Only the most blinkered of Nationalists will fail to accept the extent to which Lamont easily pulled and pushed Salmond from pillar to post at yesterday’s FMQs.
The apparent suggestion from Nicola Sturgeon that Scotland would have representation on the Bank of England’s Monetary Policy Committee after independence seemed errant and certainly wasn’t helped by Salmond’s vague reference to having talked to Mervyn King recently. The old adage ‘It’s the economy stupid’ has probably been shortened and switched to simply ‘stupid economy’ within SNP circles as outside market forces are the single biggest millstone around the Nationalist neck these days, and for many days to come.
The Treasury sought to lance this particular issue for the SNP today with an appropriately respectful but firm put down of the suggestion that Scotland would have representation on the MPC. The Treasury is not predisposed to helping out the Scottish Government, but it’s not difficult to assume that they are correct.
Alex Salmond should have heard the alarm bells yesterday and fobbed off the question by saying there are two long years to work these details through but he was fatally undermined by allowing half-baked ideas out into the public domain in the first place. People will only be convinced by hard facts and definitive answers from the key stakeholders, be it Bank of England, European Commission, HMRC or whoever. Romantic witterings from independence proponents of ‘Well, the way I see it…’ simply won’t muzzle the custard.
Faced with stubborn poll ratings, seemingly unable to preach beyond the converted (be it at yesterday’s dumb Parliament vote or last week at Cineworld) and a quietly confident set of unionist arguments amounting to ‘why bother?’, the Yes bandwagon is stuck in the dirt. To coin a phrase, the SNP cannot go on like this. Something’s got to give.
The ambitious intention to out-canvas the unionist side and use sophisticated data gathering techniques to give the Yes team an edge is impressive but insufficient. You don’t win arguments without a winning argument and, for me, there are only two scenarios that can lead to a Yes result in 2014 – one is in the SNP’s hands and the other out.
There’s only so many u-turns that any politician can make while still holding onto their credibility. Just look at George Osborne’s pasty tax and charity cap about turns. However, the SNP really has to think through its insistence that it wants to hold on to Sterling and seriously consider embracing a Scottish pound. There are stark differences between Greece being part of Eurozone and an independent Scotland being part of Sterling, but it is precisely the wrong time to hope that you’ll get a fair hearing over how a currency union without a political union will work from a particularly risk-averse Scottish public.
A Scottish currency itself wouldn’t be risk free of course, but it sits happily and more persuasively alongside the very notion of Scottish independence and boosts the SNP’s radical credentials at the same time. I mean, picture the Braveheart-esque scene:
Salmond: ‘It’s the anniversary of the Battle of Bannockburn and now it’s our turn to fight for our freedom!’
Nationalist hordes: “Yeeee-haw. Let’s get intae them!”
Salmond: ‘But we’ll be keeping the British currency…’
Nationalist hordes: ‘Ye whit?’
I just don’t see it myself. Sweden and Norway do perfectly well with their own currencies, and Ireland and Greece clearly wish they’d kept their punts and drachmas. There may be early difficulties in balancing a relatively large debt burden while trying to build up an oil fund, but I can’t imagine an historically strong Scottish economy with great forecasts into the future would attract punitive borrowing costs, despite its small size.
The alternative, sticking tight to Sterling, would see the SNP sleepwalk into a No result, possibly with the awful aftertaste that they never really gave the referendum a right good go.
The other game changer that could see a dramatic increase in support for a Yes result is a referendum on UK involvement in the EU. European integration may yet develop at a dramatic pace over the next couple of years despite a solution to the Eurozone crisis still seemingly a long way off. That solution is surely either political union or everyone back to their national corners (and currencies). A European political superstate with the Eurozone nations at the core would see the UK even more marginalised than it currently is and, with a whopping 83% of grassroots Tories wanting an in/out referendum and UKIP steadily gaining ground in polls, who is to say that that referendum won’t be sooner rather than later.
I wouldn’t want to overstate how pro-European Scotland is, but for us to be outside of the European Union, as an independent country or as part of the UK, is simply unthinkable and surely theoretically a strong reason alone to vote Yes for many Scots.
However, Alex Salmond cannot put up with getting slapped around by Johann Lamont for too much longer and there are too many Nats who believe Sterling is best for Scotland simply because Salmond said so. The rhetoric and waffle needs to be replaced with hard facts and convincing detail, underpinned with ambitions for a truly independent currency. Anything short of that and the SNP will just have to hope for a miracle, or a EU referendum before 2014, whichever is more likely.
