Replying to Andrew Wilson: a Scottish Currency is not Symbolism, it’s Power

Andrew Wilson, author of the Growth Commission report, writes a new column in The National. This he does with great eloquence and passion. In his latest offering he attempts a defence of the Commission’s controversial proposal that independent Scotland keeps using the pound sterling for the foreseeable future.

Regular readers of Bella will know I think this idea is misplaced because it leaves the big drivers of the economy – interest rates, exchange rates, access to public borrowing – in the hands of the Bank of England and City of London.

In response, Andrew counsels patience, “Rome wasn’t built in a day” etc. He counterposes this approach to the nefarious influence of “a very small number” of miscreants in the Yes family who “would rather move immediately and overnight to a Marxist revolutionary state”.

In a video clip on the Commission’s website, Andrew lectures that someday “there may be merit” in having a Scottish currency. But only after we have fixed current economic problems, which his own report puts at around a decade hence (see paragraph C2.8).

My counter argument is three-fold. First, Andrew’s formulation will fail on the doorstep, as it did in 2014. Saying vaguely “there may be merit” in a Scottish currency, at some indefinite time in the future, invites the retort, “then why go through the bother of independence now, what exactly are you changing?”

Second, it is impossible to boost growth and escape austerity unless an indy Scottish administration can set its own interest and exchange rates and borrow to invest without a City of London veto. I fully accept you can’t have a Scottish currency on day one, but you need to tell voters that’s what an SNP government wants to introduce as soon as practically possible. There is no such thing as “constructive ambiguity”, Andrew.

And third, I’m highly suspicious of handing over the decision to create a Scottish currency to an “independent” Scottish Central Bank stuffed with the people who brought the world to the edge of economic ruin in 2008.

Andrew says in his National piece that indy Scotland “will have its own currency when its Central Bank reports to its Parliament that the six tests [the Commission] set out have been passed”. Unfortunately, these six tests are deliberately very vague, just like Gordon Brown’s tests for joining the Euro. They also assume the banking community – dominated by RBS and Standard Aberdeen – gives a green light to any change.

Andrew finishes his National piece on currency by claiming “substance and people’s welfare matter many times more than symbolism”. But exerting control over our interest rates, banks and public finances is hardly “symbolism”. It is the minimum we need to change economic direction. It is about political power.

Andrew is honest enough to admit the Commission offers “the softest of possible changes to the current arrangements, not the hardest”. In other words, it is about offering people the illusion that very little will alter with independence. That was the sell in 2014, too. Since then we’ve had Brexit, Trump and trade wars. To counsel patience when your house is on fire is the opposite of political sense.

INDYREF2: BREXIT CHANGES EVERYTHING

SHORT of an unlikely, Damascene conversion by Comrade Corbyn towards backing a People’s Vote, the UK is headed out of the EU in, or just after, March 29. For Scotland, the issue is not whether it is a hard or soft Brexit. Rather, we need to come to terms – and rapidly – with the fact that the next independence campaign will be fought on radically different economic terrain from 2014.

With the UK out of the EU, out of the Single Market, and (probably) out of the Customs Union, Scottish independence will necessarily create an economic border of some kind with England, our largest single market – assuming we rejoin Europe.

That’s not an insuperable problem at a technical level. Post-Brexit, the best plan for indy Scotland would be to remain outside the EU but to join the European Economic Area (EEA). Joining the EEA would mean Scotland was inside the EU Single Market, with free movement of capital and labour. But we would be outside the Common Agricultural Policy and Common Fisheries Policy and the Customs Union unless we decide otherwise.

Crucially, being outside the EU Customs Union would mean we could keep a free trade zone with England – so no customs checks. But the Scottish authorities would be responsible for collecting EU import duties on English goods transhipping from Scotland to the EU itself. Note: this happens in Norway, with is inside the Single Market but outside the Customs Union.

