George Kerevan: Let’s make sure the numbers are right when indyref2 comes

First: will the EU let an independent Scotland back in, post a UK Brexit? Certainly Spain’s current premier, Mariano Rajoy, has a habit of casting doubt over a Scottish entry. However, a close textural reading of his latest pronouncement – while rejecting separate talks with Scotland as part of the UK’s Brexit negotiations – leaves open the door to our eventual membership as an independent nation. As always, Rajoy is more concerned with resisting Catalan separation from the Spanish state than with Scotland itself. But Europe has bigger problems and these will ensure a warm welcome for an independent Scotland.

The Little Englander orientation of the Brexiteers could fatally compromise Europe’s peace and security. Firstly, because it has given momentum to Europe’s neo-fascist and populist right, which wants to kill off the EU and its democratic values. Witness the re-run of the election for the Austrian presidency, which now could propel an anti-EU, neo-racist candidate into that office. Secondly, by creating uncertainty for years to come, Brexit undermines the security of the Nordic and Baltic countries when faced with the Mafia-style politics of Vladimir Putin in their neighbourhood. In this dangerously fluid situation, Scotland’s positive orientation to Europe will find favour with our Continental partners. Besides, our strategic geographical position in the North Atlantic makes us key players and necessary allies of the Nordic and Baltic countries.

Next comes the vexed currency issue. There is no doubt that the SNP did not convince voters in 2014 on its plan to remain in a common currency zone with the rest of the UK. More to the point, a post-Brexit Tory Government will be in no mood to accommodate us. This is a pity because there remain positive advantages for both sides – indy Scotland and rUK – to keep a common currency. The Brits are running a record current account deficit which is being funded by the Chinese buying up London (so much for Brexit returning “control”). So an indy Scotland pooling its surplus export earnings (think whisky) with the Bank of England would be useful.

Assuming keeping sterling is off the agenda, we need an alternative. Even if we wanted to, joining the Euro would be a long-term project because we would have to align our economy and exchange rate with the Eurozone’s, and that would take years. Which leaves us with creating our own Scottish pound (or whatever name you fancy). To avoid disruption to trade, contracts and pensions we would likely need to set the exchange rate at parity with the rUK pound sterling, at least for a period. Ultimately, of course, a Scottish currency gives us the flexibility to devalue to boost exports and productivity.

The issue for immediate consideration is the mechanics of creating a new currency quickly. That’s not impossible: the Baltic States did it expeditiously after they declared independence from the old Soviet Union in 1991. And Scotland is better supplied with the banking expertise to create the necessary new financial institutions. But if we go down this road, we can’t wait till the Saltire is run up over Edinburgh Castle before designing those institutions: a central bank, (probably) a currency board, and financial regulators.

Third: how will independent Scotland cope with the likely fiscal deficit, in the immediate post-independence period? This is an issue we should not shy away from as it is bound to be the chief fear factor utilised by the remaining Unionists, especially in the rump of the Scottish Labour Party. They will argue that with oil revenues well down, early independent Scotland could not maintain current levels of public spending without unsustainable (or unachievable) levels of state borrowing.

What they won’t admit is that Scottish fiscal stability is already under direct threat from Brexit. Michael Gove had barely declared his candidacy for Tory leader than he was arguing that the Barnett formula has to go. Conclusion: there is no return to the fiscal status quo for Scotland, indy referendum or not. Better then to do something radical about it by taking complete control of our own fiscal destiny.

Fiscal shocks are now an endemic part of the global economic picture. Brexit has only added to this. I doubt there will be an instant meltdown in the post-Brexit UK economy but I do think that inward investment will drift away over time, putting us into deflationary decline. Time to man the economic lifeboats. Fortunately, experience proves that periods of economic uncertainty and crisis are best managed by small, independent nation states.

These are nimbler when it comes to making necessary adjustments (e.g. boosting productivity and exports) and exhibit greater social solidarity when it comes to sharing any economic pain – and thus minimising the time taken to get back on a growth path. Witness: Iceland, Norway and Sweden powered out of the 2009 global recession faster than the UK. Even battered Ireland has seen an export and productivity miracle. In the UK, where productivity is stagnant, Brexit economic blues are the last thing we need. Incidentally, much of the Nordic nations investment in capital projects that improve competitiveness comes from the jointly-owned Nordic Investment Bank (NIB). The NIB offers long-term loans and guarantees on competitive market terms to its clients in the private and public sectors. It raises funds by borrowing on the international capital markets and NIB bonds enjoy the highest credit rating. Thought: an independent Scotland should apply to join the NIB.

FINALLY, what economic niche will an independent Scotland fill in the global market place? I raise this because unless we have a clear and realisable set of national economic goals, we add to the inevitable uncertainties unleashed by the Brexit vote. The purpose of Scottish independence is now about delivering economic and social stability in place of the existential and generation-lasting instability of Brexit. Consider one example: little Switzerland (population eight million) supplies fully one per cent of global manufacturing output.

The UK (population 65 million) produces barely three per cent of global manufacturing output. Super-productive Swiss manufactures twice per head of population by value than the US. Perhaps Scotland could aim to turn itself into an industrial powerhouse once again, instead of relying for bogus “growth” on the British model of debt-fuelled consumer spending. Of course that would require a fiscal and monetary policy aimed at encouraging industrial investment; i.e. jam tomorrow rather than jam today. But it would supply better pensions and a high standard of living for all.

We are nowhere near indyref2 yet. The immediate political task is to protect Scotland’s social and economic links with the EU and to guarantee the rights of EU citizens residing here. But if those goals can’t be achieved, a second independence referendum seems inevitable. Let’s be prepared.