2007 - 2021

The Number One issue in independence? Currency

“Scotland will be liberated by debt if it becomes independent” – Richard Murphy.
Scottish independence requires the problem of currency to be addressed and solved. This the most critical matter of all. The SNP in 2014 wanted to share the currency (£ sterling) with the UK but the British Government blocked this, for reasons I will discuss below. It was a mistake to propose sharing the currency in 2014, because it meant Scotland would not be independent. Control of currency is control of the purse strings, and that is a more decisive control over a country than everyday politics. The current SNP position is now to move to a separate currency, but not immediately. This is also unsatisfactory, and for those who wish to explore why this is so I recommend reading Common Weal, and also Dr Tim Rideout who is an SNP member; for their extensive coverage of the matter. I also recommend Richard Murphy, who has just produced a short ten minute video lecture that explains the position, here:

I wish here only to explain where we actually stand now in Scotland, and what this implies.
The British State has already acknowledged that it was taking full responsibility for all the commitments associated with currency in the event of Scottish independence in 2014. In January, 2014 the Treasury made a statement on currency, post-independence: In the event of Scottish independence from the United Kingdom, the continuing UK government would in all circumstances honour the contractual terms of the debt issued by the UK government”.
This established the principle that rUK was the ‘continuing state’ in international law, and that rUK was responsible for both the currency assets and liabilities. In February George Osborne, the Chancellor formally ruled out a currency Union with Scotland. In September 2014, Mark Carney, Governor of the Bank of England, confirmed that a currency union between an independent Scotland and rUK was “incompatible with sovereignty”. It had been made clear throughout that there was no qualification to the responsibility for debt that rUK was acquiring, related to the Scottish State taking a share of debt, and there is good reason for that. rUK did not wish to leave a scintilla of doubt in anyone’s mind anywhere that the obligation rUK was carrying was conditional in any way, on anything Scotland did. The currency of rUK was going to continue to be the currency of a wholly free currency issuer. This was fundamental – they did not wait to negotiate it: it was too important, and too urgent.
There are three important points following from this.
1) Scotland has no responsibility for UK debts.
2) It is forgotten that the Treaty of Union in 1707 created a completely new Parliament for Britain (both the Scottish and English Parliaments were dissolved, but only the Edinburgh parliament actually ceased); this deliberate formality created what is technically described as an incorporating Union.
This has a precise meaning.
Strictly, the only way to break an incorporating Union is to dissolve it, not do what we would actually be doing – allowing the secession of Scotland from a union that is not in fact, strictly a federal union; but this is in order to ensure that there is a continuing an rUK that is also the ‘continuing state’; dissolution would be a world disaster. Why was it set up as an incorporating union? Because England hoped that it could bind Scotland forever in the Union. If they believed that they would not have proposed secession in 2014 (in fact the Union almost broke in Parliament shortly after the Union, in 1712. The Scots nearly left, and the Union was rescued in Parliament only by proxy votes).
The lesson is: nothing is forever. In that sense the whole operation now is a fiction – but nobody, not rUK, not Scotland not anyone can afford to follow the strict niceties devised by 18th century commissioners’ rules. They are no longer viable in the modern world. We are doing the only thing that works. Scotland leaves, England takes the common assets and the liabilities that go with them. It also happens to follow the contemporary international precedents; the fairly standard boilerplate rules typically in use for seceding nations in international law. This is what works most efficiently and fairly in the modern world.
3) The important point about the 2014 British government statement is that rUK was also making a big, very revealing declaration about what was really important to it. Nobody asked Britain to make that statement.
It was not what Scotland proposed at the time. But rUK was not prepared even to negotiate with Scotland over the currency (£ sterling), in spite of the fact that Scotland is a joint owner of the currency. rUK just gratuitously asserted right of possession and full title.
In fact Alex Salmond had proposed sharing the currency (a very bad judgement).
The assertion by rUK was not founded in right, but necessity. It was done because the currency was of vital importance to rUK, and it required and was utterly determined, to establish unvarnished sovereignty over the currency as its prime objective, and it understood that in taking title to itself without notice or negotiation, the price of taking the currency with no negotiation was that rUK would have to assert equal certain ownership of all the currency liabilities. The corollary of this is that Scotland becomes a currency user of its own currency, and therefore also requires to issue its own currency after independence, if it wishes to retain independence. rUK knows in this case they cannot have it every way; both have their cake and eat it; (of course everybody living in rUK thinks it is worthwhile to pile in and try to grab a free lunch as well by trying to pass off the liabilities to Scotland anyway as if this is a car boot sale), but we all know it won’t wash.
The solution proposed by rUK in 2014 was vital to rUK, and it suits Scotland well, because independence is de facto defined by being a currency issuer, not a currency user; currency issuance is the defining feature of modern independence.

Comments (53)

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  1. Ian McCubbin says:

    The SNP national assemblies had discussed currency and I chaired a group of 30 people at Aviemore where a Scottish Puund was proposed and accepted as the way forward from Day one.
    This went to a vote and was overwhelming agreed. Keith Brown listened in took all the notes, and along with decision s on other Independence matters has held them in reserve, or parked them.
    I like to think the former.
    Oh we also need to reopen a stock market in Glasgow or Edinburgh.

    1. Coinneach says:

      It bothers me that, despite the amendment being passed by the membership, the powers at the centre of the party still seem wedded to the Growth Commission and its suicidal currency proposals. Clearly there is an urgent need for economic education, in particular about the monetary cycle, the role of tax and the necessity of having our own sovereign currency (i.e. no GBP or Euro). This isn’t a criticism of the SNP leadership as it’s evident that most politicians don’t understand how it works in reality.