The real problem will be political. The Unionists will do their usual fake news thing and shout about indy Scotland quitting its biggest market. But nobody is proposing ending free trade with England – which would only be true if we joined the EU Customs Union and England did not. Or unless the mad Brexiteers want free trade agreements with everyone except… er, Scotland, their nearest neighbour.

 

Comments (41)

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  1. Block says:

    We do more trade with the rUK than we do with the ROW combined. Burdening that relationship with exchange rate risks and costs make no sense.

    “I fully accept you can’t have a Scottish currency on day one, but you need to tell voters that’s what an SNP government wants to introduce as soon as practically possible.”
    The capital flight out of Scotland would be epic.

    1. Graeme McCormick says:

      But they can’t take the land which can be the source of our capital and public funding source without borrowing

      1. Block says:

        It isn’t the 19th Century anymore.

        1. Alf Baird says:

          Block, Scotland sells less than £50bn (goods and services) to England, whereas Scotland’s retail sales, virtually all of which comes up the M6, are over £100bn. Scotland buys twice as much from England than we sell in return.

    2. FreedomBringsResponsibility says:

      To suggest, that dealing with an exchange rate when trading between Scotland and England, is a strong argument against a Scottish currency, is like sayiny that you would forego all the benefits of owning your own home because you don’t want to take on the build maintenance responsibilities!

      You are saying that a small and necessary burden is equivalent to a massive benefit.

      It’s a nonsense argument and one you would only make if: a) you don’t understand how important monetary policy is for an economy, or; b) you are trying to propagandise against the benefits of Scottish independence.

      Trading between different currency areas is a straightforward technical issue that is dealt with all around the world every minute of every day. Not least with all the trading that happens between the North and the Republic or Ireland!

      1. Alex M says:

        Canada has more trade with the USA, than ROW, but does not use the US$. No truly independent country uses another’s currency for long. Some current economists believe that an over emphasis on financial markets is the root cause of the poor productivity in the UK, as investment is not directed to manufacturing, but inter alia to inflating property values.

        1. Lorna Campbell says:

          And they’d be right, Alex M.

    3. Alex M says:

      Block
      I assume you are against Independence then.

      1. Block says:

        Like the majority of Scots, I see that its costs outweigh its benefits.

        1. Julian Smith says:

          A bit like the House of Lords then?
          Fortunately, there are many of us who agree with George Kerevan that a country needs to have the means to optimise its economy and that, without its own soundly based currency, it would not have the means so to do. It would be pointless and reckless to continue with the same flawed, unstable monetary system that brought the financial world to the brink of collapse, and not for the first or last time, in 2008.

        2. Wul says:

          Block: “..Like the majority of Scots, I see that its costs outweigh its benefits.”

          Like the majority of those currently living in Scotland over the age of 50, you mean? The under 45’s voted overwhelmingly for self determination.

          Strip out those born elsewhere, and count only those born in Scotland and “the majority of Scots” actually voted to run their own country. A quite normal, sane and rational thing to wish for.

          PS: What exactly are you doing here, Block? What are you scared of?

      2. Josef Ó Luain says:

        You remind me of my Granny, who claims that running a national economy is similar to running an efficient household budget.

    4. Jim says:

      Why in your opinion would there be capital flight if we introduced a new currency?

    5. Michael says:

      Dear Block,

      In follow up to your point regarding exchange rate burden, isn’t it interesting that the UK Special Representatvie from the City of London to the EU and former UK Foreign Office Minister, Jeremy Browne, sees this issue as of such little significance that in late 2016, while giving a talk to industry insiders about the impact of brexit on Britain, Ireland, and the City of London, he said that:

      “Ireland, as you would expect, does more trade with Britain than any other country in Europe. The British Isles, including Ireland, is in many ways a single economic entity. In terms of supply chain model of business management, they have a single model in some cases. They’re not separating out the Irish part of operations.”

      Correct me if I’m wrong, but isn’t this City and Westminster insider saying that trade, and even businesses, can function almost seamlessly across a national border and in different currency zones. It doesn’t sound like borders and currency are significant inhibitors to trade and business, is this City inside is to be believed.

