JOANNA Cherry said in The National on July 25 that the SNP leadership should engage with the wider independence movement and be prepared to change policy when expert Yes groups point out the errors and misunderstandings inherent in their present approach.

The Scottish Currency Group strongly agrees with this and has been trying to influence the leadership on currency for years. Unfortunately we have largely been ignored.

We don’t do this due to vanity or for glory but from a conviction that we lost in 2014 because the SNP’s positioning on currency then was fatally flawed and, sadly, continues to be so now despite our best efforts.

The policy to retain sterling for a period after independence, in line with the recommendations of the Growth Commission, is based on faulty thinking in at least two respects. First, an independent Scotland is storing up major problems if it borrows in a foreign currency. We need our own currency to avoid borrowing in sterling.

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Had Scotland become independent after the 2014 referendum but still been using sterling at the time of the pandemic, we could only have paid for furlough and the other costs of supporting our economy by borrowing enormous sums in sterling at interest rates dictated by the Treasury and rUK Government.

The repayment of debt on such a scale to a foreign government would have been crippling to Scotland.

The pressure to repay interest in sterling would have required us to focus on increasing sterling earnings from exports and sales of national assets – the very opposite of what an independent Scotland needs to do in its early years. Our focus, using our own currency, should be to use that capability to rebuild our domestic economy.

A second fundamental misunderstanding is that an independent Scotland should delay introducing our own currency in order to “build up reserves”.

On the contrary, foreign currency reserves will automatically accrue to the Scottish Central Bank (SCB) through the process of Scottish residents exchanging sterling for the new Scottish pound.

The Growth Commission wrongly believed that foreign currency reserves would need to be built up over a period of up to 10 years after independence before Scotland could issue its own currency – during which period Scotland would not be truly independent.

The reality is that reserves of sterling will be achieved within months of independence. While no-one will be forced to change their assets from sterling to the Scottish pound, most people will need to do so because after independence all taxes and all benefits and government contracts will be in Scottish pounds.

People will have to buy these by selling their sterling and this will automatically generate substantial foreign reserves for the Scottish Central Bank (SCB).

We estimate that the net foreign reserves position, after repayments of sterling loans and mortgages, would be some £50 billion. That would be spread by the SCB across a range of currencies – the euro, US dollar and sterling. This would see the Scottish economy off to a very healthy start. US dollar reserves would quickly increase with proceeds from oil sales, which are all settled in that currency.

Some observers seem to believe the change from sterling to the Scottish pound would simply be a re-denomination of existing balances. That would not be possible. It needs to be understood that when Scotland changes to the Scottish pound, sterling is not being “re-denominated” or “retired” as happened with the euro when the former currencies were “de-monetised” domestically and internationally.

After Scottish independence, sterling will continue as a global reserve currency and as the primary currency in England, Wales and Northern Ireland. Even if Westminster is hostile to our departure, sterling will retain its own exchange value internationally and domestically for the UK.

These special circumstances would create a unique opportunity which can legitimately be used to accumulate foreign currency reserves. Scottish residents and businesses will sell sterling in exchange for Scottish pounds in order to pay their taxes.

As we have previously pointed out, there are also other problems with retaining sterling even for a short period. The continued participation of Scotland in the Bank of England’s sterling inter-bank payments system is for the BoE and UK Government to decide. We must not risk the threat to cut us off, which would be calamitous for the Scottish economy.

The SCG stands ready to help the SNP leadership. We sincerely hope that, particularly after the recent election results, they will now listen to the advice we and others in the wider Yes movement are offering.