Currency debate derails SNP

“A devolved government will always act with one hand behind its back. On that hand there are several vital digits, the most important of which is currency.”

“Control of its own currency is a country’s most potent economic weapon. It allows government to control the money supply, interest rates and exchange rates, all of which can have a profound and relatively rapid impact on our economic growth and economic competitiveness. A country without its own currency is a country not only without a steering wheel, but also without brakes and an accelerator.”

So wrote Mike Russell, Scotland’s (SNP) Education Secretary, before he came to office. He’s probably right, of course. That’s the problem.

Alex Salmond’s own Special Adviser, on the other hand, said the SNP had “always recognised the benefits of Euro membership” in 2009. Mr Salmond himself put enough on record that even he cannot deny he was once in favour of euro membership.

In other words, the SNP has supported a separate Scottish currency (“a country’s most important weapon”), the benefits of Euro membership (which they just happened to mention at the time when Sterling was weakest against the Euro), and now, within a decade, they have moved on to a currency union with the rest of the UK.

Meanwhile, Jason O’Mahony wrote this, nominally with reference to Europe but actually with reference to just about anything. The currency argument shows, more than anything, that the SNP hasn’t quite gotten used to the idea that, in chess, the other side gets to move too. The SNP tends to forget that, if Scotland were independent, the remaining UK will be independent too. In such an event all the “benefits” of independence would apply to Scotland, but also to the remaining UK. What is more, as it is Scotland which would have opted to leave the UK unilaterally, it would have walked away from the “shared assets”.

That means the SNP can talk up the benefits of a post-independence “currency union” all it likes, but if the remaining UK opts not to have such a union, that’s that. The terms of any “independence” are not for Scotland alone, or even mainly, to decide. This has been demonstrated during the past week – and those voting in September are unlikely to forget it.

What is more alarming still is that the SNP has changed its position so frequently. Once it was Republican and for its own currency; then it was vague and for the Euro; now it is Monarchist and clearly pro-Sterling (to the extent not just of pegging a new currency to Sterling, but actually forming a Currency Union). It quoted Ireland and Iceland at their height and opposed Sterling at its lowest; now it forgets about Ireland and supports the rising Sterling. Every time it has simply swum with the tide rather than developing a long-term plan. Even the case for “independence” comes back in SNP PR to the “bedroom tax” – a highly short-term issue which in any case Northern Ireland will avoid even while remaining in the UK.

This was, of course, all before Mr Barroso suggested it would be “difficult if not impossible” for an independent Scotland to join the EU. I was astonished at his phrasing, and to be frank I simply don’t believe him; but it is yet another example of how “independence” means the independence of others as much as the independence of self. The SNP accuses others of talking up “uncertainty” – but that’s what a yes vote entails.

None of that is to say there isn’t a case for “independence” (I’m quite sure there is), merely that the SNP’s is ridiculously inconsistent, alarmingly short-term and frankly bizarre. Why not just offer a Scottish Republic with its own currency?!

“Better Together” will no doubt point out simply that if Scotland wants to exert influence on the Sterling Zone’s monetary policy and remove any “transaction costs” when trading with the rest of the UK, it would surely be better to, well, stay in the UK.

For all that, others argue this has nothing to do with the economy and everything to do with identity. Out of interest Mr Russell, Scotland’s Education Secretary, was born in England; and Michael Gove, effectively England’s Education Secretary, was born in Scotland.


11 thoughts on “Currency debate derails SNP

  1. martyntodd says:

    The campaign for Scottish independence is based on clever politics. It will be very interesting to see if the campaign manages to fool enough people into ignoring logic for the sake of heart-felt identity.

  2. Scots Anorak says:

    You’re right about Barroso, Ian. As far as I know his term ends on 31 October, so he can afford to express misleading opinions as a favour to his friends and, if the Scots vote “yes”, take the hit to his reputation of having been found out (he’ll no doubt be well rewarded by right-wing think tanks on the after-dinner speech circuit). I don’t think it’s correct to say that the Scots walk away from shared assets if they become independent, however. Apart from anything else, it would be against the Vienna Convention on Succession of States in Respect of State Property, Archives and Debts (not ratified by any party here, but still codifying fair play and predictive of the likely international response).

    As an aside, article 17 of the Vienna Convention on Succession of States in respect of Treaties states that newly independent states may join multilateral treaties to which their former colonisers (or, in this case, union partners) were a party without the consent of the other parties in most circumstances.

    While it’s conceivable that an rUK Government would attempt to deny Scotland a fair share of assets, Scotland could as a response walk away from a share of Government debt. As the Bank of England holds around one third of UK Government debt through quantitative easing, I cannot imagine that Scotland would ever service that part of it if the Bank itself were not shared, not to mention the tens of billions of pounds in gold reserves.

