Thursday, 3 November 2011

Currency is Important

I was for the Euro. By that I mean for British participation. Oddly, in light of subsequent events, one of the main reasons I was for it was because I believed that it might, in time, allow Scotland, in the Euro, to advance a differential taxation and spending approach from that pervailing in England and Wales.

I believed then, as I do now, that an "Independent" Scotland, still tied to a Sterling Currency zone in the control of our much larger neighbour, would be no Independence at all, within or outwith the Union.

And that even a much more fiscally devolved Scotland would have the same basic problem.

If ever however it was ever demonstrated that for the SNP, "Independence" is really only about flags and anthems, then it must be their attitude to the currency. Having been for the Euro, when that was popular, they now have decided that their preferred currency would be Sterling. They seem to have no conception that a Country trading in the currency of the "Bank of England", would not be an "Independent" Country at all. Indeed, as the Greeks are discovering in a different context, it might not even be a true democracy.

But the most revealing aspect of this at all is the reason that the SNP regard continued participation in Sterling as being important. Sterling remains a major trading currency. It therefore remains unlikely that it would go down the tubes overnight. And allows those who control it at least some freedom of action.

At the moment we, the Scots, do not control Sterling, but we have some degree of limited influence over it.  Logically however, if it was not our currency, but only one we were borrowing, then it would not be for us to have even that degree of limited   influence. The illusory "English bastards" might decide to be actual "English bastards". After all, what duty would they then owe to us?

So, if we do not have that influence over the currency, what is the point in having the currency at all?

There was a time when the SNP advanced the idea of a return to the Pound Scots. Indeed, I am old enough to remember when their main alleged reservation about such a currency was that, such would be the oil riches of an Independent Scotland, the value of this currency would make our other exports uncompetitive.

People however didn't believe them. They worried that, if the Nats were wrong in this analysis, then the result would involve the  cost of a fortnight's holiday in Benidorm being suddenly transformed into the price of a single Cerveza. And raise major questions as to why any "foreigner" would want to invest their private pension fund with a Life Company trading in that currency.

So we now have an SNP Policy that would, in their own argument, tie a rich and prosperous Scotland to Sterling, the currency of a foreign country at a time when that foreign country was being rendered almost bankrupt by the removal of the riches of "Scotland's Oil" which they've been stealing from us all these years. Yet despite that shock to the English system they will remain willing to assist in this process. You could not make this up. Even if the SNP have.

1 comment:

  1. I'm not convinced that an independent Scotland's relations our neighbours would be anything other than friendly. Yes, there are quite a few politicians in Scotland who have gratuitously offended other countries, but England hasn't usually been the target. I'm sure we would be able to get on perfectly well.

    More broadly, I fail to see the problem with retaining Sterling initially. The differences in wealth and tax systems inside the hypothetical Sterling zone would, initially at least, be minor. Not just minor in comparison with those inside the Euro or other currency areas, but minor full stop. If we were to assume that using Sterling in Scotland isn't a catastrophe now - I very much doubt that you believe this, even if there are bound to be some people who do - it wouldn't be a catastrophe then either. Not to start with anyway.

    In time changes to the economy and patterns of trade in Scotland along with increased divergence of taxation systems within the Sterling zone would tend to make Sterling a less-good choice. At some point, whether because of these changes or - unlikely as it now seems - because there was a desire to move to the Euro, the then-Scottish government would face a decision on cutting the link to Sterling. If this was because there was a decision in favour of the Euro, then after a suitable interval - to allow the cost of two weeks in Benidorm to fall to the cost of a glass of beer, or vice versa - Scotland would then join the EMS and after a number of years the Euro. But attempting to predict today when such decisions might be faced, or what the choices might be, is very much a waste of time.

    Independence, just like devolution, would be a process rather than an event. Unless you're of the view that Alex Salmond is immortal and the SNP will be in power forever - Dev wasn't and Fianna Fail weren't - it would be unwise to place too much reliance on their pronouncements. Who knows, one day Labour - or its successor - might govern an independent Scotland. And then your views on the currency, or those of some of your younger colleagues, would be more significant than those of Salmond and the SNP.

    Do you have a view on the currency policy of an independent Scotland? If not, perhaps you ought to do. It might come in handy some day.