{"id":8299,"date":"2019-04-10T12:36:26","date_gmt":"2019-04-10T12:36:26","guid":{"rendered":"https:\/\/sceptical.scot\/staging\/?p=8299"},"modified":"2019-04-10T12:42:03","modified_gmt":"2019-04-10T12:42:03","slug":"scotland-needs-its-own-currency","status":"publish","type":"post","link":"https:\/\/sceptical.scot\/staging\/2019\/04\/scotland-needs-its-own-currency\/","title":{"rendered":"Scotland needs its own currency"},"content":{"rendered":"\n

Common Weal Head of Policy and Research Dr Craig Dalzell writes an open letter to Scottish finance secretary Derek Mackay in response to his recent endorsement of the Growth Commission report<\/a> and his motion to the SNP conference.<\/strong><\/p>\n\n\n\n

Dear Derek Mackay<\/p>\n\n\n\n

I read your recent article in The National (6th April<\/a>) with interest. Particularly your endorsement of the motion being put to the SNP conference this month as \u201cyour\u201d plan, building on the Growth Commission. This direct endorsement gave me hope that you would have taken the opportunity in your article to tackle the now widespread critiques of that plan.

Your direct endorsement of the Growth Commission proposals also led me to the realisation that, unless things change, you as Finance Secretary will be personally responsible for this plan and its consequences. In this spirit, I would like to address you directly regarding some of the critiques raised.
The big one, as raised by Robin McAlpine in The National last week (30th March<\/a>), is the problem of what happens to the Scottish economy if we\u2019re Sterlingised \u2013 that is, we continue to use the pound without a formal currency union \u2013 and the rUK economy tanks.

Without the powers to create (or destroy) money, apply Quantitative Easing, adjust interest rates, adjust exchange rates and, crucially, without the Bank of England having a legal remit over Scotland to do it for us, what powers would a Sterlingised Scotland actually have to shield us from the effects of an rUK crash?

This is not merely a hypothetical. The UK has suffered a recession in every decade of the past the century bar one (the 1940s) and we\u2019re still suffering the \u201clost decade\u201d from the 2008 Financial Crisis. Let\u2019s be honest, your plan isn\u2019t going to meet the \u201csix tests\u201d<\/a> within the first Parliamentary term and we all know it so the results of the vote at the end of that term is a foregone one. Following the Growth Commission model of not having a currency for the decade or more that those tests imply presents a major systemic risk to the Scottish economy. You will surely understand that this is not a problem that can be solved by tweaking tax rates.<\/p>\n\n\n\n

Currency and economy<\/h2>\n\n\n\n

Derek, you are quite correct to point out that currency is a servant of the economy but it\u2019s not true to say that the reverse doesn\u2019t also apply. The relationship is one of mutual feedback. The currency shapes what kind of economy is possible. It\u2019s notable that you and the Growth Commission are keen to point out that many of our comparator countries don\u2019t have their own currency. What you seem less keen to point out is that all of them are Eurozone members. None of the comparator countries cited in the Growth Commission report unilaterally use the pound, euro, dollar or another currency. Read section A3.21 of the report if you don\u2019t believe me.

It\u2019s the placing of limits on that range of economic possibility that is proving concerning to many. Under the Growth Commission\u2019s wider economic proposals, there are measures to keep Scotland\u2019s financial regulations tightly tied to the UK\u2019s failed model \u2013 not just at the point of independence but as the UK continues to make changes to their regulations afterwards. Scotland\u2019s political input into the Union may be slight at the moment. We may so often be ignored. But at least, on paper, UK-wide regulations are made with Scotland\u2019s say and to cover Scotland\u2019s needs.<\/p>\n\n\n\n

Post-independence, your plan makes as much political and economic sense as unilaterally adopting changes to the financial regulations of Singapore. It is a plan built to appease those who would be loaning Scotland the money that we couldn\u2019t print on our own. They will not easily give up such a \u2018valued client\u2019 – hence why the \u201csix tests\u201d take the nigh-impossible-to-meet form that they do.<\/p>\n\n\n\n

I understand the desire by some to campaign for a \u201csoft independence\u201d model. It\u2019s not my preferred model. It\u2019s not the model favoured by just about any SNP member I\u2019ve ever met. It\u2019s certainly not a model anywhere near compatible with the \u201cScotland in Europe\u201d policy espoused by the SNP. Put aside the \u201cwe\u2019ll be forced into the euro\u201d arguments. We won\u2019t be getting back into the EU at all if we don\u2019t have control of our own currency nor if we follow the rUK\u2019s \u201cGlobal Britain\u201d financial regulations into an ERG-led tax haven on (non-EU compliant) steroids. Such a \u201csoft independence\u201d was compatible with \u201cScotland in Europe\u201d in 2014 but that compatibility ended in June 2016. Scotland doesn\u2019t necessarily have to choose between the UK and the EU, but we can no longer have both.<\/p>\n\n\n\n

First published on <\/em>Common Space<\/em><\/a><\/p>\n\n\n\n

Further reading: Amendments <\/em><\/a>on Growth Commission for SNP conference<\/em><\/p>\n\n\n\n

Sustainable Growth Commission <\/em>report<\/em><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

‘Post-independence, your plan makes as much political and economic sense as unilaterally adopting changes to the financial regulations of Singapore.’<\/p>\n","protected":false},"author":263,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[319],"tags":[708,179],"class_list":["post-8299","post","type-post","status-publish","format-standard","hentry","category-economy","tag-indyref-2","tag-scottish-economy"],"_links":{"self":[{"href":"https:\/\/sceptical.scot\/staging\/wp-json\/wp\/v2\/posts\/8299","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/sceptical.scot\/staging\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/sceptical.scot\/staging\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/sceptical.scot\/staging\/wp-json\/wp\/v2\/users\/263"}],"replies":[{"embeddable":true,"href":"https:\/\/sceptical.scot\/staging\/wp-json\/wp\/v2\/comments?post=8299"}],"version-history":[{"count":0,"href":"https:\/\/sceptical.scot\/staging\/wp-json\/wp\/v2\/posts\/8299\/revisions"}],"wp:attachment":[{"href":"https:\/\/sceptical.scot\/staging\/wp-json\/wp\/v2\/media?parent=8299"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/sceptical.scot\/staging\/wp-json\/wp\/v2\/categories?post=8299"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/sceptical.scot\/staging\/wp-json\/wp\/v2\/tags?post=8299"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}