Referendum : The White Paper - Currency Union and the Currency Disunion within the "Yes" campaign

27 November 2013

Alex Salmond has released the White Paper on Scottish independence which we were told was to contain all of the answers to the questions that people have been asking.

What, amongst others, have not been not answered have been questions on an issue that is at the centre of the debate on independence – the future of the £.

The recent intervention by John Swinney to claim – wrongly - that a “Yes” win in the Referendum would entitle the SNP to interpret such a result as a victory for Mr Salmond’s “promise to keep the £” illustrates how difficult the issue of the currency is for them. 

Mr Salmond has no Plan B for alternative currency arrangements to rely on if there were no agreement between the rest of the UK and an independent Scotland over the use of the £ in an independent Scotland.

He asserts that an independent Scotland could establish a  monetary union – a  “sterling zone”- with the rest of the UK which would retain the £ as the currency of an independent Scotland and the Bank of England as the lender of last resort.

However, this would come at the cost of Scotland losing some sovereignty over decisions on its own fiscal policy (e,g, how much it could spend on health, education, etc) with the Bank of England determining interest rates and the cost of borrowing in Scotland.

Not that long ago this would have described by nationalists as “ meddling in Scotland’s own affairs”; not so long ago the SNP described the £ as“ a millstone around Scotland’s neck”

Mr Salmond wants Scotland to break away from the rest of the UK, but he wants to  retain the use of the currency of the UK , the £, by setting up straight away a currency union with the remainder of the UK that Scotland has just broken away from.

He has absolutely no guarantee that this currency union – a “Sterling Zone” - would be agreed upon by the rest of the UK.

That leaves the option of a separate Scottish currency which Mr Salmond has rarely spoken about.

He prefers to attempt to soothe away justified fears of an uncertain future with a “ promise to keep the £” in an independent Scotland , despite lacking the power to do so.

But “Yes Scotland” has a few dissenters from the unswerving loyalty to the First Minister’s assertions that is shown by the SNP in the Scottish Parliament.

There is some publicly-expressed opposition to the Salmond  £ plan within the pro-independence camp.

Patrick Harvie and the Scottish Green Party delivered problems for this “promise to keep the £” last month at its annual conference in Inverness last month voting instead for a separate Scottish currency in an independent Scotland.

Colin Fox, the leader of the Scottish Socialist Party, a member of the advisory board of “Yes Scotland” and also a supporter of a separate Scottish currency has described the currency union plan as “ untenable” adding “I think the idea of a sterling zone renders ridiculous the idea that you have an independent country.”

Even more bad news has come from former SNP MP and former Vice-Chair of the SNP Jim Sillars who says that Mr Salmond’s refusal to outline any Plan B is a “gift” to political opponents.

He wrote in a letter to the Daily Telegraph :

“Assuming independence, for two separate countries to form a currency union requires a treaty.

“A treaty requires both to agree.

“If one says no, there can be no treaty and no currency union,” he wrote in a letter to the Telegraph

To add to Mr. Salmond’s discomfort, an unlikely source has also published an analysis of why a currency union "is not in an independent Scotland's interests" - the Scotland Office, the department of the Secretary of State for Scotland .

It states :

“A currency union is not in an independent Scotland’s interests because:

"Constraints on an independent Scotland’s economic policies: even if it could be agreed, a formal currency union would severely limit an independent Scotland’s economic freedom – to ensure that risks to the rest of the UK were managed an independent Scotland would not be able to set its own interest rates and would have to accept the rest of the UK having oversight of its tax and spending plans as is increasingly the case in the euro area. "

Mr. Salmond’s plan all along has been to portray the break up of the UK as something that would disturb everyday life in Scotland as little as possible.

His independent Scotland would still surround people with familiar reminders of the past, symbols of the status quo such as the £.

Hence talk of a new independent currency does not go down well with the SNP Establishment.

Meanwhile the Scotland Office analysis goes on to make it clear what Mr Salmond’s plan would mean : 

“No one should vote for an independent Scotland on the basis that they will get to keep the pound.

“Independence means leaving the UK’s monetary union and leaving the pound.

“The only way for Scotland to keep the pound as it is now is to stay in the UK.”