    It could well be the case that the ideal long-term solution is an independent Scots currency. However, I read one interesting article arguing that, given the level of indebtedness incurred through New Labour’s banking deregulation, it would in fact be impossible for Scotland to set one up while servicing such a high level of debt. Unlike you, I’d tend to view that as an argument in support of Alex Salmond’s position rather than that of Gideon Osborne, however.

  3. michael says:

    The SNP was never republican. And what’s wrong with changing your mind on currency? It’s dogmatism vs pragmatism isn’t it? The notion though that this event has derailed anyone is not based on any evidence. In fact the Yes campaign and SNP have been besieged with offers of help and money since Osborne’s intervention. It’s perfectly possible to argue as many in Scotland do that Osborne’s intervention has exposed more clearly than anything else the nature of the No campaign and its agenda and the relationship between Scotland and the rUK. Making this a fight between the SNP government in Edinburgh and Tory toffs in London plays very nicely in to the Yes campaign’s hands.

    • Of course the SNP was Republican. Indeed, Alex Salmond has been challenged to point to the vote where it changed its mind and failed to do so. All SNP members I know remain Republican.

      And there’s everything wrong with changing your mind on currency. You can’t just change currency when you feel like it. Furthermore, it shows the SNP makes errors, quite often. Who’s to believe what it says now if it itself doesn’t believe what it said in the past?

      And stop talking about “Tory Toffs”. It’s just as negative as the thus far awful “Better Together” campaign. The UK is a hugely diverse country.

  4. michael says:

    ‘None of that is to say there isn’t a case for “independence” (I’m quite sure there is), merely that the SNP’s is ridiculously inconsistent, alarmingly short-term and frankly bizarre. Why not just offer a Scottish Republic with its own currency?!’, well, why should it? You do understand that the SNP is the government of Scotland and that it achieved a majority in an electoral system designed specifically to keep it out of power. You know when people do stuff like that you underestimate them at your peril. You do understand too that the SNP is currently polling at around 45% of the vote in SP voting intentions – after 7 years in government! That must be unprecedented in Europe. I mean you imagine that you know better about how to appeal to the Scottish electorate than a party with that level of success. That’s unionist hubris for you, I guess.

  5. michael says:

    The SNP was never republican Ian. I have been a member since 1975 and it has always supported the retention of the monarchy. If you can prove otherwise provide a reference.

  6. michael says:

    Of course you can change your mind on currency. Otherwise nobody would be in the Euro.

  7. Slightly Bruised Man says:

    Ian, what’s your personal position on Scottish independence?

    • I have some sympathy with the idea that, post-Empire, the British Isles would be better consisting of separate, sovereign states freely cooperating (cf the Nordics) than being forced together. That said, there is also a case that devolution achieves that.

      However (and I’ll detail why nearer the time), I have come to the conclusion the SNP hasn’t a clue what it’s talking about. That is frankly dangerous. One man’s charisma is no grounds for such fundamental change.

      My own preference would be for a fully federal UK with a Statute of Autonomy for Scotland, Wales, NI and perhaps even London.

  8. Scots Anorak says:

    “That is frankly dangerous. One man’s charisma is no grounds for such fundamental change.”

    One could be forgiven for thinking we were all in the Reichstag discussing the passage of the Ermächtigungsgesetz.

    Rather we are talking about the re-establishment of an ancient state whose politics on almost every indicator (electoral system, NHS, schools, EU, immigration, welfare, nuclear weapons) is more progressive than that of the state from which it wishes to secede. It enjoys enviable social cohesion (no English riots) and upon independence will instantly be one of the richest states in the world.

    Nor is it all based on one man’s charisma. There was a good article by Murray Pittock in the Bel-Tel the other week that put it all in historical context.

    If I were pushed to give a reason why this is happening now, I would say that in the recent past some kind of economic and demographic tipping point was reached that meant the south of England could dominate everywhere else in perpetuity, regardless of which party is in power — just at the moment when Scots got their own Parliament, which most view as a resounding success. At the same time, the fact that welfare entitlements frozed since 1980 are now being cut means that the pressure for full fiscal powers is unavoidable. If the Westminster parties all signed up to devo-max, I suspect they could still stop it, this time. However, the Labour Party in particular seems very reluctant to suffer the loss of its Scots MPs or the curtailment of their voting rights, since it is depending on them to get it back into Government.

    That’s not to do with Alex Salmond’s surplus of charisma, though, but with Ed Miliband’s lack of it. In the south of England, politics is more akin to what Alexis de Tocqueville found in America: a beauty contest.

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