      1. Josef Ó Luain says:

        “This isn’t a criticism of the SNP leadership as it’s evident that most politicians don’t understand how it works in reality.”

        You might include large sections of the commentariat in your assessment. The SNP leadership (politicians all) and its blind embracement of neo-liberal economic orthodoxy, must produce consequences, surely?

    2. Alin Scot says:

      I too attended the National Assemblies – in Ayr. Our group had the question “why should we remain in the UK?”. There were quite a few reasons given the plan being how to rebut them. Three examples beyond currency were – savings protection, pension preservation, social security benefits – still have no answers. I emailed Keith Brown twice but it was not important enough to merit an acknowledgement.

      These assemplies were simply yet another march up the hill and down again to no avail.

  2. Michael says:

    Great that you are writing about this essential and oft ignored and/or dismissed issue.

    I know people are much more easily engaged with the shiny and satisfyingly emotive issues of environmental degradation and social injustice etc etc, but the currency issue is central to tackling all other issues.

    It really can’t be overstated that, as you say: “currency issuance is the defining feature of modern independence.”

    You also make a vital point, that the British State really revealed what is important to it.

    It would be very helpful further explore the implications of this statement you make: “Nobody asked Britain to make that statement.”

    Because, in fact the people with the most influence over the global economy – those who control global finance, bond markets, the corporate financial world etc – were definitely demanding clarity from the British States regarding how it planned to managed things. Without clarification The City’s whole shadow banking model could
    have started to unravel – ironically making independence more likely!

    I look forward to reading more from you on all this.

  3. grafter says:

    There won’t be any form of “independence “if this criminal government gets its way over the virus scam. We should not be wittering on about currency or any other related issues . There is a massive elephant in the room which cannot be ignored . Our basic freedoms are slowly being removed as we are beginning to face censorship and the curtailment of free speech orchestrated by a malign Tory administration .

    1. Michael says:

      But it is control, by criminal elements, of the society-defining technology of currency that is the key factor facilitating the suppression of human rights etc. Control over currency allows the paying off and paying for the promotion of any agenda you so wish.

      As I said above, it is understandable that we so easily get sidetracked by emotive issues. But those are really only the symptoms. We need to address the cause!

    2. John Monro says:

      ….what virus “scam”?

  4. Duncan says:

    A Scottish Pound sounds really good to me.
    There was currency boards in the world at one time advertising the Scottish Pound, and it had a higher value than the RUK Pound.
    A Scottish Pound backed by our off shore assets, whisky and food exports also the Green Power potential would be strong from day one.
    Also the historical data shows that newly independent countries exist in a fresh vibrant economy that grows exponentially boosted by the instant injection of saving on our cash flowing to London. Extra jobs will flow from the total business of government being moved to Scotland. Scottish heads and tails will be up.
    It is time.

    1. Coinneach says:

      You’re right about the “Scottish Pound” being traded at a more advantageous rate than the GBP, Duncan. I worked in Germany in 1990s and a bank in Dusseldorf Airport would change my Scottish notes into Euros at better rate for me than my English notes. Their rate for Scottish notes into Euros was also miles better than I could get at Glasgow Airport, so I got my Euros in Dusseldorf every week. As a result I got to know the bank staff there and asked them about the differential rates between Sc£ and GBP. Their reply was they didn’t know why they were different, but had got a daily telex message from the bank’s head office advising them of the rates for the day and so they had to apply them. I didn’t let on that the Scottish notes were ultimately guaranteed by the Bank of England (through their licencees in the Scottish Banks) and their true value was therefore the same as for GBP, but what they didn’t know wouldn’t bother them.

  5. Blair Breton says:

    Mimic what commonwealth countries did when becoming independent from U.K. e,g. Cyprus. They used a Cyprus pound pegged to Sterling as part of the sterling area. After about 8 years of independence they floated the Cyprus Pound. In Scotland there are Scots Pounds already pegged to Sterling. This approach enables businesses to operate assured that the money in their accounts remains equal.

    The approach gives time for Scotland to stand on its feet and set up a sovereign Bank.

    1. Malcolm Fraser says:

      Is that not what Ireland did too?

    2. Gordon McAdam says:

      I don’t think we should have a currency pegged to some other currency – especially one that is controlled by Westminster. It’s just another limiting factor for Scottish monetary and fiscal policy.

      1. Blair Breton says:

        Countries need to build up an economy to make sure financial markets respect the currency. So not having a period of pegged currency the currency would be lowly rated.

    3. David Swain says:

      And why would the rest of the uk underpin the Scottish currency. I for one would not wish to support Scottish government actions. If you want independence then accept the things that go with it.

      1. John S Warren says:

        Consent to peg a country’s currency to another country’s currency, or basket of currencies is not required. There are various ways, and degrees of currency co-operation that may be utilised, but they are not a necessity.

  6. florian albert says:

    A few questions arise from this article.

    1 If Scotland refused to accept any share in the UK national debt accumulated since 1707, is it not likely that the rUK would retaliate economically ?

    2 When a new currency is established, would John S Warren envisage this floating or being pegged to sterling ?

    3 ‘currency issuance is the defining feature of modern independence’
    Does this mean that Ireland is not independent and that Scotland would lose its independence if it joined the eurozone ?

