Scotland should dare to be to dull on economic plans for indy

But as well as promising to pay a large part of everyone’s gas bills, he felt he had to go on a tax-cutting spree. No-one, except perhaps for some hedge fund managers, really saw that coming.

On becoming Chancellor of the Exchequer, almost his first action was to sack his permanent secretary. That raised some eyebrows. We now know he also refused to publish the Office for Budgetary Responsibility’s commentary on the fiscal statement.

The IMF issued a public warning that the UK’s fiscal and monetary policies are now “at cross-purposes” and would “likely increase inequality”. For most of last week, as the value of sterling collapsed and interest rates shot up, it was clear that the Government had lost control.

Some stability has been restored after the Bank of England shored up the bond market by spending £65 billion on buying up securities. That reversed its recently announced plans to sell government bonds and involved it acting as the lender of last resort, staving off a liquidity crisis.

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There has been plenty of commentary about how pension funds could have become insolvent. There has been less discussion about how easily a crisis could once again have spread to the banks.

Joanna Cherry used her National column last Friday to call for new economic thinking. I would put it differently. We now need a firm commitment to the boring, responsible parts of economic management.

When Gordon Brown passed the power to set interest rates back to the Bank of England, he gave people confidence that he would not try to set artificially low interest rates to squeeze out a little bit of extra growth, and ignore inflation.

When David Cameron and George Osborne set up the Office for Budget Responsibility, it was to make sure that governments would no longer be able to rely purely on internal, politically expedient forecasts from the Treasury when setting their budgets.

An effective political government often distributes political authority across many institutions, preventing undue concentrations of power.

The art historian Bendor Grosvenor made the point on Twitter that this is not the case in the UK because there is no formal separation of powers. Executive powers are concentrated in the post of prime minister representing the Crown in Parliament, an arrangement Lord Hailsham called an “elective dictatorship”.

There are few formal checks and balances to stop UK Government ministers from wrecking the market. We rely heavily on what the historian Lord Hennessy calls the “good chap” theory of government.

From having a rogue in 10 Downing Street, we have gone to having a zealot. Shambling, lying Boris Johnson has given way to the slightly demented, barely coherent Liz Truss, as the Conservatives demonstrate their ingenuity in finding ever worse leaders.

The last week has had much the same feeling, politically, as Black Wednesday. The tide has gone out so far for the Conservatives that their task now will be to manage the scale of their electoral defeat.

Writing last week that a winning formula for independence would emphasise that Scotland is European, I was thinking about the importance of ensuring that we have robust democratic institutions after independence, with decentralised authority, so that Edinburgh does not simply replace London as the sole focus of power and influence. There would be a constitution which would place many checks and balances on the authority of the executive.

AT the SNP’s annual conference this weekend, I hope there will not be too much discussion of the need for politeness when campaigning. The conference agenda has some interesting resolutions but there is nothing which declares the party’s readiness to lead the building of a new state after a successful referendum next year.

In this context, John Randall suggested on your letters pages on Tuesday the importance of Scotland having an independent central bank which would manage its own currency. He pointed out that this appears to be the Scottish Government’s policy and, to be scrupulously fair, formally that it is the SNP’s policy.

We have vague commitments just now. Presumably, somewhere in St Andrew’s House, plenty of work has been done to think about how it might become a reality and the Scottish Government will set out clear proposals at the start of the referendum campaign.

John Randall gave a good account of the liberal arguments for Scotland having a currency-issuing central bank, arguing this would give the government the greatest possible flexibility in the management of the economy.

There are alternative, conservative arguments, which go back to Milton Friedman. No friend of economic planning, he believed strongly that central banks should support a stable economic environment.

That meant bearing down on inflation by raising interest rates. It also meant keeping the banking sector liquid, so that credit would expand steadily. All this would support rapid economic growth.

Impatient people sometimes tell me governments should not care about market reactions. But markets are the canary in the coal mine – a crudely effective early warning system of problems. For Scotland, independence is the radical concept: in its implementation, we can dare to be dull.