#1 by Iain on June 1, 2012 - 11:07 am
I don’t understand how we can get to the stage of public discussion without painstaking expert research having been done in advance. I thought the plan was more robust than this. Hm.
#2 by Aidan on June 1, 2012 - 12:43 pm
You’d hope so. Especially given this was supposed to have happened in 2010.
#3 by Airtteth on June 1, 2012 - 11:30 am
I agree the best alternative for an independent Scotland would be to have our own Scottish pound, initially pegged to sterling, but which could be re-valued as and when necessary/appropriate.
However, who would act as our lender of last resort and what would it mean to an independent Scotland credit rating and subsequent borrowing capabilities?
#4 by Aidan on June 1, 2012 - 12:36 pm
Pegging a currency isn’t a matter of choice though. It’s an act of central bank will. The markets (used in the non-pejorative sense) have to believe that 1 Pound Tillicoultry is actually roughly worth 1 Pound Sterling or whatever the peg is set at.
Given we’d likely be running a deficit from the get go even with a geographic share of oil there isn’t the time available to build up a huge backstop to maintain it and a new Scottish Central Bank would have limited credibility on day 1.
Assuming we aren’t going to impose capital controls that would mean abandoning our entire monetary policy to maintaining the peg and sod what’s good for the economy.
What sort of independence is that?
I have no idea about the lender of last resort, the plan doesn’t seem to have been thought through at all.
#5 by Doug Daniel on June 1, 2012 - 2:01 pm
“Assuming we aren’t going to impose capital controls that would mean abandoning our entire monetary policy to maintaining the peg and sod what’s good for the economy.
What sort of independence is that?”
The same sort of independence that is acknowledged as “independence” throughout the rest of the world (except, apparently, the UK)?
You do understand that it’s hardly unusual for newly independent nations to start off with their currency being pegged to the currency they’ve just stopped using, yeah? And you understand that whatever currency we have after independence is only in place as long as we want it to be, having just awarded ourselves the power to change it if we see fit?
#6 by Aidan on June 1, 2012 - 3:19 pm
It’s hardly seizing the levers of monetary policy is it?
#7 by Doug Daniel on June 2, 2012 - 1:44 am
Okay, time to invoke the standard so-are-you-saying-France-and-Germany-aren’t-independent-because-they-share-a-currency argument, then.
#8 by Aidan on June 2, 2012 - 2:01 am
Okay, time to invoke the standard “we should have control of monetary policy by reducing our control of monetary policy” argument. We’re neither France, nor Germany, nor Spain.
#9 by Aidan on June 2, 2012 - 2:12 am
To clarify: an independent Scotland using Sterling would would not be taken into account when considering the inflation target or have any right to influence appointments to the MPC, both of which we have now.
#10 by Craig Gallagher on June 2, 2012 - 2:41 am
But it would have the right to change its currency in the event that a future rUK government decides to devalue the £ and lower interest rates to disastrously low levels, harming borrowing across the sterling area in an attempt to stop itself collapsing under the wait of all the negative equity they co-opted to help out their mates in the City. Meanwhile, pensions, savings, real wage rises and public sector pay are all frozen, reduced or made worthless and real people go cold, hungry and ill-fed. A power we don’t have now.
#11 by Aidan on June 2, 2012 - 1:01 pm
You think the solution to our economic problems is tighter monetary policy?
#12 by Doug Daniel on June 3, 2012 - 3:10 am
“You think the solution to our economic problems is tighter monetary policy?”
Aidan, your concern with monetary policy would seem more genuine if it wasn’t for the fact that you’ve previously said you don’t want independence because you would prefer the Scottish parliament to get more powers through a continued process of devolving powers slowly, with time taken to assess how they’re working before devolving more power.
How does that square with your apparent sudden conversion to wanting Scotland to have its own currency?
And I dare say Craig thinks the solution to our economic problems is to give the Scottish parliament the power to set taxes and borrowing; choose to spend money on welfare, pensions and public sector workers rather than on Trident; and generally just ensure that decisions affecting Scotland are being made with Scotland in mind, not south east England.
What – other than leaving all these powers in the hands of the Tories and crossing our fingers that Labour will suddenly lurch back to the left and get back into power at Westminster in 2015 (an event even Anas Sarwar has accidentally admitted won’t happen) – do you think the solution is, and perhaps more importantly, which party is actually advocating it?
Leaving monetary policy with the badly-named Bank of England is a compromise, but it’s one worth making for the rest of the powers we would be getting – and that’s ignoring the fact that many, many people would laugh at your idea that Scotland has even the slightest bit of influence on appointments to the MPC or is taken into mind for inflation targets just now.