    1. John S Warren says:

      Pegging the currency carries risks. I shall quote from the economist Randall Wray, a leading modern monetary theorist, discussing currency pegs:

      “Generally speaking, the nonconvertible, floating exchange rate currency system provides more policy space. Government can use fiscal and monetary policy to pursue the domestic agenda. Fixing the currency reduces policy space because government must consider its promise to convert. That can conflict with the domestic policy agenda. For example, it is usually (but not always) the case that the government must pursue policy to ensure a positive flow of foreign currency (or gold) to be accumulated as a reserve to maintain the peg. That usually means domestic unemployment to keep wages and imports down.”

      Notice, ‘generally speaking’. Wray stresses that the argument above just provides the ‘logic’. The better to undertand the full implications it is better to read Wray’s argument, here: (http://neweconomicperspectives.org/2014/02/mmt-external-constraints.html).

      It is worth remembering that Scotland has very robust external trade because its exports are valued worldwide, and generate significant foreign currency inflows; Scotland’s trade balance is more export-oriented than the UK as a whole.

      1. florian albert says:

        I asked whether or not you favoured a floating currency or one pegged to sterling. You seem reluctant to give a clear answer.

        Your refer to Scottish trade but the value of a putative Scottish currency would depend on far more than that. It would depend on the overall health of the Scottish economy, including the state of government finances. I fear that – judged by these criteria – Scotland’s economy is, in many respects, weak.

        You are clearly committed to the belief that Scotland has no duty towards the UK National Debt. Interestingly, in the nearest parallel to Scotland leaving the UK, the Anglo-Irish Treaty of 1921, the Irish Free State agreed to assume some responsibility for the UK National Debt. When a dispute over ‘land annuities’ – a complex argument over UK claims that the Free State still owed money – broke out in the early 1930s, the UK responded with tariffs on Irish beef. This had a hugely negative impact on the Free State economy at the height of the Depression.

        1. John S Warren says:

          It is not a matter of my “commitment”. Scotland has no obligation to pay the UK debt. That is the basic fact. It is how secession works in the modern world.
          Nor was it a matter of commitment in my answer about a peg. I was trying to provide a a balanced view of the matter, because I did not wish to over-simplify quite complex matters. I assume people wish information to form their own judgement. Circumstances vary at different times, different places. I do not approve of the desire for glib, simple answers to everything, so the whole world can be explained in one tweet; and nobody has to think, and everything is simple. The world is not simple.

          I do not favour a peg for a Scottish currency. But the answer is not ‘absolute’; it does not fit every occasion.

          1. John S Warren says:

            On reflection, while I wish to stress the importance of a floating currency, I think in Scotland there may be an initial use of a peg between independence and the new currency launch, and immediately after. Personally I do not favour pegs, but Common Weal propose an initial and interim only (as I understand it) peg, and there is an anti-speculator argument for this, although I am not totally convinced. That was why I was so so open-minded, as is Randall Wray on the principle, but I felt my comment to you, on reflection looked as if I was, rather in the midst of a vermicular dither!

          2. florian albert says:

            Pro-independence Scottish politicians are extremely reluctant to commit to an independent Scottish currency – except in the dim, distant future. One reason for this is
            that they are immediately asked; ‘peg’ or ‘float’; an entirely legitimate question to ask once a person commits to supporting a new Scottish currency.
            They are aware that, if they then do not have a clear answer, they lose credibility. If they commit to either side, other difficult questions follow.
            What you refer to as ‘glib simple answers’ may be regarded by voters as the minimum they are entitled to know from somebody seeking election with all that that entails.
            Politics is a rough, old trade.

          3. John S Warren says:

            “Pro-independence Scottish politicians are extremely reluctant to commit to an independent Scottish currency – except in the dim, distant future. One reason for this is that they are immediately asked; ‘peg’ or ‘float’; an entirely legitimate question to ask once a person commits to supporting a new Scottish currency.”

            Politics isn’t a rough old trade because of that; it is a rough old trade because it is rough. If we reached the point that there was even a dialogue bout ‘peg’ or ‘float’ that would prove, against the odds that it was highly refined, reflective and rational. Would it were so; but it isn’t.

            Autoritas non veritas facit legem (Hobbes, Leviathan).

          4. James Scott says:

            “Scotland has no obligation to pay the UK debt” by which I presume that you mean “An independent Scotland has no obligation to pay any portion whatsoever of the [current] UK debt” strikes me as worthy of considerable amplification.

            Would you care to do so?

            To take one broadly analogous case, in my opinion, can you tell us whether this solution of “no obligation” was either (i) floated or indeed (ii) implemented in the case of former Czechoslovakia?

          5. John S Warren says:

            I am not clear why you think the dissolution of Czechoslovakia is “analagous”.

            1) There was no ‘continuator’ state. Czechoslavakia disappeared. rUK will be the continuator state.
            2) The Czech Republic and Slovakia at the outset shared the Koruna. The new states began as a monetary union. This will not happen for Scotland/rUK. rUK (though it does not exist) has refused to share the currency, although that is what Scotland proposed in 2014. rUK has simply asserted ownership and absolute control of £ sterling. Scotland could use the £ Sterling, but on a non-formalised and weak basis. Other remedies are required.
            3) The Czech Republic and Slovakia chose to divide all the movable assets between them (right down to the art collections). This is not proposed for a Scottish secession by anyone. There will be no divsion of movable assets. Assets will be divided by country of location.
            4) The agreement was called ‘the velvet divorce’ because everything was agreed harmoniously be both sides; a remarkable achievement, although there were later disputes. Given the fact that rUK would not even discuss the currency, the prospect of the level of harmony in a detailed division of an older and more complex Union that assumption cannot be expected.
            5) In 1968 Czechoslovakia established a federal state, of which Slovakia formed part. The dissolution was in 1993. The UK is not a federal state, but an incorporating Union. It is quite different.

