon as practicable following formal independence.
Conference therefore calls on the Scottish Government to commit to taking all measures needed to permit the introduction of a Scottish currency, including the establishment of a Scottish Central Bank during the transition period between a Yes vote and formal independence; while leaving the timing and detailed implementation of a Scottish currency to the post-independence Government of Scotland.
We will be doing a public launch of ‘The Road to the Scottish Currency’ report in the next month or two. Glossy printed copies have already been provided to the MPs, MSPs, Ministers and senior civil servants. The public version will add another section with a Q&A that will answer all the common questions that have come up in the more than 50 talks we have done on the Scottish Currency. Such as ‘What happens to my mortgage?’
SUPPORTING STATEMENT
This resolution revisits Party policy on currency arrangements after independence. It endorses existing policy that Scotland should adopt a separate currency as soon as practicable after independence, while recognising that the post-independence Governments of Scotland will be in the best position to take decisions on policy implementation according to future circumstances.
The resolution therefore emphasises that post-independence Governments should have unconstrained discretion to take decisions both on the timing of the introduction of the new currency and on the exchange rate policy to be followed (including whether the currency should be ‘pegged’ to another currency for an initial period or allowed to ‘float’ on the foreign exchange market). This formulation reflects the conclusions of the Scottish Currency Group’s report ‘The Road to the Scottish Currency’ and can accommodate different views which have emerged within the independence movement.
To ensure that all options are available to the post-independence Government, a Scottish Central Bank should be established during the period between the independence referendum and the formal declaration of independence. This will give it maximum flexibility to decide when conditions are appropriate for the introduction of a new currency, taking account of the economic position at the time.
While the resolution notes that having a separate currency will enable an independent Scotland to apply to re-join the EU, it does not pre-empt decisions on European policy (including whether membership of EU or EFTA should be pursued).
Tim’s last sentence is worth expanding a little: membership of the EU requires a country applying to join to have it’s own currency – it’s a sine qua non and not having its own currency will considerably lengthen the membership application process. It constantly surprises me how many politicians, political commentators, journalists appear ignorant of it.
While the SNP’s stated aim is to have EU membership, a great deal hangs on how the negotiations with the UK Government turn out. If the Scotland – rUK border issues prove to be intractable or disadvantageous, it might make more sense to apply for EU or EFTA membership in order to simplify cross-border trading. This isn’t a trifling matter – just look at the N Ireland Protocol – so Tim’s resolution sensibly enables the necessary flexibility.
recent opinion polls suggest only 3 in 10 Scots want another referendum let alone independence.. i honestly think Sturgeon, deep down, doesn’t believe she can win.
Maybe…
This could just be a ply to keep her party on side, but a high risk one in that case
I concur with the Scottish Currency Group and with all Richard has written on a Scottish currency, but I have one concern.
The introduction of a new currency is usually accompanied by volatility whenever it occurs. Of course, Scotland could rely on the good offices of the rUK Government and its friends in the City, not to mention the wholly benign activities of international speculators, to ensure that the period from I-day until after the adoption of a new currency would not be exploited in any way. And certainly not to encourage some buyers’ remorse!
While the SCG has mooted some pegging or floating arrangement for this interim period after rates were initially fixed, I suspect that won’t be strong enough protection at time when Scotland would be at its weakest.
Rather, I think that once a referendum is won, Scotland would be well-advised instead to foster the development of new political alignments and establish the Scottish Central Bank.
Then elect a new Parliament to take office on I + 1, which would have observer status until then, shadowing Ministers and MSPs. The new currency should also come into operation on I + 1. A transition group of politicians and bankers should advise the SCB.
Scotland will face significant pressures as a newly independent country. Regardless of whatever is agreed with London, inter-state politics will prevail thereafter. Not having control of its currency will not help in those early days.
The volatility is likely to be less than Breit caused
I think the answer to that is there will be a one-to-one peg during the ‘Exchange Period’ which might be 3-4 months. After that there will be a peg to Sterling with gradually widening bands. So maybe Month 1 held within 1%, Month 2 within 5%, Month 3 within 10%, then relaxed to a free float if all is going well. The SRB will have plenty of FX reserves as a result of having sold the S£ into existence.
