One story I missed commenting on from last week was Osborne statement, or more to the point scare at bed time, regarding whether Scotland would be allowed keep the pound in the (unlikely) event of independence. Predictably he implied London would make thinks exceedingly difficult for Scotland, not so much because it was in Britain’s interest to do so, but too punish the Scot’s for walking out on him. Indeed his speech reminded me of the sort of behaviour I’ve seen from a divorcing couple where one jilted partner seems determined to make the divorce as difficult as possible, e.g. fighting over the family home, to the point where the likely outcome is that they’ll have to sell it at below market value, neither will get enough from the sale to buy a new home and the only winner is the lawyers (who’ll get most of the money via their fees).
That said, the Alex Slamond all but knelled down in front of the Tories on this issue with a sign on his back saying “kick me“. It would indeed make little sense for Scotland to retain the pound after independence (at least long term). It would be an unprecedented move for any independent country. While several countries have pegged the value of their currency to the dollar (or even allow them to be used as an unofficial currency) these are very different circumstances to what Scotland would face.
Again, a big part of the problem is the SNP’s unrealistic and naive believe that independence can take place quickly, when in truth there would have to be a long and protracted series of negotiations. This would probably see the Scot’s hanging onto the pound for some part of that transition period, but longer term it would make sense for them to set up their own currency, even if this was merely a transitional step towards the Euro. And like the issue of EU membership, it is becoming obvious that the SNP have not properly thought this one through.
In truth there would be advantages to both sides to reaching an amicable settlement on this issue (a review of the option here), not least of those the fact that the Scot’s might just walk away from England, form their own currency and leave Britain to pick up the tab for Scotland’s share of the UK’s national debt.
And contrary to what Osborne says it would be more in England’s interest to maintain a currency union than Scotland. Without Scotland’s industry, which includes many high value export goods (e.g. Whiskey, Salmon, Angus beef, Irn-bru :DD etc.) plus their oil reserves, Sterling will be much more vulnerable without Scotland part of it and probably at risk (in its present from) to speculator attack next time the country gets into economic trouble. Indeed my suspicion long term is, if Scotland leaves, they’ll get their own currency (at least until the oil runs out) and England will eventually be forced to join the euro.
There is no reason to doubt that a Scottish currency would be stable. Many smaller European countries of similar size have very stable currencies, and they don’t have Scotland’s oil reserves to back up there currency. And let’s face it, the way some English shopkeepers act, Scotland essentially already has its own currency.
Take Ireland, we used to have the punt. It was, despite the many up’s and down’s over the 80 years of its life, a fairly stable currency. And its value generally tracked that of the British Pound reasonably closely (within 10-25%), despite there being no official pegging of the punt to the pound by Dublin. While the Irish national bank did occasional intervene to maintain a reasonable exchange rate, by and large the punt was allowed to float. There is thus little reason to doubt the integrity of any Scottish currency (and that it would maintain value v’s Sterling), so long as the SNP didn’t do something really stupid, like what Iceland got up to (and even then its worth noting that Iceland is not recovering and has a better credit rating than a number of eurozone countries).
Of course the problem for the SNP is that they know from their focus groups and opinion polls that many in Scotland don’t believe that a Scottish currency would be stable. The tabloids have long been stirring things up to suggest otherwise, not to mention hinting at chaos if such a currency was introduced. Indeed many of the scare stories they’ve dug up are similar to the stuff we heard in Ireland before the Euro came in.
We were told back then that there would be panic in the streets, hyper inflation (even before the euro was introduced!), that someone would try to buy a sandwich with a mix of Euro coins and punts and both he and the shop keepers would spontaneously implode in confusion, that there would be a wave of crime (as security vans would for a brief period be carrying double the amount of cash), that shops would shut down to escape the chaos and we’d all starve…..actually what happened was on January the 1st everyone’s bank account rolled over from punt to Euros and I, like most Irish, gathered up whatever punts I had left, went to the bank, handed them over and got it all back in Euros. Simple as that. Again there is no reason to suspect that the introduction of a Scottish pound would be any less stressful. Its hardly the first time in history a country has introduced a new currency (when Norway and Sweden split at the turn of the century, they essentially split the Krona in two, Swedish and Norwegian).
But the SNP have allowed themselves to become trapped by their own ideology and their commitment to unrealistic polices. As I’ve long argued, I’m minded to support Scottish independence, but for me the devil is very much in the detail. As far as this currency issue is concerned, what the SNP are proposing is just silly and unworkable.
My advise to the SNP is to drop the independence referendum altogether and focus on getting more devolved powers for the Scottish parliament, as in truth this is what the majority of the Scottish people actually want.