          6. Tim Wall says:

            “That was why I was so so open-minded” (on the question of float v peg)

            But that’s the problem, isn’t it? Even after being asked twice by Florian Albert, you still can’t really answer the question, other than a vague reference to an “interim” peg.

            And if the SNP can’t answer that question come the next referendum, expect the unionists to hammer the point home again, just like they did on the currency question in 2014.

          7. John S Warren says:

            Mr Wall,

            No, it isn’t; but I try to explore and discuss real issues, not write propaganda. I am not a member of the SNP; they will have to sink or swim for themselves. Alex Salmond was a banker, and drew the Scottish Government into some dreadful mistakes on currency, and the Party – from my outside and thankfully distant perspective – has been botching currency policy ever since. Currency is the key issue; independence as a currency user, but not a currency issuer isn’t independence: it is dependence, a form of economic slavery, tied inextricably to Westminster political policy and even the Bank of England.

            Issuing Scotland’s own currency is the solution, and it offers Scotland real opportunities for much wider prosperity in Scotland than has been achieved. The matter of a peg is a secondary matter, and it is complex. I think most informed opinion rejects a long-term peg, but there is a compelling – perhaps unanswerable – argument for a short-term peg, in the initial phase after independence launching the £Scots. Common Weal, who have actually done more careful, thoughtful work on transition than any institution (read them), and I think they understand the potential market shenanigans that accompany the launch; in any case they advocate the initial peg and are open-minded about a longer term peg.

            Denmark, a very good comparator for Scotland, has long run a peg against the Euro, perfectly satisfactorily. Some people perhaps think that implies the Danes are using the peg to protect the kroner from attack, and from depreciation; but it is more likely it uses the peg to ensure the kroner does not increase in value sharply against the Euro. It is also worth remembering that China (PRC), the most powerful exporter of goods in the world, achieves this distinction, and now holds onto it, because it pegs to the dollar. The huge surpluses it invests in the dollar are simply the consequence and corollary of that policy; they go together, they have limited choice, given their priorities.

            I am merely being personally candid about the currency issue, as best I may; I prefer – in the long-term – floating exchange rates. One of the problems with this is exactly the trap you are falling into; allowing people to go on endlessly believing in ‘baloney’; that the world economy is in permanent equilibrium, delivered by perfectly ‘free markets’. No, it isn’t. Markets only work within very, very narrow limits; limits the real world operates simply does not fit. Markets are actually insecure, and inherently unstable; they need constant protection, and are high-maintenance; and regularly fall flat on their face no matter what, with disastrous results.

            One of the side-effects of COVID-19 is that the electorate is becoming more immune to the simple-mindedness of Daily Mail Unionism. The glib certainty of today, that is so certain everyone pretends it didn’t actually fall apart when the Conservatives U-turn within a week, or a day of its announcement of whatever certainty; when the spaghetti hits the fan, almost before Johnson and Cummings have set the policy. This isn’t 2014, not by a long, long way. Save in the increasingly shrill, hysterical and brazenly incoherent circles of Scottish Unionist (small and large ‘C’) conservatism; they are approaching the comedy of the absurd, in everything they touch.

    2. John S Warren says:

      I am a little rushed, and did not answer your other two questions. On the Euro/EU, see my reply to Mr Learmonth below.

      On the response of the UK to Scotland’s position on currency, and the prospect of it trying to exact penalties, please look at the whole issue, as it will be in reality, in the round; not as it is spun by Unionists solely to stop it happening.

      Wiser heads will prevail in rUK when Scotland actually leaves. Because they have to; this will be a negotiation. It is not new in the world, there are well established precedents in international law, and the world will be watching (mostly rUK), rUK has a reputation for fair dealing to protect (especially after Brexit, and perhaps with no trade deals, anywhere). At the same time Scotland is not in the weak position rUK pretends now; before we leave, rUK thinks it can stop it by threatening to be a bully, but in the immortal words of Mandy Rice-davies, it would say that, wouldn’t it?

      In fact England has a big economic stake in Scotland and trade with Scotland; this is not one-way traffic. After Brexit, it cannot just strart cutting everything off, including its closest friend for 300 years, through thick and thin. The proposition that it will bully is just absurd.

      In a changing, climate conscious world Scotland has huge advantages, that rUK, at the sticking point cannot sensibly reject; not least for example, in Green power supply through the enhanced connector we already have (and at also free of the atrocious rule of the UK grid network pricing rules). rUK trying to punish Scotland would be stupid, an act of serious self-harm.

      Think of all the things rUK needs from Scotland, from trade to defence. At the same time, rUK has refused to negotiate over the currency. The SNP were wrong in 2014 to wish to share it, but they are not being given any choice. rUK is asserting ‘de facto’ ownership that carries consequences with it. It considers the currency (£ sterling) exclusively its asset; sole owner. So be it. The liabilities follow the asset. It isn’t pick-n-mix in a sweetie shop. rUK takes the asset for itself, and all the debt follows with it.