Fascinating stuff…………………..Scotland absolutely needs a sovereign currency of its own.
The canny Scots though will not tolerate Scottish pound that is weaker than pound sterling. Their ‘poond’ has be as good as if not better than the Sassenach version they’ve been made to use all these years (which is possibly the only good thing we’ve ever done for the Scots – provided them with a relatively stable currency – albeit never enough of it – and not always stable either).
To reassure people, the Scots must go beyond the limited ideas that dominate current fiscal policy. I note that Scottish law has principles that are different to English law – is there any underpinning of radical new approaches there?
All I would say to the Scottish is that a sovereign currency, central banking and tax policy is at the heart of the power of a nation – including a new one. The nettle has to be grasped – come liberation and those who voted for independence finding that they’ve voted to make themselves poorer against a country that has pillaged and held them back – well that would go down like a shit sandwich – and rightly so. The Scots would feel that they were back at square one because Westminster has been making them (and us) much poorer since 2010. And what if the poond was poor against the euro? More regrets.
I have no answers, just broad ideas and philosophy and I think heterodoxy is the way to go – not orthodoxy. An unleashed country is one that can be brave and imaginative (not the Patel & Raab version of unleashed either). But it is also grasping that sovereignty is not simply a matter of borders, language, laws and executive power – all that is BREXIT old hat: it is also the money-power of a free Scotland at the centre of it that must be a goal.
All the best to Tim Rideout and others but the message I’m getting is that the transition bit is just as important as the end result. Giving birth to a new nation and its currency will need be managed very proactively and in real time too – there can be no ‘set it and leave it’ monetarist deals. There’s just too much at stake – the last thing a new nation needs is its own citizens being angry with it from day one!
“…the Sassenach version they’ve been made to use all these years”
Forgive me, but they weren’t “made to use” it. For over half the eighteenth century the Scots, as a matter of convenience and utility continued to use both currencies (as well as the ‘chalder’ in many country districts, which was an anachronistic measure of grain). Bluntly, your sketch is an unfortunately too common Disneyworld version of Scotland. It is a complete misunderstanding.
By the early eighteenth century Scots were principally dogmatic, Presbyterian Unionists. The Union meant something that, on close inspection was distinct from England’s understanding of ‘Union’. It has run very effectively (especially because of the Empire) on very, very close parallel lines for three hundred years; without anyone noticing that parallel lines meet only at infinity.
Sheeesh – John!
It was just a light-hearted (yes – even Disney world – and why not?) unserious statement chivvying along about why the Scots should have their own currency that’s all. Surely that’s the main objective for an independent Scotland? If people need convincing let’s get on with it.
Flipping heck? Why do you always insist on playing the dour Scot? Lighten up. I’ll be the first to say I lack the historical detail but that’s all it was. How often have I seen notices up in shops etc. , refusing to accept Scottish notes in England? Where is your infinity concept there? It’s not out here in the real world and such behaviour does not make sense – and its the non-sensical that is the most dangerous.
And BWT – my intent is not to portray the Scots as victims or anything like – far from it. But I know enough about the centralising tendencies of London to know that an independent Scotland needs to be robust – and that’s what matters – Disney or not.
And for the the London financial markets to make a meal out of a badly handled transition to a Scottish currency is too awful to think about. I know my own back yard John – at least give me credit for that.
And my own back yard is full of people who would love to see Scotland fail in order to say ‘Told you so’ or because they are just racist. You know what England is like now – I’m sure.
The proof of the pudding for Scotland will be how English it appears or not after independence, especially with regard to social policy, its NHS, it’s fiscal management – all the stuff London has so thoroughly fucked up for so long. Will Scotland be a ‘courageous state’?
I have high hopes and expectations for Scotland. I hope that she will be courageous.
I think my wife would disagree with you about that and say that in the mid 18th century Scotland was fairly evenly divided with the Jacobite side definitely not ‘unionist’ as one of the stated aims was the restoration of the Scottish Parliament.