      Are you still going to claim that this seemingly insignificant issue of exchange rate “burden” is an argument for not taking control of the most significant levers over our economy and fiscal policy.

      Or do you have different facts?

      Quote from 16.40mins: https://m.youtube.com/watch?v=BNyCZJOTRZA&feature=youtu.be

    6. Me Bungo Pony says:

      And Project Fear raises its ugly head in no time flat! One wonders how other countries of Scotland’s size manage to govern themselves and prosper without Westminster taking control of their economies. Perhaps we should be contacting them and telling them they’ve got it all wrong. Though I suspect they would soon tell us where to put our advice whilst shaking their heads sadly at the supine nature of Scottish Unionism.

    7. Jim says:

      Bolok I am unclear on what you mean by your comments .Do you mean there will be capital flight if we create a new currency or capital flight if we don’t and why do you come to that conclusion?

  2. Andy Anderson says:

    Another good article I entirely agree on the issue of the Scottish currency and membership of the EEA.

    It is vital that we have the currency issue openly debated so that people can be brought into the discussion in a meaningful way and it seems to me that those of us who have some knowledge of the subject have a duty to explain the issues and encourage open discussion on this.

  3. Jamsie says:

    “The real problem will be political.”
    Not sure if you can say that a majority who vote against Indy means that.
    More that the Scottish electorate choose not to allow politicians who at Holyrood and Westminster have failed miserably to provide a case.
    Bluntly the electorate fo not trust the political class anymore and rightly so.
    People like George and Angus Robertson who were rejected by the electorate but who continually try to lecture on what people should think are just a turn off for the ordinary voter.
    The moment has gone.
    Any notion that Indy is coming has been well and truly kiboshed.
    The SNP may remain the party of government but they will never be trusted with Indy.

    1. Julian Smith says:

      Has anyone ever suggested that there won’t be elections after Independence? If the voters prefer not to elect the SNP, that’s what will happen. Or do you have so little regard for Scotland’s people that you think there is no one capable of governing the country as effectively as the present HM Government?

      1. Jamsie says:

        Julian
        I have the greatest of faith in the electorate of Scotland.
        I am happy they will not vote for Indy.
        They may well as I said vote the SNP in as the largest party but I strongly suspect that even with the Greens in support they will not have a majority.
        And a referendum on Indy will not be risked by a split SNP in the knowledge that the people will vote no once again.
        This surely cannot be a surprise to anyone?

    2. Alex M says:

      Well we are obviously better off, with the decisive and competent Tories in London telling us what to do! It is almost inconceivable that anyone could question that.

      1. Jamsie says:

        Alex
        The question is whether a majority would question that.
        A minority may well do.
        No argument from me on that.
        At the last General Election a large and growing section of the electorate in Scotland obviously thought that.
        Surely that result demonstrates the problem for the SNP.
        They are not trusted!

        1. Derek Thomson says:

          That’s three posts now and no mention of “wee Nicola”. What the hell is going on?

          1. Jamsie says:

            Deke
            I have already been censored and banned for such things!
            Opinions are only allowed if they concur with Mr Ed’s so I am treading carefully.
            Thanks for noticing!

          2. It’s not that opinions are only allowed if they concur with mine. I am, and Bella is regularly challenged / berated / criticised and a wide range of competing opinions are played out here.

            That’s as it should be.

            What eventually becomes tiresome – and will be the basis of removal – is if your presence here is entirely aimed at relentless negativity. That is the basis of Trolling – not disagreement – but having the sole purpose of undermining a political platform which you detest.

        2. Me Bungo Pony says:

          Two points Jamsie.

          (1) If the SNP are “not trusted” but get over 40% of the vote and over twice the elected representatives of the Tory/Lab “alliance”, what does that say about the electorate’ s trust in that “alliance”?

