Former Salmond advisor casts doubt on currency union

Alex Salmond’s plans for a currency union should Scotland vote for independence have suffered another setback.

Alex Salmond’s plans for a currency union should Scotland vote for independence have suffered another setback as one of his former economic advisers admitted that the difficulties in establishing such a union with the rest of the UK would likely prove too difficult to achieve.

Speaking to the Scottish Parliament’s Finance Committee, professor John Kay, a former member of the first minister’s Council of Economic Advisers, noted that conventional wisdom, particularly in the eurozone, is that there can only be currency union if this leads to fiscal backing.

He told MSPs on the Committee:

“Personally I don’t think that’s true but there’s almost not much point in our debating whether that’s true or not, because people in markets and political circles believe it’s true.

“The result of that is that if Scotland voted for independence and we were to have negotiations over monetary union, you would be getting conditions laid down by the UK Treasury in these negotiations which I think would be very difficult for a Scottish Government to accept.”

He continued:

“The rest of the UK would be demanding control over the banking system in Scotland and over fiscal policy in Scotland which it would not be willing to concede.

“That’s the almost intractable problem on which these negotiations would fail.

“If Scotland agreed to the UK demands it would be giving away most of the “economic policy levers it hoped to gain by independence.”

The Committee, currently taking evidence about what Scotland’s finances might look like if it votes for independence, also heard from Gavin McCrone, a former chief economist at the Scottish Office, who was equally pessimistic about the prospects of the SNP securing a currency union.

Telling MSPs that he felt it was “more likely in the end” that Scotland would adopt its own currency “even though it may start with an attempt to keep the same currency”, McCrone continued:

“On the whole, I think that a separate currency but one pegged to sterling is the probably the long-run answer, that’s what the Irish did for a long time, then they unpegged it when they went into the European exchange rate mechanism.

“Smaller countries very often do that, the Danes for example have kept their own currency but it is pegged to the euro, but that means they can alter it if they really have to.”

15 Responses to “Former Salmond advisor casts doubt on currency union”

  1. Alec

    The final and insurmountable set-back came in February.

    ~alec

  2. Kryten2k35

    The same McCrone who’s 1970’s report was massively overblown by the SNP. They lied and said it was “hidden” from the Scottish people. by the British government. In reality, it was not. It was made available to every Scottish government, and written base don publicly available information. http://www.scotsman.com/news/gavin-mccrone-is-an-oil-fund-still-feasible-1-3147200

  3. Kryten2k35

    I wonder who will be the first to call this “scaremongering” Salmond or his stooge, Sturgeon?

  4. Alec

    Nah, he’ll be led out to a peatbog, left without a compass or shoes and to fend off the rabid haggises (Scottish haggis, not English colonialists).

    ~alec

  5. David Carr

    First of all – this is far from saying there would be no viable currency option for Scotland.

    Secondly – John Kay has publicly said )on Newsnight Scotland) that whichever option is taken has pros and cons *but it doesn’t much matter*.

    Crushing blow to the Independence argument? I think not. There are options – but Currency Union is probably the one rUK should favour, in their own interest.

  6. Kryten2k35

    Why is it in the UK’s favour to be in a currency union with the separating state? because we can buy Irn Bru slightly cheaper? All the major companies will move to the UK, which will have trade benefits with the EU. Scotland will not be an EU member and will lose this.

  7. Alec

    First of all – this is far from saying there would be no viable currency option for Scotland.

    Yes, because no-one is credibly saying that. What people/we are saying is that Salmond’s preferred currency union with Ster£ing (after the €uro concept went tits up and he no longer could ridicule Ster£ing as a millstone around Scotland’s neck) is not going to happen.

    ~alec

  8. The Hairdresser

    Why has Alex got a Mullet in this photo?

  9. Paul Taylor

    It’s not an insurmountable blow to the independence cause by any means. But the solution is a Scottish currency. That will mean real independence, without handing policy levers to rUK. And that’s what Scotland is voting on no?

  10. David Carr

    Nice satire! 🙂

  11. RolftheGanger

    John Kay is and always has been Unionist. Check back previous criticism of the SNP Government.
    He did not “admit” anything – he made another criticism.

  12. Kryten2k35

    That’s not what the SNP is saying.

  13. uglyfatbloke

    Possibly ‘cos he’s not really a salmon after all? Cod knows we’ve been herring enough crab from both sides; no wonder they’re both floundering all over the plaice.

  14. rollo_tommasi

    Interesting that you attack the man not the argument yet not in the least bit suprising.

  15. Alec

    So, only pro-YES Scots (or outsiders like Billy Bragg) can have an opinion. Perhaps you should have said that the SNP and YEScotland’s favoured blogger thinks it’s not possible to consider yourself Scottish and British or that the Hillsborough 96 were to blame for their deaths, then one of your lot would have seen it as an unhinged rant (not to mention a lie, except for the bits which were 100% accurate).

    There is going to be no currency union.

    Check back previous criticism of the SNP Government.

    Welcome to an advanced liberal democracy. We’re allowed to criticize Governments. Which flight are you catching to Moscow?

    ~alec

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