One of the most interesting swing constituencies for the independence referendum is just one person – Jane Carnall. Yesterday morning she pointed me to a piece in which she explains why she’s leaning towards a No vote because of the SNP’s currency union plan.
As she rightly points out, if that plan goes ahead “key decisions about the Scottish economy will be made by the Bank of England in the City of London“, and, like her, I think an independent country should, for economic and political reasons, have its own currency.
Eurozone countries don’t have their own currency, of course: and their monetary policy is set by the ECB. So are they not independent? Well, they’re less independent than EU member states outside the Eurozone as a result.
In fact, all EU member states, because they’ve decided to pool sovereignty, are less independent as a result – and to a lesser extent so too is Norway, which doesn’t even get a say in the EU rules they have to adopt in order to stay in EFTA. Montenegro is less independent than Serbia, because it doesn’t have its own currency and monetary policy. Monaco is less independent than Luxembourg because its defence policy is set in France.
Similarly, countries outside the UK which have QEII as their head of state, the SNP’s preferred model for Scotland, are also less independent. Just ask Gough Whitlam (still alive at 97), whose Australian government was overturned in 1975 by the Governor-General, acting with the Queen’s authority.
In short, it’s a category mistake to think that independence is a binary on/off, yes/no question in the modern world. Sure, what the SNP propose is now less independence than they used to prefer. But it’s still significantly more independence than we currently have (and devolution already makes us more independent than, say, the North East of England).
The crucial binary part is simply this: where are decisions ultimately taken, and by whom? A Yes means Holyrood and the Scottish electorate, and a No means Westminster and the UK electorate. By that test, for example, Slovakia was fundamentally independent of the Czech Republic on 1st January 1993, but it was clearly more independent by 8th February 1993 when both states began to use their own currencies.
However, her argument, as I read it, stands on two legs: the SNP’s flawed currency policy is just one. The second is that the actual structures of a post-Yes Scotland will be determined by the SNP. To quote Jane again:
“You can argue that the referendum is not a matter of party politics and we should just not think about the SNP but only about independence. But this is absurd: the SNP is the party of Scottish government until May 2016, and the only Scottish politicians who are entitled to be part of negotiations with the rUK government in the event of a Yes vote. Therefore, what they say they plan to do in the event of a Yes win matters very much indeed – if you think Yes will win. Because, again, currency union is not independence.”
I absolutely will argue that the referendum is not a matter of party politics. Plenty of SNP voters will vote No, and plenty of Labour voters will vote Yes. Referendums aren’t party politics by definition. And the SNP have a mandate (from 2011) both to legislate for a referendum and to run a post-Yes transitional period, should Yes win. Nothing more, nothing less.
This is where the SNP’s timid indy-minimum is actually beneficial in some respects. It’d be entirely inappropriate for a transitional administration to abolish the monarchy, leave NATO, or leave the existing currency union. “The pound in your pocket” is pragmatically the only appropriate currency for us to be using on day one of independence, prior to a the election of a proper Scottish Parliament for an independent Scotland. I’m okay with those “key decisions” referred to above being made that way for the short term, unless and until the Scottish electorate vote in a Parliament which takes a different view on the currency.
Jane’s view is that people like me who oppose the SNP’s approach to the currency, the monarchy and the rest are being dishonest in saving those fights for another day: quite the contrary. We aren’t saving those fights at all. Every time they make one of these u-turns and hedge what independence means to them we object, we shout loudly that other, better options will be put to the Scottish electorate in 2016, and we remind them exactly this: neither the SNP nor Salmond himself is on the ballot paper in September. Only independence is.
Then, as is obvious already, in May 2016 Greens will stand for election on a platform of much greater independence (within Europe). We know now roughly what that manifesto would look like, and 2016 is the proper point for the parties and then the electorate to start making nuanced decisions about exactly what kind of independence we want for the long term. A Yes/No vote doesn’t allow for nuances on these issues, and nor should it. Nor is it anyone else’s responsibility to try and change SNP policy, as Jane suggests. I’d rather their positions were better, sure (as I argued here with regard to NATO), but other parties’ policies are not my remit, nor the remit of anyone outside those parties.