      Fundamentally, once Scoltand leaves, rUK is not in a specially strong negotiating position. It wants a great deal to work. It wants the currency, it wants its seat in the Security Council of the UN. It wants its independent deterrent. It wants to be a power broker in the IMF, G8, and so on. It cannot just take everything, and dump some unwanted debt on Scotland because it thinks it can bully its way to have everything for nothing. The world knows rUK is weakened by Scotland leaving. rUK will need a good, clean negotiated deal; a fair one if it going to hold on to all the things it wants. rUK will have to negotiate sensibly.

  7. Alasdair Macdonald says:

    Prior to 2014, I had assumed that independence would also entail a Scottish currency. I had expected that there would be a very short interim stage before the Scottish currency was issued. However, that was simply an assumption I had made without actually researching the ‘nuts and bolts’. When Mr Salmond announced that he wanted to share the pound sterling, I was surprised, but, because he was an economist and I was not, I gave him the benefit of the doubt, although a nagging doubt remained. Then Mr Osborne, followed by Mr Ed Balls, in ‘grinning chimp’ demeanour announced that this would not be permitted. My first reaction was, “it is our pound, too”. It was then that I began to look into the concept of money and currency. So, in retrospect, I agree with you that it was “a very bad decision” on Mr Salmond’s part – as an economist.

    A few months after the referendum I attended a lecture addressed by Professor John Curtice on his analysis of the polls prior to the referendum. He was in no doubt that Mr Osborne’s declaration, far from scaring the people of Scotland, caused, almost immediately, a large change in support for independence from the mid 30%s to the mid 40% and that that figure fluctuated upwards until a poll, close to the referendum indicated support at 52%. This caused panic amongst the British Nationalists, with Mr Cameron scurrying to Edinburgh, the Daily Record producing ‘the VOW’, and Bodger Broon was let out of his cage to address a Labour Party gathering in the Community Centre Halls in Maryhill, which just happened to have complete UK media coverage.

    Support for independence has seldom been below referendum level, but more often, above it. Since 2014, support for the SNP and the Greens has risen while aggregate support for the three British Nationalist parties has slid down into the 40/50% range.

    So, while Mr Salmond made a bad decision, Mr Osborne made a bad political one, too.

  8. John Learmonth says:

    Mr Warren,
    I presume from this article you want Scotland to be free from both England and the EU?
    I do, but if you entertain the fiction that the EU would allow an independant Scotland to join the EU without joining the Euro then dream on…..
    As you correctly state any independent country has to have its own currency otherwise independence is a chimera.
    So Scotland independent or a vassel state of the EU……please clarify.

    1. Blair Breton says:

      Other countries joined keeping their own currency. The statement that has to made is in time the Euro will be adopted but no time scale.

    2. John S Warren says:

      Of Course. I hope an independent Scotland joins the EU, and stays out of the Euro. That is not the impossibility that critics of the EU (alone) are anxious to believe. The requirement to join the Euro comes with tests, in order to join. The requirement is ‘de facto’ a fiction. There is no requirement to pass, or probably even take the tests. Sweden is supposed to be moving toward joining the Euro. Everyone knows Sweden never will.

      The Financial Crash and its consequences has moved the EU a long way on this matter. Greece finished it. They can never repeat the central banking blunders the Greek crisis produced. The irony is that the reason for that disaster was not least the over-eagerness to expand the EU quickly, and not look closely at the applicant’s economic and monetary credentials. The leader of the urgent ‘expanders’, ironically was the UK. When the going was tough because of the fast expansion, the UK then walked out. Germany and Angela Merkel appear to have learned the lesson. Forcing countries into the Euro is unsustainable, and everyone know it (except the British Euro sceptics, who live permanently in the past). That part of Maastricht is dead, whatever the pretence. The idea that the EU will spurn Scoltand is patently, risibly absurd.

      As of end 2019 there were eight EU members not using the Euro; Bulgaria, Croatia, Czech Republic, Denmark, Hungary, Poland, Romania, and Sweden. Whether some may join is an open question. I suspect fewer will now do so. The EU, like everything else, changes.

      1. Gordon Purvis says:

        In any negotiation I however expect that indy Scotland will be very strongly encouraged by the Commission (and also the key EU MS) to join the EURO in a reasonable timetable. Or at the very least peg to the EURO in the short term. Sweden has a derogation, linked to the fact it had its historically existing currency, like Denmark. But ‘ever closer union’ means exactly that. That can work but we should be clear about it. We would be joining the EU in its current situtation post UK wanting to go beyond the current union situation.

        1. John S Warren says:

          There are eight countries in the EU that do not use the Euro. If Scotland joined with its own currency that would make nine; nearly one-third of EU members would not be in the Euro. That doesn’t represent outliers, it represents a serious political group with a shared interest. The damage done to Maastricht policy by the Greece financial disaster, and the poor response of the EU to Greek suffering establishes a fundamental, and deeply sobering change. I think Merkel and Germany realise that, and will have learned the lesson. Greece should have been subject to stricter regulation before it joined; but that was then, and that is history. The damage done sticks – to the euro; I suspect a few EU non-euro capitals thought mid-crisis 2008 on; there but for the grace of God …..

          This is now, and things have again changed drastically. Denmark is pegged, but that is probably to ensure the kroner does not appreciate against the euro. Currency issuers have the power to look after themselves in a crisis; currency users don’t. It is fundamental, and the penny dropped for many.

