2007 - 2021

Kiwi Socialism, Complex Currencies and Spreadsheet Phil’s Dilemma

George Kerevan on Spreadsheet Phil, the currency debate and unexpected socialism down under …


PHILLIP HAMMOND must be the most anonymous Chancellor of the Exchequer in decades. This is partly because Brexit has obscured much else on the UK political agenda. And perhaps because “Speadsheet Phil” is happy to stay out of the limelight to escape blame if the economy hits the post-Brexit buffers.

Next Wednesday, 13 March, is the Chancellor’s Spring Statement. This is what used to be the Budget before it got moved to the late autumn. Unfortunately for Hammond, this year’s Spring Statement falls the day after the big Brexit vote on Mrs Mays EU deal. If MPs reject the deal yet again, then next Wednesday will be chaos. Wednesday evening could see an emergency vote on rejecting a no-deal exit from the EU, in which case our Phil will be a sideshow.

This means the 2019 Spring Statement is essentially a holding operation. True, the Office for Budget Responsibility (OBR) is likely to revise down economic growth, given the fact that UK business investment has fallen four quarters in a row as a result of Brexit uncertainties. But Phil has no immediate option other than to squirrel away tax income and await the day he might emerge as saviour of what’s left of the post-Brexit economy – and throw his cap in the ring to replace the Maybot in Number 10.


Andrew Wilson uses his most recent National column to come out fighting in defense of the SNP Growth Commission’s plan to keep sterling after Scottish independence – at least until the bankers tell us we can have our own money. “Currency policies are complex”, says Andrew, a sentiment no one would disagree with. But complexity is not the same thing as beyond understanding.Andrew’s main argument is that introducing a separate Scottish currency “in haste without having established ourselves and got the economy and trade motoring and the public finances stable and sustainable could risk jobs, stability, growth and public services”.

The problem is this: if, as Andrew believes, we must get growth and trade “motoring” and the deficit permanently reduced while using sterling, then why change currencies at all? That’s exactly the question we’ll be asked on the doorstep, Andrew.

The counter argument of those who want Scotland to have its own currency, interest rates and bond market, is that we need those very economic levers precisely in order to mange growth, productivity and fiscal balances. Currency is a tool. And that’s not complex to explain on the doorstep. You get the economy motoring by investing and that means public borrowing. That borrowing will be blocked by foreign sterling lenders who will tell independent Scotland to eliminate its deficit first. Q.E.D.

Andrew also raises possible technical impediments to introducing a Scottish currency. In particular, he argues we would need to amass (through borrowing) a significant foreign currency reserve before starting. In true Project Fear style, he says this would “cost taxpayers and public services now and saddle future generations with the most expensive interest we will ever have to pay” (my emphasis).

For starters, introducing a Scottish currency means converting from existing sterling balances. Companies and individuals would acquire Scottish currency (in the first instance to pay taxes and for public services) by buying it from the Scottish monetary authorities. By definition, each new Scottish pound issued is backed by a foreign reserve held by the monetary authority. You do not have to amass a huge foreign reserve a priori – Andrew speculates circa $70 billion, like Denmark. It is more a step-by-step process.

Of course, you cannot set up a new currency in a day – I don’t know anyone who argues this. But you do need a definite timetable, or you risk creating uncertainty and the very “disorderly” currency transition that Andrew accuses folk like myself of risking. I respect Andrew Wilson’s desire to win assuage voter worries and business uncertainty, when proposing a new currency. One solution we might agree on: the new currency could run in parallel with sterling for a time.


New Zealand’s incoming Labour prime minister, Jacinda Arden – that country’s youngest PM since 1856 – has just announced that capitalism is a “blatant failure” and rejected neoliberal, free-market economics as a national guide.
NZ was, of course, the prototype for a neoliberal, privatised economy and served as a model for Tony Blair and New Labour.  It also figures – still – as one of the economies Andrew Wilson’s Growth Report wants an independent Scotland to emulate.

NZ has upped its GDP growth rate to around double the Scottish average, which presumably what attracts Andrew.  To achieve this, NZ has dismantled its welfare state; destroyed probably the fairest, most equitable income distribution in an advanced economy; created the worst homeless situation in the OECD; and impoverished its public sector workers, hundreds of thousands of whom – nurses, teachers and junior doctors – have been striking over the past 12 months.  These days, chasing crude GDP is code for a failed neoliberalism. Take Jacinda Arden’s word for it.