#13 by Jeff on June 1, 2012 - 2:29 pm
For me, Scotland would be in the EU so a lender of last resort would either be a Central Bank of Scotland or the ECB (despite not being in the Euro).
As for credit ratings and borrowing costs, this is crystal ball territory, but small countries do seem to do as well as large countries and it’s more about how you conduct yourself financially, rather than simply the size of your country, that matters.
#14 by Aidan on June 1, 2012 - 6:00 pm
The ECB doesn’t act as a lender of last resort for anyone (officially, it sort of looks like it may be a de facto one for the central bank of Spain and perhaps Italy at the moment). It’d have to be the new Scottish Central Bank.
#15 by Alasdair Stirling on June 1, 2012 - 12:05 pm
Whilst I tend to agree with the idea of an independent Scotland adopting its own currency, it is wrong to dismiss the SNP’s current ‘keep sterling’ policy. Australia, New Zealand and South Africa (to name but a few independent states) for 50 or more yeas after their independence from Westminster. The arrangement worked well enough for all parties. It succeeded because it was flexible in practice: the arrangement allowed the British to devalue sterling against the dollar twice and the Australians to internally devalue their pound against the British pound.
Moreover, Salmond makes a very good point about a ‘sterling zone’ being in the interests of the remaining UK. Were Scotland to adopt a currency other than sterling, rUK would have to purchase the vast bulk of its oil on international market in dollars and would immediatly have to find foreign exchange earnings (dollars) equilivient to 1/3 of its current earnings. Truth is that if an independent Scotland adopted a currency other than sterling it would plung the rUK economy into a very serious balance of payments crises.
Generally, a nation’s political independence comes about in one of two ways: conflict or negotation. Nations whose independence is brought forth in bitter conflict (e.g. America, Ireland or Algeria) have by neccisity to build every institution from scratch. On the other hand, nations who independence in a spirit of cooperation (e.g. Canada, Australia and New Zealand) have the option of retaining and using many of their previous political, social and economic arrangements. Retaining such links doews not invalidate a country’s independece (who thinks that Canada, Australia and New Zealand are really less independent than the Republics of South Africa or India).
#16 by Jeff on June 1, 2012 - 1:10 pm
I’m not dismissing the idea of keeping Sterling, I personally think it’s only marginally less preferable than a Scottish currency, but it will attract considerable derision for several reasons from Eurozone crises to not being independent enough, rightly and wrongly.
The SNP is facing more of a political problem than an intellectual one, but it’s a problem that needs addressed nonetheless.
(I’m not up to speed on Canada, Australia and NZ experiences so thanks for that, and maybe Sterling as a policy isn’t quite sunk yet if there are demonstrable successes for other countries to use as a model. Also I’m not sure I’ve got my head around the oil example Alasdair, couldn’t rUK just buy oil from Scotland in S£? Easier to pump it within the same islands, and got to think of the savings in green air miles…)
#17 by Alasdair Stirling on June 1, 2012 - 4:43 pm
Jeff,
At the moment oil landed in the UK from the North Sea is worth circa £40 billion per annum (of which England, Wales and NI consume circa £36bn per annum). At the moment it is an internal market within the UK and any dollar requirement is offset by an equal and opposite contra trade back to sterling. After independence the trade in Scotland’s oil will be international and (unless Scotland uses sterling) there will be balancing contra trade and a rUK will have to find £36bn worth of dollars to purchase its oil from a non-sterling Scotland (or other foreign supplier). This sum is rougly equal to 1/3 of the current UK foreign exchange earnings.
Of course, not only does this oil trade cause rUK a balance of payments deficit. It similtainiously generates a Scottish current account surplus. The reality is that a seperate Scottish currency (say pegged to the dollar or a basket of currencies) would be an economic disaster for the rUK economy and I rather suspect that (despite Unionist scoffing) the rUK Chancellor will agree to almost any Scottish demand to keep us within a sterling zone.
#18 by Alasdair Stirling on June 1, 2012 - 4:48 pm
Jeff,
It is an all too common mistake to consider North Sea Oil in terms of Govenment tax receipts. It’s real value is in the context of the balance of payaments and current account. Additionally, the dollars flowing into Scotland (remember we only consume circa £4bn of the oil landed) would generate the volume and flow of funds neccessary to develop a viable international capital market.
#19 by Alasdair Stirling on June 1, 2012 - 4:58 pm
Jeff,
For your information, the Australians devalued their pound against sterling in the early 1930’s and thereafter A£1 was worth 16/- sterling. On the other hand, New Zealand didn’t devalue and NZ£1 remained worth 20/- sterling until decimalization in 1967. The system was very flexiable and in practice worked without any difficulties.