          I agree that ever closer union was always the purpose, but it will now need considerable recalibration; and probably head in new directions much beyond current euro users. The relatively new member states (outside the old ‘six’) have a quite different perspective of the EU, driven by their distinctive, volatile, histories (Poland, Hungary, Romania, Czech Republic, Croatia, Bulgaria). They need the EU, but are more sensitive to issues that encroach on their independence. I do not share your view on this; I think you describe a state of European political consciousness that no longer has sufficient leverage to work as it did pre-crash. That time has gone. Things can of course change, but once bitten ……

  9. SleepingDog says:

    Currency for an independent Scotland seems to be talked about in the singular (I haven’t paid that much attention and am not an economist) but isn’t some kind of parallel currency set-up possible?

  10. William Ross says:

    This is an interesting contribution and Mr Warren is absolutely right that the matter of currency is ” the most critical issue of all” And there is also no doubt that the arcane constitutional position of Scotland and England under the written settlement of 1707 will not govern in any actual case of modern separation. Sorry, Lorna Campbell. We live in a politico-legal reality, and Scotland will become independent through succession. The unitary state will not dissolve. However, Mr Warren makes one further true statement and then derives wholly unjustified consequences from it as does our frequent friend, Me Bungo Pony. Scotland, we are assured, ” will have no responsibility for UK debts” This is true as far as it goes. No creditor of the former UK ( as it would be) will ever be able to file suit against the new Scotland. But this is a different matter entirely from saying that Scotland will have no future liability to RUK for Scotland’s negotiated share of UK debt liabilities. The only way to avoid such a liability would be for Scotland to secede through a UDI. In other words, Scotland can only become independent through an agreed deal with Westminster and Westminister legislation, or through UDI. UDI is not happening.

    The author does not make a case for a Scottish currency but relies on Tim Rideout, Richard Murphy and the tender mercies of unproven MMT. The SNP are terrified of this approach and their mantra is that any Indyref 2 can only be won by a total assurance that our currency on “the day after” will be the UK Pound. I understand why they reach that conclusion. A move to a Scottish currency would be a gigantic step into the unknown. The only problem is that sterlingisation, the favoured option of the Sustainable Growth Commission is also a giant step into the unknown, though I think it is the better bet. I have to agree with many BC commentators that sterlingisation does little to satisfy left wing aspirations, but then these were always a mirage.

    Salmond’s option to go for a shared currency in 2014 was actually the most workable option but it would have diminished the integrity of the independence which would have been achieved. I

    We are entering into a very interesting time. The Unionist parties in Scotland are utterly ineffectual and one really feels that Unionism is dying. While Johnson has seriously wobbled during the pandemic the Tories are the new establishment in England. But none of Johnson’s glory rubs off in Scotland. A Union that has no coherent ethos will eventually fail. Who would even lead a future “Better Together”?

    On the other hand, Scotland has no convincing argument on currency, and the SNP, which is highly divided, will soon be in serious internal difficulties.

    We live in interesting times.


    PS. I am glad that the author implicitly accepts that no member of the Euro has real independence ( apart from Germany of course — which runs the whole thing)

    1. John S Warren says:

      Nobody wants UDI. It is unnecessary. “The only way to avoid such a liability would be for Scotland to secede through a UDI.” You offer no case for this assertion, and no evidence. rUK has already accepted full responsibility for all the debt; it is not dependendent on Scotland’s UDI. The proposition that there is a Scottish obligation has not been made; and there are no grounds. Scotland had no debt when it joined the Union. Between Scotland’s economic contribution to the UK up to the 20th century and two world wars; and then through the oil age from the 1970s up to around 2018, Scotland was generating surpluses, sometimes huge surpluses. You offer no gounds in monetary flows, in international law, or in the history of secession precedent to make any case for your assertion.

      As for your dimissal of MMT; what is your case? You haven’t presented one. What is it? Fractional reserve banking?

      Rather, if you really possess a comprehensive, properly researched case, please write a full article, and make it.

  11. William Ross says:

    Sorry Mr Warren, but you aren’t getting it.

    There are only two ways for Scotland to become independent. Either without the agreement of Westminster ( UDI) or with it. Is there any third alternative? If so state it.

    You sensibly rule out UDI. Thus, we will become independent after agreement with Westminister. The history of Scotland’s economic participation over 300 years is irrelevant ( though we actually had huge crushing debt in 1707 and the UK absorbed it). What matters to a Westminister negotiating team is that the UK currently has debt in the trillions of pounds. While the RUK will rightly remain legally obligated to the creditors, any deal on Scottish independence will certainly require Scotland to contribute to RUK relative to this debt. Or did you think we are just going to walz out of £100 billions?

    God help us.


    1. John S Warren says:

      Sorry Mr Ross, but you are being obtuse, and you assert where clearly you are ignorant of the facts.

      1) You are simply wrong about Scotland in 1707. Scotland had no money, but it had no debt. England paid a sum of money termed ‘The Equivalent’ to compensate Scotland for taking a share of England’s debt. It was calculated by a Scots mathematician in Oxford University, David Gregory (1659-1708). It was paid partly in specie, carried up to Edinburgh in chests, with a large armed escort. Part of it even ended up as a contribution to the seed capital of the Royal Bank of Scotland when it was founded in 1727.

      2) Here, you offer no facts. You are peddling a hunch. Agreement with Westminster does not entail agreeing to taking debt for which Scotland has no obligation to pay. “Waltzing out of it” isn’t an argument. Frankly it is just guff. Read my argument, my replies, and also the international precedents; the facts. rUK would love Scotland to carry a burden it doesn’t owe, but it doesn’t stand up. If you do not agree with this, then fine; but find a real argument thay might stand up beyond mere assertion, and make something of substance out of it. I will happily read it and consider it. Provide a well argued case, with evidence. Repetitious assertion does not make your case.