It would be a terrible mistake for any independence supporter to vote No in September because the SNP’s vision of independence is too halting and timid. A Yes vote will bring massively greater independence, no matter who wins in 2016. With one single vote we will have almost eliminated Westminster’s malign influence over our lives. It’s a huge step forwards, an enormous prize, and yes, there will be much more to be done after that. That’s politics.
My issue with her argument is not even about not letting the perfect be the enemy of the good. It’s about recognising that devolution may be a process, in Ron Davies’s famous phrase, but so too is independence.
#1 by EyeEdinburgh on April 4, 2014 - 2:43 pm
The key issue for me isn’t directly the currency, James. It’s the central bank.
What the SNP propose – they have said this explicitly via the Fiscal Commission Working Group report – is to have the Bank of England become Scotland’s central bank/lender of last resort.
This would make Scotland the third country in Europe to have no central bank. The other two are the microstates Andorra and Monaco. Without a central bank, Scotland could be called “independent” only inasmuch as Monaco is independent of France: and Scotland could only join the EU as a dependent of rUK, because without a central bank, Scotland would not have the ability to fulfil half a dozen of the Articles of Enlargement.
Scotland would be in a devomax relationship with rUK: the Bank of England, and Westminster, would be making economic policy decisions for Scotland with zero democratic input from Scotland.
The presumption it seems to me that everyone is making – and making incorrectly – is that it will be dead easy to get out of this devomax relationship. I see no reason to suppose that.
To begin with, I do not imagine that the Bank of England will agree to become lenders-of-last-resort to a foreign country without some absolutely cast-iron guarantees that the next elected government won’t be able to wriggle out of. (And while the Tories rather showed their hand when coalition minister – Philip Hammond? – leaked that yes, they’d be fine with “currency union” really, the fact that the SNP come as petitioners to the UK government to ask for a currency union means we have to consider what they might have to give away to get it. (100 year lease on Faslane? Oil revenues?)
To go on with, aside from maybe the Scottish Greens, there is no party in Scottish politics that would stand on a platform of “let’s get rid of the currency union now” in 2016, assuming Yes wins. It’s the SNP’s policy: they won’t reverse it. It’s as close as Labour, LibDems, and the Conservatives would get to still being in the UK – in effect, a currency union ensures Scotland is still inside the UK – and they’d be unable to go into reverse on that after years of campaigning for it. While I like the Greens and vote for them when I can, I don’t see them as likely to suddenly become even the second party in the Scottish Parliament any time soon.
And the longer a “currency union” goes on, the less likely it is that any party will see it as “realistic” to reverse it. Until something goes wrong. No, I’ve no idea what. But something will, eventually, because there was never a national economy where something didn’t go wrong.
Assuming neither malice nor ill-will towards iScotland at Westminster or on the board of the Bank of England, the decisions they make then will not be to the benefit of Scotland, because their responsibility will not be to Scotland: the job of a central bank is to create financial stability in partnership with the national government, and it is this that the SNP propose to surrender, for the sake of handwaving “oh, you’ll still have the same currency”.
#2 by Peter A Bell on April 4, 2014 - 8:38 pm
I’ve seldom read so much nonsense about currency union. And I’ve seen what Alistair Darling and Alistair Darling have to say on the subject.
For a start, there’s this idea that “the SNP come as petitioners to the UK government to ask for a currency union” demonstrates a tragic failure to grasp the reality. As Professor Anton Muscatelli and others ave pointed out, the rest of the UK needs the currency union considerably more than Scotland does. A large part of the reason for keeping the currency union is that, without it, Scotland will have no way to justify to the markets continuing to contribute towards the cost of servicing UK debt. To put it as simply as possible, ending the currency union means that rUK indebtedness increases by approximately 10% while the size of the economy servicing that debt shrinks by roughly the same percentage.
