Tuesday 29 May 2012

Currency affairs

Patrick Harvie's impish grin
There's a rather curious little piece in the online edition of The Scotsman today. Don't get too excited! It's not an apology for being such a shameless unionist propaganda rag with arguably the worst newspaper website in the world. It's this - Questions raised about alternative currency for Scots.

At first glance it appears to be another contribution to the referendum debate from Scottish Green MSP, Patrick Harvie. The unwary reader is lured in by Harvie's impish grin (left) and the promise of some more of the inspirational good sense that he has been talking since becoming the de facto voice of the YES campaign. It is then that, to our dismay and alarm, we discover that Harvie makes only a brief appearance before the bulk of the piece is given over to yet another rancid rant from the shrill and far from impish Maggie Curran.

Ignoring Curran's foetid fulminations in the media comes as naturally as dodging dog-shit on the pavement - and is just as well-advised. But it is worth noting this particular deposit if only for the profound stupidity on display as Curran abandons both good sense and personal dignity in pursuit of petty point-scoring against the SNP. The gist of it is that she actually seems to believe that the Treasury and the Bank of England would compromise negotiations on a sterling currency union before we've even had the referendum! She genuinely imagines that these institutions would commit themselves in advance in the matter of Scottish representation on the Monetary Policy Committee. Madness!

Let us not linger in the vicinity of this nonsense. The flies are gathering.

Let us instead focus on the offering from Patrick Harvie - which is worth quoting in full.
Staying with sterling may be the ‘least worst’ option in the short-term but I think we need to consider the timescale for moving to a more sustainable currency situation.
“We seem to be told that our only choice is between the euro and the pound.
“I think we should open up the debate and look at whether an independent Scotland could have an independent currency, even if it might take years to reach that point.
This is the sort of sophisticated, nuanced argument that the anti-independence campaign have proved incapable of formulating, descending instead to the mindless, knee-jerk naysaying so succinctly expressed in the Bain Principle. Harvie demonstrates that the alternative to one positive vision for Scotland's future can be a different positive vision. It doesn't have to be a matter of partisan confrontation over a rigidly defined positions. It can be a matter of discussion and compromise.

Harvie is perfectly correct when he says that a sterling currency union is probably the "least worst" way to go after independence. Not only in terms of Scotland's interests but for the sake of the rUK economy also. To insist otherwise simply because the idea has been mooted by the SNP is... well... there's no other way to say it. It's just plain dumb! Of course, we don't know what circumstances will be in 2016, but as things stand a currency union is perfectly feasible. Even if there was no Scottish representation on the Monetary Policy Committee (MPC) there simply isn't anything that committee might decide in current conditions that would be contrary to the needs of Scotland's economy. Anything that might be damaging to Scotland would almost inevitably be harmful to the economy of rUK also.

As far as influencing decisions is concerned, how credible is it that a Scottish Government would enter into a sterling currency union without securing representation on the MPC? And how credible is it that the rUK would scupper such a mutually advantageous arrangement by refusing such representation? Let's be realistic here!

But being realistic means taking due account of every eventuality. It is not entirely impossible that efforts to reach agreement on a sterling currency union might fail. It is just conceivable that the issue of MPC representation might be a stumbling block if the rUK were to be extraordinarily intransigent. Much more likely to cause problems, however, would be efforts by the rUK to limit the independence of Scotland's fiscal policy and regulatory regime. It is, unfortunately, very easy to imagine the British state behaving in such a high-handed fashion. And it is very difficult to see how any compromise in these areas might be acceptable to a Scottish Government.

In themselves, these are good reasons for having the "Plan B" of an independent currency, as Patrick Harvie suggests. Another reason is that, even with the best will in the world, a sterling currency union cannot be envisaged as anything other than an interim, or transitional, arrangement. The economies of Scotland and rUK will diverge. We cannot tell at what rate they will diverge, or when the divergence will reach the point at which a currency union becomes unsustainable. But there can be absolutely no doubt that it will happen. And we need to be prepared.

The SNP would do well to take on board what Patrick Harvie is saying. As well as pointing out the benefits of a sterling currency union post-independence they should demonstrate awareness of potential pitfalls and acknowledge the limitations of such an arrangement.


  1. Spot on. I've been thinking along these lines ever since "stay with the pound" was first mooted. The possibility of joining the Euro (which may come out of the current crisis much stronger) should not be excluded either (though we'd need our own currency first anyway).

  2. I think that it makes a lot of sense for a post Independence Scotland to retain the pound Sterling as her currency of choice.... FOR THE SHORT TERM ONLY!

    I do NOT believe in taking Scotland into the Euro.I think that would severely detrimental to Scotland's needs. My personal choice would be after say 5 - 10 years of Independence Scotland adopting the Groat and cents or Merk and cents.

  3. I'll go along with Andrew on the matter of the euro. Hardly worth discussing at the moment. But we should be open-minded enough to allow that a single European currency could be a good thing and might yet become a viable option.

    I'm not in the slightest bit sentimental about currency. It's only a tool. I really don't care what it's called. Or whose picture is on the notes and coins.

  4. Anyone who knows about managing significant change in any organisation ( and they don't get bigger than countries) will know that you aim to decouple the possible changes from each other, so that the the failure to change one minor element does not scupper the whole project.

    Both Currency and Head of State are decisions that are best left 'till after independence.

    On Currency - the McCrone report warned that the oil revenues in Scotland would make the Scottish groat (or whatever) dangerously strong! The English pound, on the other hand, without the advantages of the oil, would be weakened, so a short term currency union should suit both countries very well indeed, stabilizing both economies!

  5. I suspect the SNP are suggesting their prefered options are Sterling or Euro to avoid scaring the horses. As we know independence will be a massive leap for some people to make So we need to make it as 'unscary' as possible. I personally support our own currency but that is a section based on circumstances for the future.