      I do not wish to be abrupt but I genuinely do not have the time to waste debating the matter in circles so tediously; either you understand, or you don’t. Either way this is clearly futile. Your trite assertions are contributing precisely nothing to understanding. This is like logical postivism; you are merely ’emoting’. Forgive me please my candour, but I leave it with you.

    2. Me Bungo Pony says:

      Scotland did not have ” huge crushing debt in 1707″. Individuals were ruined by the Darien Scheme but the “nation” wasn’t. That ruin was used by “England” to bribe those individuals into ensuring the Union went through. As many then decanted down to London, taking their new found wealth with them, the money was not lost to “England” for long. At the same time the taxes imposed on Scots were raised many fold. Scotland did not do well out of the Union.

  12. Robert allan says:

    This is fascinating stuff and I love it. I was completely unaware of the history and circumstances described here.
    However, I do it believe it raises another problem and that is what will an Independent Scotland use for currency on “Day 1” ??

    1. John S Warren says:

      Common Weal is your best source for detail. Robin McAlpine et. al have done a lot of work on this. They have produced substantial, detailed papers. Dr Tim Rideout, an SNP member is another interesting source, and of course Richard Murphy (Tax Research UK). Plough through his videos, and blogs there (there are lots of Scottish centred ones on these issues- and read the below-the-line comments, which are often interesting).

  13. Kangaroo says:

    The Falacy in your Argument
    “It is forgotten that the 1707 Treaty created an entirely new Parliament for Britain…” you then go on to say that both Scottish and English Parliaments were dissolved…this is incorrect, the English Parliament was dissolved and the Scottish prorogued. You make a further error suggesting that only the Edinburgh Parliament actually ceased. Again this is incorrect as is obvious when you read your statement that the English Parliament was dissolved, indeed it was and Hansard states that it was. There was NO continuation of the English Parliament and therefore NO incorporating Union, just because the British Parliament used the same premises as the old dissolved English parliament does not make it an incorporating union.

    In the event of independence then there are two MAIN possibilities
    1. rUK could be recognised internationally as the continuing UK whilst Scotland would be a new State, or
    2. Both rUK and Scotland could be new States

    Your analysis suggests only the first option is possible, not true because of the Fallacy above.
    It may well however come to pass, but that would be because it was negotiated between the parties and not just demanded by England. A negotiation could mean Scotland gaining a substantial compensation for agreeing to option 1. Lets not give it away just because the other side wants it that way.

    1. John S Warren says:

      You are extremely muddled. You are confusing matters of constitutional politics, realpolitik and public law with a dry and naive appeal to the narrow use of formal logic. It doesn’t wash. The whole Union is full of anomalies and holes (the House of Lords as the final court of appeal in Scots law was not the way the Union was constructed, but it ended that way because of bad drafting). The Patronage Act 1712 rolled over and obliterated a fundamental tenet of the Union; the de facto independence of Presbyterianism. The Union survived. You are merely demonstrating the ‘fallacy’ of anachronism in history. The relentless reality is different, and I reflected what actually happened; in theory and practice, because it became both, and is with us still.

      The English Parliament ceased theoretically but continued de facto unchanged; and in its traditional (English) execution of absolute power (read Blackstone and Dicey, and even later Scots jurors and thinkers, they knew the English dissolution was a mere theoretical fiction), and the Parliament, using pure English standards, rolled over the Treaty of Union whenever it was convenient. It made no allowance for Union, save through the political necessity when it was relying on Scots Presbyterians to sit hevaily on the Jacobites. The Scottish Parliament simply ceased; in theory and de facto. I do not think you realise how few people in Scotland, in the 17th or 18th century had any confidence at all in the Scottish Parliament; which had long been the personal plaything of the Lords of the Articles. It was so bad, even the elite that owned it wanted rid of it, for their own reasons and family interests. Within a realtively short time (save the Jacobites, for dynastic reasons), nobody in Scotland cared. The Union survived a Parlaimentary scare in 1711-12; but neither the issue of independence nor Presbyterianism broke it. What actually caused the Parliament to retreat wholesale before Scots anger, was something far more important in Scotland, de facto, than either; the hated Malt Tax. Parliament threw in the towel.

      You are lost in sentimental logico-legal metaphysics.

      1. John S Warren says:

        There is no prospect of rUK not being the continuator state. None. The effects would be catastrophic for everybody.

  14. Blair Breton says:

    Once upon a time many countries pegged their currency to sterling. Including most of the common wealth at first used it until the economies after independence were robust. So why not Scotland? It’s not for ever


  15. Michael says:

    Isn’t the point of this article that it doesn’t matter what “we” think about this fundamental issue. It matters what the actors that are influencing, and will influence, the process of becoming independent believe and/or put on the table?

    Thus far this is a major major weakness for the independence movement. Whatever we here may think, it is what’s put on the table by the SNP (as the only realistic vehicle taking independence forward) that matters.

    Thus far the SNP have put forward a City of London friendly proposal – which is worrying to day the least.

    Ultimately, if independence ever gets to a point of being realiaed, the currency/monetary solution will be some form of compromise.

    We can argue here about the details, but the real issue is who and what is influencing the SNP leadership? And how do we as the movement shift things in our favour?

