The Scottish Currency Group, comprising pro-independence experts in finance, banking, and public administration, has published a further report in its ‘The Road to the Scottish Currency’ series. The report contains advice to the SNP leadership and the Scottish Government on the priorities for the present Scottish Government on currency policy in an independent Scotland.
The report, released on 11 March, which responds to the currency proposals in the Scottish Government paper ‘A stronger economy with independence’, was prepared by a Working Group chaired by Ian Stewart, a retired senior banker.
The main recommendations are as follows:
- We strongly support Scottish Government policy to introduce a Scottish currency as soon as practicable after independence, but believe the present Government should not set out criteria on timing in advance. This decision will be taken by the post-independence Government, which will be in the best position to decide timing in the light of circumstances at the time.
- The present Government should concentrate on putting in place, prior to formal independence, a Scottish Central Bank and other institutions and arrangements needed to support a Scottish pound so that the post-independence Government has all options available, including introducing the new currency immediately, or soon after, independence. This will require intensive work with external partners during, and possibly starting before, the transition period prior to formal independence. The necessary arrangements will include an inter-bank payments system for transactions in the Scottish pound.
- The present Government should also undertake a major publicity campaign as a matter of urgency, to raise awareness of the substantial economic and social advantages of a Scottish pound, explain how the new currency arrangements will operate, and reassure households and businesses in Scotland on frequently asked questions, for example the implications for mortgages, pensions, and savings. The previously published Scottish Currency Group Q and A Report could be a basis for this campaign.
Speaking ahead of the launch of the new report, chairman Ian Stewart said: “Only with our own currency will Scotland have full control of economic and financial policy. In many ways, the Scottish pound will be the key to unlocking Scotland’s economic potential, for example in renewable energy. It will also enable an independent Scotland to tackle the challenges facing our National Health Service and deliver social benefits to all residents of Scotland. Without it, interest rates will be set by other Governments without reference to Scotland’s needs and borrowing will have to be undertaken in a foreign currency.”
Effects of borrowing in sterling on Scottish economy
Borrowing in sterling will, of necessity, result in distortion of the Scottish economy towards earning sterling to pay this debt. This would prolong the link to the economy of the rUK (the rest of the United Kingdom after Scottish independence) and demand that we focus on its requirements rather than those of the Scottish economy and, indeed, our ambitions for it. It may be that a degree of diversity in our economy and therefore resilience would be lost. The need to earn sterling would also see the bulk of our natural resources lost as exports and not then available for our own use.
Furthermore, our capacity to invest in infrastructure and policies key to Scotland’s national economic, social and industrial strategies would be limited in contrast to the flexible spending afforded by issuing our own currency. A currency issuer can always manage debt issued in its own currency using fiscal and monetary policy tools to balance its economy towards achieving priorities. With curtailed investment in expansion of our productive economy, we would be less able domestically to meet the demands of Scottish consumers which would increase the need for costly imports. This further adds to the cycle of exporting resources to pay for imports.
Introducing our own currency puts us in the best position to weather the challenges of the early days of independence, ensuring we have a lender of last resort in place and giving us the greatest capacity to meet unexpected events and crises.
Our own currency is what gives agency to decision making and is the means by which we mobilise our tremendous resources to fulfil our national economic strategy. Our own currency gives us greater flexibility to choose what type of stake we take for the people of Scotland in any enterprise, policy, utility or sector of the economy.
If Scotland is to hit the ground running and build a successful nation, it needs the capabilities and protections afforded by issuing our own currency as a matter of urgency after Independence Day.
The Scottish Currency Group sincerely hopes all of the candidates and the future First Minister will engage with our recommendations.
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