Referendum :  Mr. Salmond and Mr. Micawber - "Something Will Turn Up"

1 November 2013

Mr. Micawber is one of Charles Dickens’ most famous characters remembered for his hope that “ Something will turn up” .

That must also be the wish of Alex Salmond after his party’s annual conference concluded with the “YES” campaign still well behind the “NO” campaign in the Referendum polls.

After a year of campaigning, the gap between the different sides of the argument has barely changed, reinforced by decades of opposition to Scotland leaving the UK.

Mr Salmond hopes to persuade voters by telling them that independence is not a big change ; that it is only a small change,  and that it is only a small change because familiar symbols from Britain would remain in place such as keeping the Queen as head of state and keeping the £.

Keeping the £, or currency more generally, may seem like an abstract issue best confined to economic textbooks , but it is a matter that affects, amongst  other things,  mortgages, credit card interest rates , imports, exports and jobs.

Mr Salmond wants Scotland to depart from the UK in one step , and then at the next step, he wants Scotland to begin immediately to share the £ in a “currency union “ with the rest of the UK that Scotland had just left.

As Johann Lamont shrewdly put it :

“Alex Salmond wants a divorce while keeping a joint bank account”

Further to that, Mr Salmond asserts that the (by then) foreign Bank of England will act as an independent Scotland’s central bank that would also act as its “lender of last resort”, as a last-ditch guarantor.

Mr Salmond’s problem here is that his assertions have never been agreed by or negotiated with the UK Government.

Negotiations to permit sterling to be currency of an independent Scotland  would be tough ; he would not get his promises to use the £ rubber-stamped,  and the government of The Remainder of The UK would likely play hardball.

There is no guarantee of a successful outcome that would satisfy both sides.

Mr Salmond has been asked repeatedly to reveal his Plan B – what contingency plans for Scottish currency does he have if negotiations failed?

No details of Plan B have emerged yet.

Mr. Salmond might try a completely new unproven and untested  currency for Scotland.

His Education Secretary Mike Russell,  was at one time a supporter of a new Scottish currency which could be called the “Ducat”

However a new currency that is not backed up a bank or by government reserves looks risky particularly when viewed against the stable £ .

Another option would be to use the £ “informally”, that is, without the agreement of the rest of the UK.

Ed Balls, Labour's Shadow Chancellor, has responded thus :

“ The fall-back position of the Nationalists is to claim that Scotland could use the pound informally, without a central bank, a lender of last resort or any control over the monetary framework.

"It shouldn’t have to be said, but the currency arrangements followed by economies like Kosovo, Panama or Montenegro are too big a risk for a complex economy like Scotland’s.

"This has rightly been dismissed by Alex Salmond’s own economic advisers.

“ Without the backing of the Bank of England, large financial institutions such as banks or insurance companies would not base themselves in Scotland. "

Whatever options might emerge as Plan B , they would mean that the consequences for the Scottish economy of a new Scottish currency or a new “currency union” with the Rest of the UK would be that Scottish interest rates and budgets , to a large degree would be determined by a foreign country – the Rest of the UK.

Mr Salmond is settling for the illusion of independence .

His policy would not “set Scotland free”.

Last year to commemorate the 200th anniversary of the birth of Charles Dickens, a special item of UK currency was minted .

It was a £2 coin on which were inscribed the words of Mr Micawber : “Something will turn up”

As Alex Salmond is confronted by his difficulties over “keeping the £”,  he must be hoping that as well.