#20 by dcomerf on June 1, 2012 - 6:11 pm
Correct!
On this issue the problem is political rather than economic. I discuss briefly the currency issue at http://dcomerf.blogspot.co.uk/2012/02/economics-of-independence.html but it’s worth repeating: “he eurozone crisis has highlighted the risks of monetary union without fiscal integration – which given the stated policy of keeping Sterling initially, looks like an economic cost of independence. However, as Martin Wolf at the FT (and others) have pointed out, the best predictor of difficulties within the eurozone was balance of payments problems, where at a fixed price (exchange rate) the peripheral nations were net importers of goods and services funded by capital flows from the core. Scotland is not in this position: our economy is ‘pre-adjusted’ to this fixed exchange rate, and there are not massive balance of payments imbalances. Eventually, with policy divergence, this currency arrangement may no longer be appropriate. However, by then we will have a government with the power to change it and either join a reformed supranational currency area (Sterling or Euro) with transfer payments, or start a Scottish currency.”
#21 by Commenter on June 1, 2012 - 12:22 pm
I can’t help thinking a variable exchange rate with the rest of the UK would be very off putting for many. I wonder what dark thoughts it would prompt in the accounting dept of my English headquartered company…
#22 by Chris on June 1, 2012 - 12:26 pm
Unfortunately it is all part of Salmond’s weakness for taking a punt and hoping for the best. It is a good opposition tactic as you have nothing to lose, but now it looks, and is, lazy.
There is a basic laziness to Salmond that is his real weak point. He would rather quip than answer a difficult question, he would rather accuse opponents of talking Scotland down than answering basic questions. He is also foisting the referendum on a reluctant public without doing ANY of the hard work of getting the public on his side first and – as part of that – (b) he is unable to answer basic questions.
A separate currency would be a more honest answer – tracked to the pound or dollar or euro but with the flexibility to move when the oil price soars and dives. But then the ugly question of Dutch Disease rears its head (perhaps the hidden strain behind maintaining GBP). But as probably not much more than one thousand people understand it, it is more of a technical than a political issue.
#23 by Daveinmaryburgh on June 1, 2012 - 12:48 pm
I would rather the SNP instead of stating what they would want in an indy Scotland they put forward the options and as much detail as possible on the pros and cons for each. After the referendum the various parties can state their position and we can decide on the direction we want to take.
I for one haven’t been convinced on why we should remain with Stirling rather than use our own currency from the start. OK it will take time I suppose to settle however I’m sure that is something that can be managed.
#24 by Thomas Widmann on June 1, 2012 - 1:01 pm
I think Salmond is trying a bit too hard not to scare potential Yes voters away. I don’t think he believes himself that Scotland would keep the Pound Sterling forever, but he just wants to reassure people that there would be no immediate changes.
However, I do agree it’s a dangerous strategy, not least because any statement about getting a seat on the BoE’s MPC can be dismissed (rightly or wrongly) by London, and claiming that they’d change their mind post-independence is just a very hard sell.
I think a wiser course would be to say that Scotland would keep the Pound Sterling unilaterally (without any seat on the MPC) for a few years to allow for a thorough discussion of the best course of action, the creation of a Central Bank of Scotland, and the printing/minting of Scottish Pounds.
#25 by Doug Daniel on June 1, 2012 - 1:42 pm
“There are stark differences between Greece being part of Eurozone and an independent Scotland being part of Sterling, but it is precisely the wrong time to hope that you’ll get a fair hearing over how a currency union without a political union will work from a particularly risk-averse Scottish public.”
I don’t think worrying about getting a fair hearing or not should be a reason in itself for adopting or dropping a policy. That decision should be made on the strengths and merits of the policy itself, not people’s reactions to it. Particularly not Johann Lamont’s.
You, I and many others know that it is a complete fallacy to compare Scotland and England to Greece and Germany. That most unionists are too stupid to understand this (or clever and dishonest enough to promote the idea to the general public in such an invidious manner) is not a good enough reason to dump what is actually a credible policy.
On the other hand, the same sort of reasoning can be used precisely for not saying we should have our own currency. Keeping Sterling would prevent us from being able to enter into ERM II, meaning entry to the Euro is impossible. I’m sure we all know that Sweden and Czech Republic have both utilised the de facto opt-out by just not entering ERM II, but remaining in Sterling gives us yet another block. Unionists are already trying to confuse people with talk of Scotland having to join the Euro – this merely gives them more ammunition to confuse people with.