I don’t agree with you about there being any huge ‘attachment to Sterling’. I think there is a huge attachment to the ‘Scottish Pound’ by which I mean the distinctive Scottish notes. I think because this is a very visible symbol of Scotland being ‘not England’. On the 50 or so Currency Talks I have done from one end of Scotland to the other then I have found no resistance to the idea of introducing the Scottish Pound as our new currency, partly because so many people think there already is one.
I can’t post the image of our Panelbase Opinion Poll question from October 2020, but when asked the Question: The SNP’s policy is that if Scotland becomes independent, a new Scottish currency would be introduced as soon as practicable after Independence Day, to ensure that Scotland has control over its own monetary and fiscal policy and interest rates. To what extent to you agree or disagree with this policy? Sample size was 1020.
59% were either completely or somewhat in agreement. 21% of Tory voters were in favour too. The only age group to be overall against (50%) were the over 55s. Those 35-54 were 58% in favour and the under 35s were 73% in favour.
One of the things that is going to be interesting and indeed telling is just how Scottish the handling of the transition to the ‘poond’ and their own central bank will be?
We have a crap system in England – a central bank reserve account that is minted and bloated in order to help grasping banker’s casino operations that acts like a blackmail threat on the economy whilst there is too little money in society and public services go to the wall.
I suppose the other way of saying it is ‘ Just how English are the Scots in these matters?’.
Not much I hope. But that is the challenge isn’t it?
I hope we see the true mettle of the Scots and the end to Anglo-Saxon orthodoxy. That would be fantastic to behold in my opinion.
PSR – the whole point of independence is NOT so that Scotland can have its own currency. The point of independence is to create a “fairer and more equal society” – which means the eradication of poverty, homelessness and insecurity, and doing this whilst restoring and reversing the environmental harms we have done.
Independence requires that we have our own currency but both the currency and independence are the means to an end, not the ends in themselves. Independence has to have a purpose and our money/currency must also have a purpose.
I agree to an extent with John W’s concerns about establishing a Scottish currency – doing this will require displacement of sterling and breaking the loyalty people have to sterling. There is no clear way to do that – any “plan” would rapidly run into unpredictable events and circumstances. But what we can say, I think, is that there will be no “big bang” instantaneous adoption of a new currency. Trust in the new Scottish state and its currency will take time so it is vital that the right decisions are taken which will help build that trust. If the new state with its new currency can prove in practice that is more capable of delivering what people need to live well and in harmony with nature then more and more people will decide to give up their sterling and exchange it for the new currency. They will come to believe the Scottish state’s “promise to pay” more than the UK state’s “promise to pay”.
Of course, at the point in time when the new currency is introduced people will need to exchange some of their sterling in order to pay their taxes and workers employed in the public sector will be paid in the new currency (although they might just exchange some of their income back into sterling). But there is a limit to the ability of the new state to compel people to use the new currency. From these beginnings it is essential that, whatever the post independence government does, it promotes the development of our productive capacity, accelerates the process of decarbonisation and begins to tackle the scourge of poverty in our country. Achieving these aims will require not only our own currency so that the government can control the public finances but also reform of the banking and financial system so that it serves the public and national interest and directs bank credit and the investment of the public’s savings towards the development of the productive capacity of the economy.
A new currency cannot be fully established by decree – once it has been introduced its survival and its legitimacy depends entirely on the ability of the new state to deliver what people need to live well and in harmony with nature.
If the Scottish Government requires that tax be paid in Scottish pounds the new currency will be in use overnight
That is how currencies are legitimised
Jim
I ‘m not disagreeing with John on the point he is making – as usual the point he is making is in the devil and the detail of how these things will actually happen. That is where John Warren seems to surf, and his many insights in the nooks and crannies of these issues are always appreciated by me and others. I’m not being obsequious or sarcastic either.
As I said, for those who want independence to happen and wake up the next day poorer than what they were before is not a good start for a fledgling country. I understand the issue I think in broad terms and also from John’s contribution.
But also, I stick to my guns about being bold and the Scottish Government being innovative. The CBRA has a limit on it to guarantee that banks can get paid and not lose to other banks in the process of doing what exactly for society?