          (2) Strangely, you seem to have missed the myriad recent polls that have shown support for independence at just shy of 50% if there is no Brexit, at 53% with a Brexit deal and as high as 59% with a “no deal” Brexit. Not quite the slam dunk for unionism you would have us believe. Just think how high support for independence could go when an actual campaign gets underway to oppose the unionist campaign that has continued unabated since 2014. A unionist campaign that, despite its persistence, has seen support for independence rise in the face of it.

          1. Jamsie says:

            As I have already said many times – let’s havw the referendum and get it over with.
            But that won’t be happening any time soon will it?
            If it does and she loses it us off the table for a hundred years.
            If she wins by 1% then the no voters would demand and get a rerun.
            Her standing is at an all time low.
            Her “government” proving daily to be incompetent across the board.
            There has been no shift from 55% naw!
            Seems to me you are a wee bit out of touch.
            But that’s supporters of nationalism for you.
            No majority, no mandate but every and every no voter is too stupid to see the benefits of another 20 years plus of austerity.
            Are you serious?

          2. Me Bungo Pony says:

            Havers Jamsie 🙂

        3. Ts says:

          If you say the SNP!! are not TRUSTED!! who is this party you have in your head that will be TRUSTED in SCOTLAND more than the SNP!!
          This is why the SNP are in government because the Scottish people believe in them as they are the only 100% TRUE!! SCOTTISH!!PARTY!! that will stick up for SCOTLAND!! and as we know no other party can say that as the other party’s are tied to the English parliament(Westminster) and leat heavy for it. FACT!

          1. Jamsie says:

            55 % if the people don’t trust them.
            Or have missed that?
            look at the share of the total electorate against what they actually win.
            The apathy in which people choose not to vote surely tells you something?
            No?
            It should!
            They are currently the party of government despite a minority share of the vote held in office by an even bigger minority of green politicians with no mandate whatsoever.
            The west coast socialist vote large if if Irish Catholic origins jumped over from their Labour roots on the false promise of Indy bring achievable.
            This is a transient albeit stubborn vote which will jump back and indeed us already doing do because of the false promises and failed ideology purveyed by wee Nicola and her husband.
            Given that she will not call a referendum beforehand or be allowed to have one with no mandate 2021 will be a telling year.
            Indy will be off the table for a very long time possibly forever.
            And the mandate I refer to which she will need to demonstrate will be the support of the majority of the Scottish electorate not some concocted grievance based statement which no one not even nationalists believe.

          2. Me Bungo Pony says:

            Even more desperate havers Jamsie.

            Your logic and conclusions concerning the SNP’s share of the vote is flawed (to say the least), delusional and frankly laughable. To apply it to the results achieved by the two main unionist parties at the last Hoyrood election; with barely 20% of those ” who bothered to vote” “trusting” either of them enough to vote for them, translating to little over 1 in 10 of the eligible electorate, unionism is clearly in a parlous state. The party you describe as untrustworthy got more support than the two of them combined. Even the latest polling puts the SNP some 10 -15 points ahead of their closest rivals in Westminster voting intentions.

            Your every post only illustrates how desperate you are becoming Jamsie. They are a comfort to those of us who believe in our country and its ability to prosper as an independent state, making its own decisions in its own interests, without having to “depend” on the representatives of another country doing it for us.

  4. Wul says:

    Real countries have their own currency.

    A Scottish currency would make Scotland stronger and more affluent. That’s why the Unionists are so keen to rubbish the idea. It terrifies them.

    The “problem” of trading between different currencies is a myth. Does Northern Ireland trade with the South? Does France trade with the UK? Does Scotland trade with Eire? Does China trade with the US? How ever do they manage that?

    Time for a truly bold, exciting vision for independence. To hell with “don’t scare the horses”! More people than ever now feel they have nothing to lose, that’s a powerful motivator for radical change.