Remember also that just because we stick with Sterling for now, it does not prevent us moving to our own currency in a few years’ time, when unionists will be more willing to participate in such a debate. It all comes back to the fact that the referendum is about giving us the power to decide these things ourselves. We can choose to remain with Sterling forever more, or we can adopt our own currency later. Either way, it’s our choice.
I must admit to being torn, though. There are advantages and disadvantages to both. When it comes down to the referendum, it may be that folk are more concerned about the palaver of having to get notes changed and adjusting to a new currency, rather than worrying about who controls monetary policy. As long as people have plenty of it in their pocket, I don’t think people are too concerned what money they’re spending. On the other hand, I found it laughable when someone on TV recently described the pound as the strongest currency in Europe – clearly, they’ve not been to Norway recently. I think it’s pretty obvious that a Scottish currency would quickly attain the strength of a Nordic currency.
#26 by Chris on June 1, 2012 - 2:04 pm
Doug
it is not disingenuous or stupid. The problem (believe it or not) with a Scottish currency or with using the pound is that the Scottish economy would be highly susceptible to fluctuations in the oil price. At times we would be soaring ahead and making the rest of our exports uncompetitive and at times we would be falling behind and needing to borrow but we could export Whisky cheaply.
These strains would always be present in one form or another. At the moment Scotland has full monetary and political union with the UK so these strains are not present [although it seems to have give rise to a seccessionist movement 😉 ]
These questions need at least explaining. There is no easy answer and if there was I would be a lot less skeptical about indepedence.
#27 by Doug Daniel on June 1, 2012 - 2:50 pm
Well Chris, it’s certainly disingenuous to argue a point I wasn’t even making. In what way does your reply have anything to do with my point that comparing Scotland in a Sterling zone (with two near identical productivity levels) with Greece in the Eurozone (with wildly divergent productivity levels) is completely wrong? That’s what’s disingenuous and stupid.
But to take you on your argument, apart from the fact you’re going from one extreme to the other, you’re making that common error of thinking that Scotland is for some reason uniquely susceptible to problems other countries somehow (presumably through luck, unless we’re just too thick to do what they do) manage to circumvent. We would not be the first economy in the world to have a sizeable element based on oil exports. Looking at the other countries who are in our position, I’ll take that scenario over the current one any day of the week. I didn’t meet anyone in Norway recently who seemed terribly concerned about the state of their economy due to fluctuations in oil prices…
#28 by Chris on June 1, 2012 - 8:15 pm
I really wasn’t meaning to be disingenuous.
Well Scotland is in a weaker position because of its dependpency on one export. Whilst the average strength of the Scottish economy is about the same the variability is greater due to dependency on one highly volatile export.
it is hard to look at what most countries in Scotland’s situation do as most were invariably fucked up to various degrees (Chad, Nigeria, Angola) before oil came along. However the dependency on one volatile export is a serious problem.
#29 by Craig Gallagher on June 1, 2012 - 9:05 pm
The SNP make a lot of the oil issue, but it seems unfair to imply they’re expecting the economy to rest on one particular export. They have taken strides to invigorate many other industries in Scotland, such as video games development and renewable energy infrastructure. If I recall correctly, Strathclyde University is receiving a huge Scottish Government grant to fund its developments in wave turbines, with a view to this being the new industrial future of the Clyde river valley.
#30 by Doug Daniel on June 2, 2012 - 2:00 am
You forgot Norway, the country which ruins the vast majority of arguments against independence.
You also seem to think the Scottish economy is built solely on one industry. We do not have a dependency on a single volatile export. If we’re so massively reliant on oil, then how come the Greens support independence but also support not pumping a single drop more out of the North Sea? It’s an important part of Scotland’s economy, but our economy is built on far more than oil, and to characterise it otherwise is doing a complete disservice to Scottish industry.
#31 by Chris on June 2, 2012 - 10:17 am
I haven’t forgotten Norway, although we should recognise that they have a lot more oil. You might want to look at what Norway’s second biggets export is – fish, followed by unprocessed aluminium. So, again, natural resources. This is Dutch Disease in action, Norway cannot export manufactured goods because the price of oil drives up costs in Norway making export uneconomic.
So Norway would seem unlikely to offer Scotland much of a hope in terms of building an export-driven economy.
#32 by scottish_skier on June 1, 2012 - 5:22 pm
Retaining the £ initially makes sense for both Scotland and the rUK for many reasons, all of which have been discussed numerous times here and elsewhere.
