AN independent Scotland should have its own currency – about this there can be no argument. It’s a case I have been making for many years.
In 2018, this very newspaper ran a front-page splash on Business for Scotland’s currency position which we published ahead of the Sustainable Growth Commission report (SGC).
Back then, we were fed up waiting for the SGC report, we wanted to pressure the SNP into publishing so we could accelerate our promotion of the economic case for independence.
Sure enough, after delaying for more than a year, the SNP reacted and quickly published the report. But we knew straight away that it wasn’t even close to what we needed.
We engaged several times with the SGC and even spent £1500 on an event to let them discuss the issues with our members – but not one idea BfS suggested made the final report. It was a huge disappointment.
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Despite the Scottish Government’s initial independence policy paper, their position remains less than clear. As a result, lots of small special interest groups of online Yessers have formed to debate the issues, with many opinions being thrown into the mix. Business for Scotland’s position however, remains unchanged.
Our 2018 paper stated: “We believe that an independent Scotland should have a sovereign currency at the time most in line with the economic and social wellbeing of the nation. That might be right away. It depends on the political realities of the day, but it’s probably after a transitional period where Scotland uses sterling until it suits Scotland not to do so.”
And that’s the Get Real bit of the equation. As an indy supporter, of course, my heart says we should have a sovereign currency. As an economist, my head also sees the benefit of the monetary and fiscal flexibility that goes with that.
However, that pragmatic side of me also sees the potentially huge benefits to Scotland of maintaining maximum flexibility on the timing of the launch of that sovereign currency.
A flexible currency approach can help create an agile economy and deny the Unionists many of their attack lines. To be fair, the Scottish Government has stated their commitment to a Scottish pound and have made it clear that they intend to move to it as soon as is practical.
“As soon as is practical” were the words I gave the activist who wrote the motion passed by SNP conference, when he called to ask for advice. Those words were key then and they are key now.
The reality is that Scotland’s independence will result in sterling falling in value. If we are using sterling for a transition period, Scotland’s exports – our seafood, whisky, energy etc – will all become cheaper for international customers, with the USA and the EU nations significantly boosting our exports.
England, Wales and Northern Ireland will also find that the vital supplies they import from Scotland will be cheaper than from nations outside the temporary Sterling Zone.
Therefore, keeping sterling for a transition period will boost exports, create jobs and significantly increase trade with the rest of the UK after independence, destroying UK Government scaremongering.
Some will say that sterling losing value is a bad thing because we prefer a strong pound, but that’s just right-wing economics/finance sector-led thinking. The words “strong” and “weak” lead people to assume that “strong” is good and “weak” is bad – but that’s a misnomer.
We’d do better to use the terms “import maximising pound” and “export maximising pound”, rather than these terms.
The inflation we are experiencing right now is caused largely by Brexit and high energy prices. An independent Scotland rejoining the EU and creating an internal energy market – where pricing will be based on potentially supplying 100% of our own energy needs from ultra-low-cost renewables – will quickly get inflation under control, even with an export-maximising currency.
Flexibility is also politically clever – many Scottish voters have worked for rUK-headquartered firms and have pensions and investments that are paid in sterling or held in England. Being able to tell them that no pensioner will lose out due to currency fluctuations will be a key indyref2 message.
So, when is the optimum time to launch the Scottish currency? Well, the answer depends on the economic situation and on negotiations with Westminster. It might be day one, it might be a few years down the line. The key point is it will happen when it’s best for Scotland, so creating our own central bank and getting the currency ready for when we need it is a given.
I would lay short odds on Scotland becoming independent within five years (including a constitutional transition period) and then having a sovereign currency after another two-year currency transition period.
Whatever happens, we need to maintain maximum flexibility on currency and not take narrow nationalist positions – leave those to the British nationalists.
Gordon MacIntyre-Kemp is the CEO of Business for Scotland, Chief Economist at Scotianomics and the founder of the grassroots Yes campaign: Believe in Scotland
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