    1. Alf Baird says:

      Another problem with an indy Scotland using what would then be the rest-UK£, which George has not mentioned, is that without Scotland’s trade flows and other significant assets/resources the rest-UK economy including its balance of trade would worsen such that the then rest-UK£ would likely further weaken in value and interest rates would likely rise as might inflation. Wilson also does not appreciate that an independent Scotland would itself serve to further weaken the strength of the rest-UK£ and with other side effects, which means there is little point to retaining what would essentially be the English (economic) £ post independence. Without Scotland, England/rest-UK will have a whopping imbalance of trade even worse than it is today when it is buoyed up by Scotland’s trade and assets/resources etc. So in effect an indy-Scotland would serve to weaken the rest-UK£ such that there is very little point in retaining it. Conversely a strong trade balance and loads of assets/resources would ensure a robust Scottish currency; not quite NOK perhaps but a lot better than a weak Rest-UK£. This also explains why rest-UK need to ‘hold on’ to Scotland economically.

      1. Lorna Campbell says:

        I think there is a huge disconnect between the politicians who know perfectly well, Mr Baird, why they need to hold on to Scotland, and there is no one reason, but a succession of reasons, some economic, some plain old-fashioned imperialism, based on a grand delusion of their world power, and the ordinary people who voted NO in 2014. The politicians have been happy to indoctrinate the ordinary punters into believing that Scotland is a massive burden and how dare we even think about throwing their generosity in the faces; then, there is the neo colonial aspects of ‘I came up here to Scotlandshire, to settle, and how dare you change the rules of the game now’ mindset, which, joined to the ‘we can’t survive without the Union’ attitude of so many home-grown British Nationalists, completes the picture of why, quite apart from our own mistakes, we lost in 2014. No doubt we do have to make a much better economic case, but not at the expense of the reality of the determination of so many in Scotland, on grounds, basically, of imperialistic/neo colonialist attitudes, to prevent independence because they perceive it to be inimical to their own interests no matter how damaging it is for the population as a whole.

        1. Alex M says:

          Lorna,
          I agree with the points you make. It is worth pointing out to all the naysayers that voting decisions are not all based on self-interest. A little study of George Lakoff’s work will convince us all that ideas are more important than policy. Hence the success of “taking back control” and “making America great again”. Both these successful “slogans” had no intellectual backing at all, but were highly persuasive.

  5. tartanfever says:

    I wonder if these positions are taken as much out of political standpoints as economic. The SNP are keen to garner more support in the middle classes and the older generation, as young people tend not to vote in such numbers. The appearance of being safe, ‘middle of the roaders’ will however only disappoint swathes of the independence movement.

    However, the unionist arguments, demonstrated here in the comments, are overly optimistic. They have an idea that Brexit is the end, that somehow it’s all over on the 29th March. That’s delusional, it’s actually only the start. The hard part comes after, in negotiating new deals.

    Until now, the Uk have been shown a lot of courtesy by the EU simply because we are still a member. Yes, there have been some harsh words and frustrations from EU ministers, but they are insignificant in comparison to the crassness and ignorance displayed by May’s government. Once we leave and become a third country, the gloves will be off. As has been demonstrated by noises from the US and large parts of Asia, the UK will be frankly, torn to bits in new negotiations. We have proved ourselves completely unreliable and untrustworthy so far in our Brexit negotiations . We will never replicate the trade deals that we currently enjoy as EU members and common sense tells you that if one market is about to dry up, it’s time to look elsewhere and diversify. It’s the age on consequence now, new decisions have to be made.

    So when Unionists start crowing about ‘our biggest trading partner’ being England, maybe start to ask exactly what we can expect over the next few years ?

    May has shown herself and her government as being completely incompetent , just what are they going to deliver for our future ?

    So to unionists:

    What will be our new food standards ?
    How will you protect us from mass imports of chlorinated chicken and other foodstuffs from the USA that do not meet the current standards ?
    What new employment rights will you offer our workers that meet current standards ?
    How will you protect our public service contracts from overly aggressive US hedge fund backed operations out to make a killing ?
    What medicine standards will you use ?
    What environmental standards are to be enacted ?
    What about cross border co-operation in education, medical research and energy development ?