Is it impossible for a Scottish Government to uphold and guarantee the sterling holdings of it citizens in some way during transition? Now wouldn’t that be novel? Wouldn’t that be ‘un-English’? A Government looking after the people who vote for it!! How bizarre!! But what a way to get a people behind your country – to be helped in such a transition as Governments tend to help the rich and high finance who have captured sovereign currency production for themselves?
It is good to question what is possible but have we really been bold, innovative, heterodox yet? I don’t know. We live in a time of no ideas apparently. Well let’s have some before we knock them down. I think we underestimate just how orthodox we have become and how often we unknowingly adopt the views of those we say we reject.
What I objected to about John BTW was the way he responded which I think was a bit over the top. I don’t mind being put right – I’m here to learn as well as stick to better principals that we all seem share to here.
People come here who obviously want to cause trouble and get short shrift and deservedly so. But if we think we are talking to like minded people, we need to watch how we talk to each other and not over react over small differences or facts. Note how the Neo-liberals stick together with their lies whilst the ‘progressives’ take pot shots at each other over detail in the name of some form of puritanism. Maybe facts are sacred in places like this because we are surrounded by lies and deceit? But that’s all I’m trying to get over here. And it applies to me just as much anyone else when you are battling over better ideas.
PSR,
I had no idea you were offended; noticing merely a light-hearted rebuke that I was being “dour” (among the criticisms of me, not one I have often come across), but not one I thought of any moment. Criticism is something I can take. My apologies for the offence if I was too robust in my response, but I am still at something of a loss to see what was offensive; offence is not – I think I can fairly say – my ‘modus operandi’.
The issue I raised, seems to me to be very serious. I have raised it before and I insist it still does not receive sufficient attention, or convincing answers; therefore I was a little surprised by your response, and candidly wished quickly to move beyond what I perceived as introducing casual flippancy; a facetious diversion, when I was attempting, hoping to focus the concentrated attention of interested readers on the serious matter in hand.
Jim
I think that having a sovereign currency is one of the purest, most centrally essential expressions of sovereign power. I think it ill advised that people seeking independence don’t think about that. The fact that we still had the pound during BREXIT certainly helped me to see through the lies of that. It reified the false arguments about BREXIT – it was austerity (lack of money) causing us problems – not Europe. Central banking behind that currency has a record of building up small countries – like the UK.
Having your legal tender tied to another country in a world where trade has all too often been warfare is a tremendous risk.
Having said that – yes – launching a new currency in modern global economy is also risky – no doubt about that. But that can only be surely dealt with by having a go at different ways of doing it, proactive involved management of the currency as well as effective tax policy. Aping the orthodox monetarist route only is not enough in my view.
Thanks
The nuclear issue is also one to watch. The Scots wont tolerate English and US bases if the Ukrainian conflict escalates
I was sent this by Professor Walsh of Glasgow Centre of Population Health and asked to put it out as widely as possible. Might you be good enough, please, to put up the link with a brief introduction?
https://www.youtube.com/watch?v=-nvY8_ga7qE
The underpinning report is here.
https://www.gcph.co.uk/life-expectancy).
Scotland’s average life expectancy was comparable to that of many other European countries until Thatcher came to power. Then de-industrialisation made us (and the North of England) the sick people of Europe.
Best wishes,
Sam
Richard – if it is as simple as that then what is John Warren concerned about? Your previous comments suggest that you are inclined to agree with him. Perhaps I have misunderstood but if Scotland is wedded to sterling due to a long history of the relationship between the two countries how does a new Scottish state gain the legitimacy to demand taxes be paid in a new currency?
I am offering a way through the issue
Standard of living is the primary factor that the population will measure the performance of the new country by. They won’t care about exchange rates, tax bills, England or anywhere else, if it is apparent that the goals laid out prior to independence, are getting closer and life is improving.
The only way to guarantee progress towards whatever goals are set by whatever government the Scottish people elect, is by the Government issuing its own currency.
It MAY be possible under Sterlingisation but would depend on the rUK economic policy at the time, which could just as likely, be obstructive to Scottish aspirations.