Comments (14)

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  1. John MC Gurk says:

    I think as far as I can this neoliberal Capitalism light touch regulation on the banks is what got us into this whole mess in the first place
    Anyone in doubt would find the book twenty thee things they do not tell you about capitalism.

    1. Willie says:

      Neo liberalism founded on the trickle down effect with the taps turned off.

  2. mince'n'tatties says:

    It would help if George could expand on the statement of….. ‘ introducing a Scottish currency means converting from existing sterling balances.’ Indeed it would. That said, think on this for a second or two.
    Are we talking persuasion or compulsion here? Bank accounts in credit, Scottish savings accounts in all their multitude of forms, curently held in £’s. Even a hint of compulsion would see capital flight on a gargantuan scale. To argue otherwise is dreamland. That flight would weaken the new currencies legs before it could stand.
    You could persuade with higher deposit rates of interest, I suppose, or not, given that would mean higher lending rates.
    Or we could introduce capital controls, Denis Healey style. Compulsion.
    He rightly states ‘complexity is not the same thing as beyond understanding’. And my guess is most Scots will want to understand.
    The question I suppose is just how big a deal the currency question is given that the likes of Kenny MacAskill is saying not a lot and that the Euro seems safe.
    A bit of the devils advocate perhaps?

    1. Matt says:

      I suspect that there are a number of situations that will be troublesome. Here’s another couple….

      1. GBP mortgages or other loans from rUK based lenders. How do you compel a company based in a different country to convert its loan into another currency?
      2. GBP pension pots and other savings held by rUK based companies.

      The long timescale envisaged by the Growth Commission gives more time for individuals and companies to take action – which will cost – prior to the eventual switch to another currency.

      1. Me Bungo Pony says:

        I suspect that there are a number of situations that will be troublesome. Here’s another couple….

        1. GBP mortgages or other loans from rUK based lenders. How do you compel a company based in a different country to convert its loan into another currency?
        2. GBP pension pots and other savings held by rUK based companies.

        The long timescale envisaged by the Growth Commission gives more time for individuals and companies to take action – which will cost – prior to the eventual switch to another currency.

        Why would “foreign” companies have to convert their loans into another currency and, if they chose to, why would it be a problem? So long as the loan is being repaid it doesn’t matter what the currency is or where the customer happens to be resident. Do you think UK migrants in the EU have been excluded from financial services because their pensions are in Sterling while their residence is in “Euroland”. You might respond by saying their pensions are converted to Euros before they receive them but, then, that only undermines your own point while strengthening mine. Or is it, yet again, that it’s different for Scotland and things are uniquely difficult for us because, you know, we’re Scottish.

        Currency is not the complication those who oppose independence would like people to believe. Anyone who has been to Benidorm on their hols knows how easy it is to convert currency. Clearly unionists wish to muddy the waters again over this issue. Hopefully, Scots are less likely to buy it (sic) this time.

        1. Me Bungo Pony says:

          Sorry. I’d copied Matt’s post into mine so it was handy to reply to and forgot to delete it before I posted. Doh!

        2. Matt says:

          My comment about ‘compel’ was actually driven by comments I’d seen elsewhere suggesting just that, although I see that it’s not mentioned in the article above.

          The key thing for me is that during the currency discussion we need to understand that any path to a new currency will mean that individuals will potentially lose or gain. I know that it is easy to exchange currency, but I also know that I have bought Euros in a range of exchange rates between 1.40 and 1.10. Factoring in a 10-20% shift in exchange rates to loans or savings of hundreds of thousands is not trivial.

          FWIW – I voted No & Remain. Talking to a colleague today who did that same we agreed that the shambles in Westminster meant that we would be more likely to vote Yes next time. But…..I think that Indy has the potential to be a screw up just as Brexit is, and there are too many Indy supporters claiming ‘they need us more than we need them’ and ‘we wouldn’t make the same mistakes as the Tories’ to make me feel comfortable that the complexities are understood.

          1. Me Bungo Pony says:

            Fair enough Matt. You make a good point regarding currency fluctuation. I would suggest the initial period of pegging the new Scottish Pound/Merk/Crown/Dollar (whatever it is) would allow companies wishing to avoid the complications for both themselves and their customers to “devolve” their operations thus negating much, if not all, those problems.

