Joseph L. Reid: Currency? Scotland Will Use Whatever It Fancies

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From the recent #ScotDecides debate, one would think that the Yes campaign has been absolutely crushed under the genius play of “what’s your plan B?” by Mr Darling.

In reality, most Yes campaigners are left snickering on Twitter because we already know Scotland’s Plan B. And it’s Plan C, D, E and whatever other Roman letters you fancy shoving on the end there. (We’re so internationalist we even use a foreign alphabet. Eat your heart out, Farage.)

Those on the No side seem to enjoy mocking Salmond’s refusal to mention any of the other options – and I understand why. His reluctance is bizarre when his own government had this produced to detail Scotland’s currency options:

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(Source: http://www.scotland.gov.uk/Resource/0041/00419554.pdf)

It is worth mentioning that this was produced by the Fiscal Commission Working Group – composed of Professors Andrew Hughes Hallett, Sir Jim Mirrlees, Frances Ruane and Joseph Stiglitz. The Council of Economic Advisers also comprised of two Nobel Prize winners. Doesn’t sound half bad, eh?

Now, this Commission is why Salmond sticks so strictly to the line of a Formal Monetary Union with the UK – because they stated it was the best option for an independent Scotland. It obviously has disadvantages, such as the BoE having interest in adjusting the £GBP both for iScotland and rUK. There is no denying that Scotland would obviously not be the top priority for the BoE as a result. So why is Salmond not mentioning a Plan B? Because it’s the same as Plan A. Scotland will just use it anyway.

On a slight side note, Professor Andrew Hughes-Hallett is also the same man who said this:

The usual perception is that Scotland spends about 20% on public services more per head than the UK average…

“Those numbers are very misleading mainly because the spending in that part is what’s spent on behalf of Scotland but not necessarily in Scotland.

“The estimate for Scotland’s share, that’s contributions to defence, is 2.8 billion but it’s roughly 2.0 billion are actually paid out in Scotland

“So there’s an implicit subsidy going south in that sense and you can think of lots of other examples …

That said, in a newly independent nation with an untested government, it makes sense to use the £GBP as a transitional currency for at the least the first decade. This allows the Scottish economy to settle as it adapts to the new constitutional arrangements, and allows investors to watch what happens to markets without having the volatile fluctuations a new currency could bring. Additionally, it allows the Scottish people to take their time in deciding the next step in terms of currency. Should we continue using the £GBP or do shift to the Euro? How about a Scottish Pound? Chinese Yuan, anyone?

These are all perfectly plausible (perhaps the latter not so much…) but it is difficult to gauge public support for any of these options when most are (rightly) focusing on the other issues in the referendum.

Then again, we shouldn’t ignore the advantage for the rUK if Scotland keeps the £GBP. The £GBP losing 10% of a its regular user base overnight can only be a damaging factor for England, Wales and Northern Ireland. I’m of course no economist but less people using the £GBP can only be a bad thing for the rUK economy.

There is of course the matter of debt; currently the entirety of the UK Government’s debt is tied to Westminster. It is in no way attached to Scotland except from a moral standpoint. It’s “our debt”, they’ll remind you. Yes, of course it is. We made it together. Just like that Pound in your pocket. It has been argued by many that Scotland could in fact refuse its share of debt and instead just use a new currency while having no debt. If the debt is Scotland’s, surely the currency is too? Scotland technically has no legal obligation to service its debt if it is refused the £GBP, as the Treasury have already confirmed they are liable for 100% of the current UK debt. This is the unfortunate reality of being the successor state. Unionists like to claim that this would cause great concern for many investors, that Scotland had essentially shirked its (moral, not legal) responsibility to service debts it had helped to form, but if Scotland can’t use the currency it helped to create, why on earth should it service the debt?

I wouldn’t dare personally advocate we shirk our share of the debt – I’d hate to do it to the people of the rUK, but if you really think investors would be worried about the morals of it, you must be ignoring the heavy amounts of investment into countries like Russia and China. Their moral records aren’t exactly spotless yet the money continues to come from somewhere. So you end up having a nation like iScotland that has oil, potentially no debt to service and a fairly clean slate in terms of morals except from that one middle finger to the rUK; what a terrible predicament that would be. It’s not as if the rest of the EU hold a grudge against the UK or anything. Eurovision love a bit o’ Britannia, no? I swear France used to call us on the weekends…

Finally I am left with one small matter: what do I want? I personally want the £GBP as a transitional currency for the sake of stability – probably for a decade – until we transition to a separate Scottish Pound. I would eventually like the Euro taken up, but I suspect public support will take a while to fulfil that wish.

Many seem to worry about Scotland having a separate Pound. You’ll have to change money when travelling south, you lose the convenience of using it all across the UK and so on.

Perhaps then I shall leave you with this image from the London Tube’s ticket machines:

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Joseph L. Reid
@jlewr
National Collective

Image from Epsos

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