The National:

SINCE I first became involved in Scottish political debate I suspect that I have done more meetings with local groups in Scotland than anywhere else. This has most certainly been true during the Covid era. Three questions always arise.

The first is can Scotland make it as an independent country? I always say that no-one can prove this, except for the people of Scotland, that is. And if some Scots really do not think that they can provide for each other’s needs and at the same time produce goods and services to trade with others then they must explain what makes them different from every other national community of five million or so people around the world. Only Unionists do, as far as I know, have such a dim view of Scots’ ability.

The second is whether Scottish Government will be able to afford the level of services – including pension payments – that people now enjoy. I always say that this depends entirely upon the answer that is given to the third question.

READ MORE: Scotland is the 'coolest nation on Earth', says European broadcaster

That third question is the one on which, I think, everything else about the future of Scotland depends. It is about what currency Scotland should use after independence.

In my opinion there is only one answer to this question. Scotland must have its own independent currency created by its own central bank on the day that it becomes independent or it will never break its relationship with England, and its dependence on it. Let me, however, explore this in the context that someone recently asked me to do during a meeting. They suggested I should lay out the pros and cons of an independent currency.

There is a long list of pros. It starts with Scotland declaring its sovereignty over its territory, the trade that takes place within it, the mechanism for exchange which it offers to the world and, quite crucially, its economy. If independence is about anything it is about this declaration of sovereignty. Without having its own currency Scotland will quite literally not make that claim for independence, at all.

Then let's look at the economy. With its own currency Scotland can control its own interest rates. It can also control its own fiscal policy and so decide which businesses it wishes to support, and which it decides to leave to market forces alone. It can go green then. And, quite crucially in a modern context, it could also run deliberate financial deficits funded by quantitative easing so that in the event of any form of crisis it can support the people of Scotland. None of this could be achieved without its own currency. So, if independence is about improving the wellbeing of Scotland, an independent currency is essential.

But it is more than that. If Scotland is to price itself into work then the goods and services that it sends into the world must be competitive. This requires that it should have a floating exchange rate, reflecting the productivity of Scotland to ensure that work within the country is supported by the relationship between Scotland’s prices and those of international markets. Using the sterling in Scotland would positively hinder this, just as the use of the euro in the smaller countries of Europe has done the same thing. Having an independent currency will let Scotland price itself into work.

Last amongst the advantages is the fact that having its own currency is necessary to make a Scottish tax system work. If all Scottish taxes had to be paid in Scottish currency, and nothing else, then firstly the currency would have value because it would have to be used in exchange, and secondly, the use of the currency of another currency, which makes tax evasion so easy, would be discouraged.

So what of the cons? One claim is that the Scottish pound might be worth less than the English pound. But, as I have already noted, this would price Scotland into work, and boost employment, and wellbeing for the country. That shift would also, in real terms, increase the value of the pensions paid from outside Scotland. Many pensioners might like this outcome. It’s a rising Scottish pound they have to fear.

And without sterlingisation – which the Scottish Growth Commission proposes – and the price peg it suggests be used after a separate currency was created – the costs that Commission proposes Scotland should pay to eventually have a currency of its own would be avoided. There would be no need for austerity to build up foreign exchange reserves, because a floating Scottish pound would not need them as the price is allowed to float and is not fixed. This is of course true for most currencies now. What is more, Scotland would not borrow in a foreign currency and so effectively pay a tax in the form of interest that the English would receive for the use of their currency.

The National:

And yes, in that case, and only in that case, would Scotland be able to afford to continue to supply all the public services that it does now, because no-one else would have a claim on the Scottish economy, which England would have if sterling was used.

It’s time this issue was resolved for good. All who favour independence have to favour a Scottish currency from day one. It’s that or their commitment to independence has to be questioned, in my opinion.