The Scottish people will vote for independence because the status quo is unsatisfactory and stagnant. Change is necessary. UK policies are not working. Therefore, I see no option for advancement towards that better standard of living but to adopt a sovereign Scottish currency from the very start.
I agree with all of that David but once a new currency is introduced there is no guarantee it will be widely accepted. The legitimacy of the new state and its currency depends upon it delivering what was promised in terms of fairness equality and well being. There is an obligation on the part of citizens to pay tax but that is based on a “social contract” under which the state has first to deliver on its obligations to its citizens. I do not think that the deep loyalty that the Scottish public has to sterling (which is the issue John Warren believes is not taken seriously enough by currency campaigners) can be overcome simply by the new state demanding that taxes be paid in the new currency.
It follows that there must be a sufficiently compelling vision for independence which can attract sufficient support to proceed with independence and then the promises made have to be delivered, and be seen as being delivered. That can only be done once we have our own currency, which provides the means to deliver the promise, but if the currency is not used to deliver the promise its legitimacy will weaken, along with the legitimacy of the new state. It will take time to deliver those promises fully so it will take time to fully establish the currency, but if the direction of travel is seen to be positive then, over time, the currency will reach “Heineken” status and reach all parts.
Many thanks indeed for this. I was distressed by the confusion and dishonesty of arguments about the continued use of sterling during the 2014 referendum. It was unfortunate that the Carney Bank permitted itself to get politicised and manipulated by a panicked Cameron government.
It was especially unfortunate, as we have been through this process before, and scarcely anyone picked up on it in 2014. In December 1921 Ireland was given monetary independence as part of the wider political disaggregation of the IFS and the UK that was substantively completed in that year. Sterling continued to circulate freely within the IFS, and when the IFS established its own punt under the Cosgrave/Blythe Currency Act 1927 (based on the report of the Parker-Willis commission of 1926), it was at par with sterling. The Bank of England under Norman was co-operative and remained solicitous of Irish opinion throughout his governorship (see Eoin Drea’s article ‘The Bank of England, Montagu Norman and the internationalisation of Anglo-Irish monetary relations, 1922–1943’, Financial History Review, v. 21 (1) April 2014, 59-76), despite the ‘economic war’ of 1932-38. Neither the creation of an Irish central bank in 1943, nor the transfer of commercial banks’ sterling assets to the central bank in 1969 did anything to impair the status quo.
The punt remained pegged to sterling, even after the three devaluations of the latter. However, it was the UK’s decision to float in 1972 (and its inflationary consequences for Ireland) which led to the final decision to break the peg in 1979, when Ireland chose to join the EMS and the UK did not (the decision was made quite late, and even at late as 1976 the legendary T. K. Whitaker was apprehensive about breaking the peg). Fortunately, the Giscard/Schmidt plan for EMS came to the rescue. Accession to the EMS, dominated by the DM, was a calculated risk for a largely agrarian and inflationary economy like Ireland, but the pill was sugared by the promise of EIB loans equivalent to 3% of Ireland’s GNP. Although Ireland’s economic history during the 1980s was ‘chequered’, and certainly very unhappy during the first part of that decade, the effect of its liberation from sterling, evidenced in part by the steady decline of the UK as a trading partner from its former position of dominance, was perfectly tolerable.
Therefore, there is no reason why Scotland should not continue to use sterling, as Ireland did in 1921-27 (and even until the early 1950s), and as various countries use the USD. There is no reason why a Scots pound should not be pegged to sterling, as the punt was in 1927-79, nor is there any reason why it should effect a peg in the first place (although it might wish to follow the Irish example for a period until trade between England and Scotland declines to a level where the peg might be disregarded).
The currency issue therefore strikes me as being a complete canard.