    I like nothing more than bantering about the currency issue over pint. But the important issue is how to influencing the Scottish government.

    Strategy please?

    1. John S Warren says:

      The Scottish Government is some way ‘behind the curve’, but I doubt if the Growth Commission position is sustainable. I am not an SNP member so I am not best placed to comment on the SNP, nor do I see my role as an apologist for the SNP. There are of course voices in the Party for change (and a motion was actually passed at the last conference, I understand); led by Dr Tim Rideout, who is well informed on the matter. Richard Murphy is tireless. MMT is having an effect in economics (neoliberal economists are curently trying to steal their clothes, without admitting they are doing so), and because of the position of Stephanie Kelton or Randall Wray, or even Mark Blyth now (a recent convert to MMT, post-‘Angrynomics’); all this in turn, effectively turns the screw a little more on the SNP, and on a generation of conventional, prosaic, Scottish neoliberal bankers who as a cohort, and in the shadow of the Crash, scarcely provide an inspiring intellectual role model to further confidence in their ideas, independence or expertise*. In Scotland the most signifcant detailed work on transition to a new currency has been undertaken by Common Weal.

      * Before Big Bang in 1986, Scotland had a great, highly prized reputation throughout the world for its impeccable standards of independent banking; small but sound, highly respected banks, independent of London; protected by clever equity cross-holdings. This had been built up by long, sometimes bitter, but sound experience over nearly 300 years. It has all gone, wiped out; annihilated by the consequences of Big Bang, the effects of operating in London, and the Crash. Scarcely a vestige of indepedent Scottish banking remains. The final ignominy was only weeks ago; the RBS (1727) name has disappeared completely, save for a shrunken presence in Scotland; it is now the London bank group, NatWest. Scottish banking was swallowed whole by Levathan. QED.

      1. Michael says:

        Thanks John for your thoughtful reply and the quote.

        The quote is really quite sad. It makes me think that meaningful independence was probably lost as a cause in 2008. This would explain the lack of meaningful concern from Westminster – i.e., moves towards placating the natives… some kind of “federalism etc. All we’ve seen is a kind of cartoon hand wringing by BoJo et al to keep up appearances that WM still has a fight on.

        From a big power play perspective, Scottish independence is a relatively minor issue that just needs to be managed within the context of huge global economic and political changes – large driven by rapid technological developments – that are quickly rendering it, or any kind of move towards greater autonomy, at any level, futile.

        I completely understand that you are not linked to the SNP. Though I do find this a but confusing. It seems to me that the only meaningful political arena at the moment in Scotland is the internal struggles with in the SNP and the fight there in to shape an approach to what kind of independence we are aiming for. The inter-party political scene is basically meaningless at this point.

        It seems important to me that independence supporters join the SNP in order to join internal groups like the CommonWeal SNP group etc and push to shape party policy. I’d be interested in your thoughts on this?

        Thanks again for prompting this important discussion. I agree with much of your analysis and I have been following CommonWeal’s work (both theory and strategy) on this issue over the years – all good stuff.

        1. John S Warren says:

          I do not really understand the pessimism now. Independence has never been closer. There was never any prospect of winning in 2014; it was a remarkable achievement to move the level of support decisively from probably under 30% to 45% in favour. The disappointment that overwhelmed independence supporters immediately after defeat led them to overlook the resilient achievement that had been created. Pessimism of that kind is merely an enduring mistake. It was never going to be easy.

          The miracle is actually how long the Union has lasted; long, long past its “use by” date (that date, from a scottish perspective was probably December, 1941; the date the Repulse and Prince of Wales were sunk in Singapore: that event was the real effective end of Empire, and (completely unnoticed of course) signalled the death knell of the Union) …. But the lesson from that is not the obvious one. It should tell you something about the implacable nature of your opponent; not necessarily clever, but uncompromising and dangerous, until near the bitter end; and then it collapses. That should act as a reminder that the Union uses any means it finds to hand, to survive.

          1. Michael says:

            Thanks again for your thoughts. It’s not pessimism I’m expressing – I have no doubt that we are closer to political independence than ever. But it would be a great shame to rejoice in our independence only to find that all the important monetary, and thus fiscal and economic, levers are held down south!

            What you see as pessimism is my wish to try and understand the whole complicated picture of where we are with independence – not Just in terms of support in the polls. And as you say, history shows us that the powers that be will not just rollover.

            I welcome your thoughts regarding the SNP and the wider Scottish political scene?

          2. John S Warren says:

            I am afraid I may disappoint you. The political parties are depressingly predictable. They have a very tough job, but nevertheless they are peculiarly perverse institutions, for which I have little sympathy (I consider them only too natural, often slightly toxic, forcing houses of factionalism), and they all too often attract the very people who contribute little, or least to civic welfare, and climb too high up the greasy pole; I confess that I share David Hume’s well documented distaste for all that. I have given my opinion about SNP and Scottish Government failures on currency (and on GERS for that matter – and I have written about that in Bella Caledonia, somewhere in the archive), but I write about the matters I have studied or feel I understand, and think I can form a considered view I wish to communicate. I have not studied the SNP Party sufficiently closely, do not quite understand them sufficienty well, and do not feel inclined to draw conclusions.

            The SNP are, however the mechanism we have for independence. They are what they are. It is for the electorate to use them, cajole them, push them. The Scottish Unionist Parties, together or apart (who can tell, who cares), are merely a public embarrassment to themselves.

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