It is also a clear vote winner for those ‘unsures’ who are interested in the idea but a little nervous about what independence will entail. Nice to know that Scots £ in your pocket will still be just as good the day after you say yes.
All this talk of Devo Max but no devo max the ballot. However, Devo Max ‘excel’ will be. Looks just like devo max (‘full fiscal autonomy’, BoE as LoLR, still in the £-zone, mutual defense agreements), but with icing and a cherry on top.
And that will be that.
Oh, and may I take a moment to wish the people of Samoa – all 180,000 of them (including those working at the Samoan Central Bank) – a happy independence day.
http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10810052
#33 by Stuart Winton on June 1, 2012 - 6:08 pm
Doug Daniel wrote: “…comparing Scotland in a Sterling zone (with two near identical productivity levels) with Greece in the Eurozone (with wildly divergent productivity levels) is completely wrong.”
You seem to forget that it was Scotland’s and England’s economic divergence that was originally why the SNP wanted free from the shackles of Bank of England control.
The solution? Join the eurozone. Derr!
“That’s what’s disingenuous and stupid.”
You said it, Doug!
Jeff, you’re right about Scotland’s people being risk-averse, but that’s why Alex Salmond wants to keep sterling. The euro has clearly not been an option for some time now, and the single currency’s difficulties mean people will be even warier about anything other than the pound.
Of course, to that extent the UK won’t want to make it politically easy for Mr Salmond to advocate retaining sterling, whatever advantage rUK could derive from such an arrangement.
So a new currency – either the euro or the jocko – is out of the question for Mr Salmond, while retaining sterling is more palatable votes-wise, but of course it’s when the detail is examined things perhaps come slightly unstuck, as this week’s events have demonstated.
So effectively the currency issue is one big poisoned chalice for the SNP.
#34 by Doug Daniel on June 2, 2012 - 2:41 am
Sorry, who’s suggesting Scotland joins the Eurozone?
And you fail to understand the point about comparing Scotland & England to Greece & Germany. We have divergences with England, but on the whole we’re broadly similar enough that we’d make for a stable currency zone (and independence allows us to change our mind and leave that currency union if we start diverging wildly). The economy of Greece, on the other hand, is nothing like those of the strong European economies of Germany, Finland, Austria, Luxembourg and the Netherlands. The Euro is stuffed because it tried to force economies with high productivity into a currency union with countries of low productivity. It doesn’t work.
“Of course, to that extent the UK won’t want to make it politically easy for Mr Salmond to advocate retaining sterling, whatever advantage rUK could derive from such an arrangement.”
Which is why it’s bizarre to accuse the SNP of not having discussed these things at length with the UK government, as Lamont in particular has done. At the moment, the UK will do all it can to avoid Scotland becoming independent by making it look unworkable, and is not about to help the SNP’s case by saying “oh yes, we’d love to go into a currency union with you”. Post-independence, the story will be completely different, unless anyone seriously believes the rUK government will cut its nose off to spite its face.
#35 by Stuart Winton on June 2, 2012 - 3:12 pm
Er, I referred to the SNP’s original position on joining the Euro, thus the rest of your response it based on a false premise.
#36 by Doug Daniel on June 3, 2012 - 2:43 am
Stuart, I’m not talking about Scotland joining the Eurozone. I’m talking about the folly of comparing two different scenarios – one being Scotland in a Sterling zone, and the other being Greece in the Eurozone. They are not comparable, because Scotland and Greece are nothing alike, and the disparity within a Sterling zone would be nothing like that of the Eurozone.
So do you not understand this very simple point, or are you merely obfuscating in order to detract from it by going on about what the SNP’s former position on the Euro?
People bringing up the fact the SNP used to want Scotland in the Euro need to consider two things:
1. that quote accredited to Keynes: “When the facts change, I change my mind. What do you do, sir?”
2. no matter what they say in public, adoption of the Euro remains the long-term goal of UK parties – note that the current coalition’s agreement specifically rules out joining the Euro while the coalition is in force. That’s hardly “not now, not ever”.
#37 by dcomerf on June 1, 2012 - 6:14 pm
From http://dcomerf.blogspot.co.uk/2012/02/economics-of-independence.html
The eurozone crisis has highlighted the risks of monetary union without fiscal integration – which given the stated policy of keeping Sterling initially, looks like an economic cost of independence. However, as Martin Wolf at the FT (and others) have pointed out, the best predictor of difficulties within the eurozone was balance of payments problems, where at a fixed price (exchange rate) the peripheral nations were net importers of goods and services funded by capital flows from the core. Scotland is not in this position: our economy is ‘pre-adjusted’ to this fixed exchange rate, and there are not massive balance of payments imbalances. Eventually, with policy divergence, this currency arrangement may no longer be appropriate. However, by then we will have a government with the power to change it and either join a reformed supranational currency area (Sterling or Euro) with transfer payments, or start a Scottish currency.