That’s a recipe for economic disaster. It risks throwing rUK into a debt-servicing cost spiral that would cripple the economy.
England is Scotland largest trading partner. If the economy of rUK is damaged then that has serious implications for Scotland. Keeping the currency union is NOT the optimum solution for Scotland. Nobody pretends that it is. But it is, on balance, the best arrangement for both Scotland and rUK. Independence is not isolation. We have to consider the effects on our neighbours. And all of that is before we even get to the moral obligation which Robin McAlpine has written about so persuasively.
Then there is the notion that Scotland will be subject to damaging decisions by the Bank of England. More nonsense. The whole point of independence is that we would be able to leave the currency union when it ceased to be an arrangement that suits us. Vote No and we are stuck with currency union no matter what the Bank of England does. And we don’t have the fiscal control to reshape our economy. A double whammy.
I’ve probably written enough here. But I’ve said more on the subject – https://www.facebook.com/notes/peter-a-bell/blind-to-the-obvious/10152778210763289.
For now, I’ll finish by putting the question I put to others who, obsessively focussed on the process of BEING independent, whine about the SNP’s plan for BECOMING independent.
What is the alternative plan?
#3 by Iain Menzies on April 5, 2014 - 12:36 am
The UK’s largest trading partner is the EU, who use the Euro, seems that having a different currency doesnt stop you trading with someone….which at best weakens the argument that there should be a currency union on grounds of trade.
As for the debt point, A suddent spike in UK debt to GDP ratio would be a problem for rUK, but the general trajectory in 4-5 years is for that ratio to improve. If scotland was to walk away from its share of the debt it would push that reduction to the right, but the UK government has already said that it will stand by all the debts that it has taken on, and there is no real reason to suggest that it couldnt do that. Walking away from the debt cuts both ways tho, What you are essentially suggesting is that Scotland defaults on its debt obligations, which would be interesting to say the least. One might ven call it a recipie for economic disaster….
Now it may be the case that on balance the best arrangement for both scotland and rUK would be currency union, but there are plenty of people that say that the best outcome for rUK would be no currency union. All you are doing is making the europhile case for the Euro but on a smaller scale. How did that argument work out on a UK level, never mind an rUK level?
On the Bank of England, a large part of the YEs Scotland (in all its forms) argument is that the powers that be in London dont act in the best interests of scotland. IF you had a currency union you would not have Scotland taking equal representation on the MPC, and the MPC would not set policy that was contrary to the best interest of 90% of the economy that it was working for. So if we accept the nationalist critique of the union then in terms of currency if you get your way what you are suggesting is to scrap the unfiarness resulting from the treaty and act of union and replicating the same unfairness in a treaty of disunion.
As to the idea that you can always saunter off out of a currency union if you dont like what happenes to be going on at anyone time….where exactly is the economic stability in that?
As to your last point, it isnt for me to answer since i will vote no. But my problem with what the SNP is suggesting, since if it turns out to be a yes i will have to live with it, is that in so many ways what the SNP is suggesting isnt so much ‘good enough’ as really just a little bit crap.
#4 by Peter A Bell on April 6, 2014 - 1:27 pm
Had you bothered to read what you wrote you might have noticed the glaring contradiction. You note that Scotland has no obligations – because the UK government has accepted full liability – then you go on to talk about Scotland defaulting on a debt obligation that it doesn’t have. It makes no sense.
The fact that you imagine the Scottish government is threatening to default on debt it doesn’t have demonstrates how susceptible you are to unionist propaganda. The reality is that the Scottish government has formally proposed that independent Scotland would continue to contribute towards the cost of servicing UK debt AS PART OF AN AGREEMENT ON SHARING OF ALL ASSETS AND LIABILITIES.
It is the UK government which is making such an arrangement less likely by pre-empting negotiations. It is the UK government’s position that is plainly ludicrous as it insists that rUK will be the sole successor state in terms of all UK assets while simultaneously insisting that Scotland is a joint successor state in terms of liabilities.
