The Big Guns Are Blasting In The Scottish Independence Battle Of The Pound. Is a new currency looming for an independent Scotland and would the EU accept Scotland into its membership?
The Scottish independence debate has intensified with the approaching referendum on the 18th September 2014. Late January saw a visit from the Bank of England Governor Mark Carney outlining the issue of currency union and its implications. This month UK Prime Minister, David Cameron, gave an impassioned speech in favour of the union. The mainstream UK political parties were united in their rejection of a workable currency union with an independent Scotland.
Currency Union requires agreement and co-operation on large money transfers from wealthy to poorer areas, also tax and spending policies which would constrain fiscal and monetary policy in a newly independent Scotland. UK Chancellor George Osborne, backed by the cross-party Better Together Campaign, pointed out a reluctance of the remaining UK to be financially responsible, similar to the Eurozone, for underwriting the Scottish economy in the event of fiscal profligacy or shoring up Scottish banks in another financial crisis. Scottish financial sector’s assets are considerably larger than its GDP with its banks RBS, remaining a ward of the UK state, and the Bank of Scotland, part of Lloyd’s Banking Group with the Clydesdale part of National Australia Bank.
The pro-union threats on losing the pound may act as a recruitment drive for the yes vote. Scots have a long history with the pound and the Bank of England too since William Paterson’s proposal in 1694. The recent polls (Scotsman, 2014) show the yes vote up to 29%, the no at 42% and undecided remains a potent all to play for 29% of the vote. The views are spread across socio-economic spectrum too, perhaps to be expected with an economy more dependent on government spending, welfare and pension benefits for an aging population.
HM treasury has stated it would honour all issued UK government debt. This surely an opportunity for Alex Salmond and his SNP government in a newly independent Scotland to create a new currency with a Scots pound, kroner, or schilling and as little as possible assumed UK debt. They could create a low tax and spend economy embracing renewable energy technologies, entrepreneurial high-technology industries backed by the strong financial services sector, such as fund and asset management, and of course a world respected oil and gas industry. The revenues from North Sea (and next West of Shetland Isles) oil and gas may perhaps pay for the promised welfare and pensions expectations of retirees and public sector employee’s. While maintaining a free at the point of use NHS and highly regarded education system with free university tuition fees for Scots. It’s an enticing prospect indeed!
However, the UK negotiating team would have to drop the ball completely to accommodate all the fiscal and revenue wishing of a new Scottish government, never mind the provision of a military or defence capability, and not saddle Scotland with their hefty share of the UK national debt. The negotiations may last years to resolve issues like the removal of the nuclear deterrent at Faslane, entry in to the EU or even borders and boundaries for the North Sea. What about the infrastructure, such as the Forth Road Bridges are they UK or Scottish owned infrastructure, and who pays who rent and how much?
Arguably, economically Scotland could stand as an independent entity with its own public and private institutions. As it is likely to approach debt markets for funding as tax receipts and oil and gas revenues are unlikely to cover current and planned spending. The creation of a central bank as a lender of the last resort could provide confidence to domestic and foreign debt investor’s to hold any transferred or new Scots debt at non-punitive rates could be crucial. Therefore, with 7 months remaining with vital economic issues unresolved and unclear it’s hard to accept the SNP appeal to vote for independence and trust they’ll negotiate a good deal for Scotland afterwards on all these vital issues.
The other making continual headlines is automatic EU membership with Manuel Barrosso, EU Commission President stating on BBC1 The Andrew Marr Show that “there will be difficulties, if not impossible” for Scotland to achieve automatic EU membership on application. According to Better Together Campaign leader Alastair Darling on BBC1 Scotland’s Sunday Politics (16th February edition) that there were uncertainties with EU membership and it could take years to negotiate entry. Music to the ears of Tory euro sceptics but it’s certainly not SNP post-referendum policy. John Swinney, MSP and Scottish Finance Secretary added in reply that nobody has publically stated to veto a Scottish application for EU membership.
Darling again made the point which carries real vitality and substance that we’re already in a currency union in a single market of 63 million people of which we receive a higher share of government spending than other regions. Would the same be achieved with 5 million sometime in the EU? With our demographics and levels public expenditure including welfare benefits I’m of the opinion that we’re 60 years too late or 50 years too early to end the union. I think we’ll know the end when we see it.
More on the referendum later in the year…
LDC
Reference:
Scotsman Publications Ltd, Holyrood Rd, Edinburgh, accessed 16th January 2014:-
http://www.scotsman.com/news/politics/top-stories/scottish-independence-vote-is-too-close-to-call-1-3290253