#38 by Indy on June 1, 2012 - 7:45 pm
People seem to be overlooking the point that independence as the SNP proposes would make no real IMMEDIATE difference as regards currency but it would open up a range of options for the future.
The pound in your pocket would still be the pound in your pocket the day after independence but we would have the option to change that if there was a democratic mandate to do so.
Personally, I see no great value in trying to jump ahead of ourselves and decide what currency an independent Scotland will adopt before we have even decided whether or not we want to be independent.
Do we want to be able to take decisions on our currency or don’t we? That’s the only question we are being asked in the context of the referendum. So people can debate the currency, I am not saying they shouldn’t, as long as you bear in mind that you won’t actually be voting on it.
#39 by Aidan on June 1, 2012 - 9:13 pm
Well, no, actually: part of the point of this discussion is that while we currently have the ability to participate in the decision making process around monetary policy through the MPC (taking part in the elections which determine who appoints members, the MPC taking Scotland into account for inflation etc.) voting to become a separate country may actually significantly reduce our power to decisions about our currency.
#40 by Indy on June 2, 2012 - 7:52 pm
I note that you say we have the ability to participate in the decision making process around monetary policy you do not actually say that we DO participate in the decision making process, do you?
By all accounts Scotland has hee haw influence, as a nation, on UK monetary policy. In the immediate post-independence situation that would continue to be the case. Thereafter our elected representatives would judge the situation, put forward their proposals and people would vote on that as part of the normal democratic process.
#41 by Aidan on June 2, 2012 - 11:46 pm
No, I’m saying we do. It’s indirect, as it is for citizens of other nations within the UK, but we participate on the same terms and in the same manner as them.
That participation would cease post-independence.
#42 by Indy on June 3, 2012 - 9:32 am
We really don’t Aidan. It’s a matter of simple maths. Economic and monetary policy is made to suit conditions in London and the South East because that is the economic engine of the UK. Scotland is peripheral in terms of setting economic policy or monetary policy and always will be. And let’s be clear, independence will not miraculously reverse the magnetic pull of London & the South East. That will continue to exist and continue to be a major factor influencing the Scottish economy. What would change is that we would have a few more tools and a bit more ability to prioritise our specific needs and in Scottish terms that would mean – for example – a real and concerted effort to tackle inter-generational poverty and dependency in Glasgow & the west of Scotland. Because as an independent country we simply could not afford to have such high levels of economic inactivity. Whereas in a UK context that doesn’t matter so much, it doesn’t actually have much effect on the UK as a whole, so it will never ever be a priority.
#43 by Craig on June 1, 2012 - 10:03 pm
“The pound in your pocket would still be the pound in your pocket the day after independence.”
A disingenious statement if there was ever one.
In addition to the points Aidan raises about the lack of MPC involvement, the pound in your pocket would differ in a number of other ways:
The current UK Gilts would be split into rUK Gilts and Scottish Gilts. The Scottish Gilts, being the smaller of the two markets will be less liquid hence investors would demand a higher spread over rUK Gilts to hold them.
These Scottish Gilts would also be backed by a untested government – the impact of independence would be much greater on Scotland and our institutions than on the remains of the UK. That again makes investors jumpy.
And since we’re using the “same pound” instead of issuing our own country, Scottish Gilts will also be subject to default risk.
This is the biggest weakness of the nationalists: too many are focused on achieving independence for the sake of independence. To some independence is more important than the economic and social future of the country; they would quite happily take independence even if it meant generations of poverty – simply because they’d at least be independent. That’s why some nationalists fail to see why the argument has to be made for independence and why there it seems we are in danger of waking up on the day after independence with no plan for what happens next.
#44 by Indy on June 2, 2012 - 8:00 pm
The impact of independence would not, in fact, be that huge.
Continually implying that if Scots start governing themselves the country will go to hell in a handcart are simply not supported by the evidence.
This is not the 1970s.
Modern Scotland is the most successful region of the UK outwith London & the south east.
Scotland gets 9.3pc of UK spending but contributes 9.6pc of taxation.
Leading business figures are extremely confident that Scotland could not only manage its own economy successfully but become more prosperous and productive.