            There are complexities where achieving independence is concerned but luckily we do not all have to have the skills to overcome them. We have very capable people able and willing to steer us through them with the vast bulk of us unaware of it. What we get at the other side is what is important. If you have a condition that requires surgery, you do not eschew that surgery because it is complex and you do not know the procedure intimately yourself. You accept the necessity of the operation, trust the actual procedure to the skilled medical team and enjoy the new lease of life you have gained. Many countries have achieved independence in Europe over the last 20-30 years (all of them poorer than Scotland) and none of them would go back. That should tell you something.

  3. Margaret says:

    I was sceptical about the Growth Reports proposals when they came out. I’m no economist but I have lived through the 2008 bank crisis, observed the effects of an economy based on neoliberalism, canvassed for independence and listened to people’s anxieties on currency back in 2014. I attended one of the SNP’s forums to discuss the Report and felt anxious when I read the subsequent paper summing up findings from these discussions. It did not seem to me that they reflected the views expressed in the groups I was in, nor the views of members I have spoken to since then. And yet here we are presenting the Growth Report to conference to be adopted as our policy for an ‘independent’ Scotland. This risks splitting the Party at a time when we need the active support of every member if YES is to succeed.
    I will always be a YES supporter, but I will terminate my membership of the SNP if they adopt this as policy.

    1. Willie says:

      The difficulty in all of this is that ordinary folk do not have enough knowledge to decide on whether and when to convert to an independent currency . Even the experts disagree on that .

      What might be good, might not be good now, but might be good later – and why did most EU countries join the Euro, whilst some didn’t, or why did an independent Ireland set up the Punt that for decades tracked the Pound ..

      I don’t know the answer to these questions but I do know a topic that could scare the horses.

      From a comfort point of view currency continuity, at least until an independent Scotland finds its feet, seems to me to be the most attractive proposition to secure a yes vote .

      Perception and vision is what will persuade voters but currency, and in independent one right now is not one that I think has an immediate sell to the voters – and for that reason, and that reason alone, I would run with the Growth Commission plan – at least for now.

      And that George doesn’t mean you are wrong.

  4. Kenny Smith says:

    At the end of the day it’s night. No matter would be best they are going to try there best to blow holes in anything we put forward. Nothing is going to be 100% bullet proof. I never have or will advocate a currency union but in 2014 it was probably a sensible solution, not now. We need our own money as soon as possible even if there is a short term loss. I agree we won’t have it in place for day one. In 2014 they told us we couldn’t use it now they’ll be begging us to keep it. Cut all strings from London as soon as reasonably practicable. In any case if the SNP don’t get the finger out it won’t matter what they put to conference because they’ll hemorrhage votes as quick as snow off a dyke if they don’t get a move on

  5. Bibbit says:

    The Isle of Man is not a part of the UK or the EU. It manages fine.

    The Isle of Man has its own currency which is in a currency union with the UK. It manages fine.

    The Isle of Man has a population of just under 85K with its own laws and parliament. It manages fine.

    British nationalists want to spread the ridiculous and bizarre nonsense that Scotland will fail where every other country in the world has succeeded.

    It is a matter of irrelevance what currency we use after Independence. I just don’t care. It’ll be fine. Next daft question please?

  6. MBC says:

    It seems sensible to me that we keep the £ for the first few years to ensure stability and give time to iron out the issues converting to our own currency would mean, but longer term I think the argument for our own currency is strong.

    1. Me Bungo Pony says:

      The trouble is, by keeping Sterling, we would have all the financial constraints of being a peripheral region of the UK while having none of the benefits of financial freedom our own currency would bring. We’d be stuck with austerity and no way of changing it. The GC report says we should grow the economy in order to shrink a high deficit we are told would exist after independence before we go for our own currency. However, it will be almost impossible to grow the economy if we are stuck with the financial constraints imposed by an austerity driven rUK govt and Bank of England. Our only recourse would be to cut public spending as they will be doing in rUK. The only argument for keeping Sterling is the “don’t scare the horses” one …. and that is a very poor and flawed argument. It gives unionists a free hand to simply shoo them away as they did in 2014.

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