Avoiding a Political Trap: Why Alex Salmond didn’t articulate a Plan B on currency
If Alex Salmond’s main problem was that he couldn’t reassure the audience about the inevitability of his Plan A for a UK currency union, and lots of Scots remain uncomfortable with uncertainty on such a fundamental issue, why didn’t Scotland’s First Minister articulate a plausible plan B? One audience member even said: “I’m ready to vote yes, but just tell me about plan B for the currency.”
I think Salmond was wise not to, and this was a political trap. The clue lies in the fact that he was goaded into talking of plan B by Alastair Darling and about half of the audience.
When Salmond first responded to the leaders of UK’s three main parties saying they wouldn’t accept plan A of a UK currency union by suggesting that they are basically lying for strategic advantage, it seemed like a principled position, and plausible for many, including leading economists and indiscrete government ministers. More importantly, the poll movement towards Yes seemed to back it.
But Better Together have nonetheless stubbornly held that line, wavering though it may be. The political calculus that uncertainty about the colour of money in people’s pocket will outweigh the uncertainty over political skulduggery appears to have worked out, at least for now.
So surely the Yes campaign should now change track? There’s not much time left and currency is a big stumbling block. How sad it would be for those like me who want political independence for reasons that are not about the economy to lose out to doubt on this issue, which is actually much more psychological and political in nature than economic.
But I wonder if Salmond should hold his nerve. Polls are continuing to narrow and up to about a third of voters are still undecided. In a former life I played chess professionally, so I often ask myself what an opponent might be thinking, and in this case I sense that articulating a plan B is exactly what Better Together want Salmond to do.
At first blush he could say: “This is a non-issue because the currency union makes so much sense for both sides, but if sound economics and common sense doesn’t prevail, plan B would be to use Sterling outside of a currency union, like Ireland did for 50 years after independence.”
This suggestion sounds so compelling at first blush. Next question! But I suspect Darling’s prepared response might have been rather powerful: “Ah, at last! And you think the EU will let you in with a currency that lacks a lender of last resort? No chance.”
The biggest problem with the most straightforward plan B, based on the Ireland analogy, which otherwise feels so friendly and familiar, is that Ireland wasn’t simultaneously trying to be accepted as an EU member while entering that currency position. Without any link to The Bank of England or another viable lender of last resort, the claim we can join the EU without joining the Euro no longer feels entirely credible.
So what else? The principled position is to create a completely new currency, but then the risk is how that currency would be valued by global markets on day one. The Scottish economy is objectively very strong, and there is no particular reason to fear the judgment of the markets, but that feels too much like playing dice. Boldly opting for our own currency might have been a powerful plan A, because it’s consistent with the otherwise confident position on the economy. But it’s a lousy plan B. Where the purpose of a plan B is to allay anxiety, it’s enough to know it could go really horribly wrong for the bold option not to be fit for purpose.
The biggest problem with the final main option, of joining the Euro, is mostly psychological. When the Euro crisis became a household name, the original idea of Scotland joining the Euro was apparently not well received on the doorstep. Despite strength returning to the currency, recent history makes joining the Euro feel too much like asking for trouble, which again is enough for this option not to allay anxiety.
None of the economic doubts are altogether convincing because Scotland’s economy is robust and versatile enough to adapt in most scenarios. Still, the basic problem is that every individual plan B includes a potential negative factor that would provide a fresh target to The Better Together campaign, keeping currency uncertainty alive, and making each prospective plan B seem even riskier than the chosen plan A.
So I understand why Salmond is holding his ground. His position is that Plan A is obviously going to be ok, and that may yet prove to be obvious enough. And it also makes sense to speak of the other options in composite terms. Taken together, our own pound, a new Scottish currency and the euro are waiting in the wings, like an indistinct group of friends we haven’t seen for a while who might be handy in a fight.
The trap laid last night, I think wisely avoided by Salmond, is that when they come out of the wings one by one, each reveals itself to be no less vulnerable to doubts than plan A, which makes the risk of plan A not working out even more salient in the voters mind.
As I’ve written before, on balance I would personally vote yes, given the chance. After last night though, I can see why the currency issue is not going to go away. I think the Yes campaign need to take the doubts seriously but also ‘keep the tension’ on currency, as we say in chess – don’t throw away the strength of your position just to reduce complexity for the sake of it. Economically there are many viable options, and the electorate knows that, but politically there is no plan B.