Perhaps the apportionment of the UK’s debts might be a greater political issue. Indeed, as one of the comments above noted, it was the Equivalent which proved to be especially controversial, since there was only so much additional debt that England (which was incurring enormous military outlays during the War of Spanish Succession) could be expected to bear. More especially, how were the debts of the Company of Scotland (viz. Darien) to be redeemed, and how were various sectional interests to be ‘squared’? The amount was determined by Paterson, Gregory and Clerk of Penicuik, calculated on the basis of England’s pre-1707 debts, and came out as £398k (or >£42m). That amount was used to buy off those who lost out from the Scots currency being extinguished, the distressed shareholders of the Company (which included many of those in the Scots parliament who voted for union), the Scots woollen industry and allowances to the commissioners who negotiated the union. It was therefore a massive bribe to waverers in the parliament, and proved to be acutely controversial. I daresay that the resolution of debts will be as painful at the point of demission as it was at accession. However, the Irish precedent demonstrates that this need not be the case unless the rUK wishes it to be so. In 1925 the UK waived 80% of Ireland’s share of the national debt as part of a ‘trade’ over the land border with NI (this is a useful recent discussion: https://academic.oup.com/ereh/article/24/4/818/5827947). It is not clear whether Whitehall will have an interest in repeating that unusual act of magnanimity unless there is some sort of package deal regarding Faslane or any North Sea royalties.
In any event, the unions of 1536, 1707 and 1800 came into being chiefly because of the anxiety of the English state about being outflanked to the north and west by its continental adversaries, chiefly France and Spain, who were able to manipulate the Irish and Scots (and frustrate English designs on the continent). The great dividends of union were improved economies of scale and the fact that the borders of England would no longer function as zones of devastation (https://www.cambridge.org/core/books/englands-northern-frontier/0B81EB4C2EE3E19FFF81A962ED7AB486, for example). Whitehall might be especially reluctant to accommodate SNP designs if there is a reversion to pre-1707 (or 1745) paranoia, but such paranoia might well prove to be self-fulfilling (for instance, the British state, having ceded the three treaty ports in 1938, was especially neuralgic about the security of its western approaches, and the reliability of Dev’s Ireland during WW2).
Apologies for the length. I have been looking for an opportunity to get these points off my chest for a while, and you have kindly furnished it.
I rather wish you had not wasted your time here. It’s hard to tell whether you really do not know what you are talking about, are disingenuous or are stupid.
You ignore:
– The state of Ireland in 1921
– The state of fixed exchange rates in 1921
– The gold standard until 1971
– Capital market liberalisation in 1979/80
– The crushing poverty in Ireland using sterling caused
– The understanding of how many now works in the economy we now have
And when it comes to debt you ignore the law on successor states that now exists and instead try to draw some conclusions from irrelevant history
It’s hard to imagine anyone could ever write something so misinformed as you have, which so ignored the evidence of the eras it refers to or the present, and which draws so many conclusions to confirm prior prejudice without a shred of actual evidece to support, but somehow you achieved it
This is first-order drivel, to be polite
And if you don’t understand a) appreciate Ireland was crushed by fixed exchange rates with sterling b) read what I and others have written about currency, tax and sovereignty and c) take look at the law on successor states and debt
Don’t come back until you have
To John Warren
Thank you for your response most sincerely.
If you can suggest any reading about the historical relationship between Scotland and England that you think would throw more light on how it actually works, and increase my understanding (especially if it debunks any received wisdom on my part) I’m all ears.
You see John, I’m an Englishman unfortunately (my ancestors having moved from Sutherland many moons ago) and I live in a land with a surfeit of received wisdom.
The best work (and incidentally, not written by a nationalist) on the early Enlightenment development of Scotland’s Unionism, and its problems is by the outstanding historian Colin Kidd, ‘Subverting Scotland’s Past’ (1993).
On the crucial issues around the Union negotitations running up to 1707, I am not comfortable with the conventional wisdom; the economic issues, from a Scottish perspective are typically underplayed and, I believe misunderstood. I really cannot rehearse the issues satisfactorily here. Much has still to be done.
On the absolutely crtical issue of economics and Union (again, from the important but too often overlooked Scottish perspective), I think the most interesting work, William Deringer, “Calculated Values” (2018 – I have already cited this), does not explore this perspective in detail, but it is full of insight on the money and big economic issues, and provides and approach that should trigger more imaginative work and insight into what brought the Scots commissioners to the negotiating table; the conventional wisdom is at best incomplete and often lacks robust economic insight.