#45 by Don Francisco on June 1, 2012 - 8:58 pm
Good post Jeff. Salmond probably isn’t talking about it because no-one wants to talk about even more economic uncertainty. The Euro for example, is something he won’t touch with a barge pole right now. If he was in this exact position but ten years ago, he could almost casually mention he wants Scotland to join the Euro, with little uproar.
Salmond’s strategy seems to be just let the coalition carry on doing their thing whilst he waits and watches. Take no unnecessary risks, keep the small c conservative Scots voters on side. Chasing an alternative to sterling doesn’t sound particularly popular.
#46 by Craig Gallagher on June 1, 2012 - 9:11 pm
Why is it always about money? What view does it give the world of Scots that we might sabotage our most high-profile moment in centuries over what value the £ in our pocket?
Where I think the SNP are failing to lead the argument is to get us out of the quagmire discourse of “will I be better off?” and “what will the currency be?” that we saw so embarrassingly aired during the BBC’s hopeless Independence Debate last week. People are understandably worried about squeezing finances and increasing tax burdens, and most people still blame the Coalition (and New Labour) for these problems. If the SNP leadership would show a little more courage, they would argue that they can’t promise you an independent Scotland would relieve you of these burdens right away, but that there’s a very good chance it would be an everlasting bulwark against them ever getting any worse.
#47 by Allan on June 2, 2012 - 12:00 am
Good post Jeff which I think highlights the Yes Camps two biggest problems right now.
The best option looks like a “Scottish Pound” tacked on to the Pound Sterling, which is the status quo really. Of course, there is a theory that we would have had a ready made central bank… had George Mathewson not employed some bloke called Goodwin
An even bigger game-changer for the SNP led yes camp would be the promise of a referendum on entry to the EU post Independence. I suspect that there are a lot of people put off by the feeling of being forced into the EU, given it’s current controling mindset. I also think that as well that most of the arguments relating to I-Scotland’s entry/retention to the EU do take on the tone of he said/she said – well they did untill Ruth Davidson pulled the metaphorical rabbit from her pocket on last week’s “Big Debate”. Independence cheerleaders would do well to realise that there is opinion backing up both cases regarding I-Scotland retaining membership/having to re-apply to the EU.
The problems all stem from the launch. In with a wimper and not a bang was I though the best descrition of how it went last week and what they needed to have done.
#48 by scottish_skier on June 2, 2012 - 11:50 am
I am increasingly worried about the number of ‘politically interested’ (i.e. posting on sites such as this) people who seem to have no idea what they will be voting for in the 2014 referendum. It is simply about whether the Scottish electorate decide how Scotland is governed or whether the electorate of the entire UK decide this; it is called sovereignty. Yes or No?
A yes vote does not e.g. preclude Scotland remaining in the union on newly negotiated terms (this could be offered by unionist parties in the very first post-independence Scottish general election for example). In that sense, even those who support the union in some form (e.g. more devolutioners, devo-plusers, devo-maxers) should vote yes as it would open up the opportunity for Scotland to have a stronger voice within the union, form a basis for federaliastion etc if that is what was wished.
Why anyone, when presented with the question ‘Do you wish to increase the influence of your vote?’ – which is in many ways is exactly what Scots will be asked in 2014 – would say ‘no’ is quite beyond me.
Oh, and polls suggest no miracle is required. Unless that is you focus on ‘everyday value’ Yougov online quick panel surveys and ignore the results of all the other professional pollsters.
#49 by Kieran Wild on June 2, 2012 - 11:53 am
Even large countries like China have their currency pegged to the US dollar, it is far from unusual. It is just a bit scary when you look at what has happen to the value of the Iceland’s currency that lost 70% of it value in 2008. The reality of people in Iceland with savings is grim and anything imported becomes much more expensive.
Of course Scotland is in a completely different situation but Iceland but we are also not a wealthy as Norway or Sweden either.
Export business tend to be in favour of the UK joining the Euro because it reduces the risk of currency fluctuations from damaging their profits. The same is also true Scottish to UK trade. I don’t think this needs to be rushed into unless it is strongly shown that Scotland is suffering from UK macro-economic policy.
#50 by Don Francisco on June 2, 2012 - 12:41 pm
Craig – interesting point that it’s always seems to be about money. I think the response is symptomatic of how many feel about independence. It would be interesting to run a poll on how people would feel about voting for independence, if consequently the economic situation deteriorated, compared to it remaining the same/improving. I’d hazard a guess and say there would be a big difference in the numbers.
Maybe those people are shallow or self interested, or maybe it’s that being independent just isn’t that important to them. By contrast I imagine there are those whom it does matter, and who would want independence even if they did suffer financially for it.