    Because of course, an independent Scotland with some form of EU membership can enjoy all of these things because they currently exist and we use them now.

    As for the biggest market claim about England, you have to ask, what market ?

    75% of our jobs and GDP is generated through service industries and we’re leaving the single market, just how are you going to replace the loss in jobs and GDP while we lose things like financial passporting, vital to the City’s financial sector ?

    So over to you unionists, it’s time for you to start answering some questions.

    1. Lorna Campbell says:

      Couldn’t agree more, tartanfever. In fact, if you try and work out how the UK will look after Brexit, if that is the kind of UK the Tories envisage (aided by Labour and the Lib Dems), then you kind of have to see that the domestic, internal UK market cannot, in any circumstances after Brexit, remain as it is now. I was a strong Remainer, but I, too, think we need to join the EEA instead now. I am also in favour of our own currency as quickly as is feasible after independence. However, as another commentator has said already, the problems lie not in the economic factors of independence – and certainly did not in 2014 either – but in a bitter and determined resistance to leaving the Union. The economic side of the argument came second, neo colonialism first. That is what no one in the independence movement appears willing to admit or even recognize, but we are going nowhere till we come to terms with that fact. Everything since has shown that to be true, particularly Brexit, which no sane person could claim to be economically savvy or free of risk, at the moment. Yet, the Brexit bounce has not happened, and the reason it has not happened is because so many – the majority of Leavers, in fact, were previous NO voters. In both instances, neo colonialism won the day, and what Scotland desperately needs is ignored all over again. The Emperor has no clothes, but, like the poor fools who were too scared to tell the truth, but were happy to go along with a lie, and by doing so, perpetuating the scamming stupidity, we will have to leave it to the ‘child’ of desperation and reality, in its innocence, to deliver the final blow to the Union.

  6. Thomas Dunlop says:

    After Brexit, I fear that within a few years , there will be very little agriculture or fishing left. Everything will be put on a fire sale to be sacrificed for service industry sweeteners with the rest of the world. The US and others are already demanding that standards be dismantled, the NHS opened up to privatisation. So the first thing will be to convince more soft NOs that they are going to lose a hell of a lot more in the UK than outside it.

    I agree that an independent sovereign currency is the way to go. However, as it is most likely that the Scots Pound will be remarkably strong, we would need to join the euro eventually to cheapen our exports .

  7. Bill W says:

    I see little evidence the SNP has learned much since 2014. Before the next referendum the Indy movement must have an answer on currency, on the EU and on how to combat a strongly unionist press. If it doesn’t we are wasting our time.
    On top of those issues however, I think the focus needs to shift. I’m one of the “older generation” who apparently lost the referendum for us but I, and the vast majority of my friends & family, were Yes voters. For those I can speak for we all felt the financial risks were worth taking to extract ourselves from a broken and oppressive Union.
    We don’t want to be part of any Union which we can’t leave when we decide to.
    We don’t want to be part of any Union which, until recently, took all of our earnings and passed back an allowance.
    We don’t want to be part of any Union which gives free rein to a political party winning 40% of a vote
    We don’t want to be part of a Union which decided to sell off its greatest assets during a period where it had an oil windfall.

    I could rant on about the issues there are with the Union we are in but few are about currency or GDP. They are about taking the decisions on how we earn our money and how we spend it. Whether we are working for the future and our children or whether we are Thatchers “loads a money”, “I want it now”. That’s the real decision for me.

    1. David Allan says:

      Couldn’t agree more. 4 years on and no further forward. the polls reflect a small move toward Indy. The SNP have failed to usefully mobilise their huge membership rise in 2014, we can’t even prevent the BBC from airing another Motherwell Union Biased Question Time. The Editing out Fiona Hyslop’s reply should be subject of parliamentary action(Holyrood).

      The power of the BEEB and the Unionist Press to selectively influence public opinion has never been challenged .

      The ‘ National ‘ apart . Without other media support the second referendum will frustratingly be doomed!

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