Britannia waives the rules!
#5 by Richard on April 5, 2014 - 8:28 am
I neither know, nor have heard of, Jane Carnall, but her argument is absolute nonsense! It’s like the people (albeit a small number) who voted No to a parliament in 1997 because it wasn’t full independence.
Refusing a part of what you want purely for the reason that it is not all you want seems silly and spiteful. As you say James, Devolution/Independence is a process, a journey (and a long one at that!), and it is unrealistic to try and reach our destination in one big jump. So why not take baby steps, and recognise that we’re heading in the right direction?
#6 by EyeEdinburgh on April 5, 2014 - 11:38 pm
I neither know, nor have heard of, Jane Carnall
What, I’m ever so famous and interesting… er, no. *sheepish grin* James is flattering, I think.
So why not take baby steps, and recognise that we’re heading in the right direction?
Because in my view, devomax is completely the wrong direction, and the SNP should acknowledge that and drop the plan before indyref.
#7 by Peter A Bell on April 6, 2014 - 1:29 pm
You are seriously confused. The SNP has no plans for “devomax”. And neither do any of the British parties.
#8 by Richard on April 6, 2014 - 2:16 pm
Nobody has ever proposed that a currency union should be enshrined in a Scottish Constitution. Therefore, if it doesn’t work in future we can change it. Simple as that.
I’m also unsure how reasserting the sovereignty of the Scottish People (which is the main argument of the referendum) and enshrining that in a constitution can be considered as “completely the wrong direction” from Independence.
#9 by bringiton on April 5, 2014 - 12:27 pm
A No vote means that Scots continue to have No say in the major aspects of our life.
Should being in the Sterling zone prove to be not working for an independent Scotland then we have the choice to do something which will.
People who say they will vote No because of this policy or that policy are basically in denial about the idea of democracy and having choices e.g. “I am voting No because I hate that Alex Salmond”.
A Yes vote,is for democracy and accountability within Scotland for the very first time.
The interim constitution will have to enshrine the right of Scots to elect a government of their choice but leave everything else open to choice by the people through the ballot box.
#10 by EyeEdinburgh on April 5, 2014 - 11:40 pm
There’s nothing to stop the SNP dropping their plans for devomax before the indyref. The indyref is supposed to be on independence, not on setting up a new union which goes – in my view – in completely the wrong direction. I neither like nor trust the idea of devomax, and won’t vote Yes to get it.
(The fact that Yes voters won’t even try to change SNP policy on this doesn’t make me think it likely that they’ll be able to change anything after indyref, if Yes wins.)
#11 by EyeEdinburgh on April 6, 2014 - 9:47 am
And the SNP have a mandate (from 2011) both to legislate for a referendum and to run a post-Yes transitional period, should Yes win. Nothing more, nothing less.
If you read “Scotland’s Future” (Chapter 3 Finance and the Economy) you will find out for yourself, James, that the Scottish government – that is, the SNP – intend to set up devomax arrangements with the Bank of England as a permanent agreement. There’s no suggestion that this would be transitional.
#12 by BaffieBox on April 7, 2014 - 9:39 am
Perhaps you could define “permanent” Jane? I know of nothing in politics that is permanent but Im curious how you think the SNP will tie down monetary union permanently? Even including it in some constitution doesnt make anything permanent and I highly doubt it would be anywhere near a constitution.
Also, you say that there are no parties other than the Greens who would argue against currency union. Labour, the Tories and the Liberal Democrats all oppose a currency union so it is very possible a currency union will be short lived unless the SNP go on winning a majority in the Scottish parliament.
#13 by EyeEdinburgh on April 6, 2014 - 1:09 pm
Nor is it anyone else’s responsibility to try and change SNP policy, as Jane suggests. I’d rather their positions were better, sure (as I argued here with regard to NATO), but other parties’ policies are not my remit, nor the remit of anyone outside those parties.
I disagree with that, too!