Swinney on Scotland currency – more questions than he answers?

Ed Jacobs asks whether the elaboration of the SNP's policy for the finances of an independent Scotland really answers the crucial questions

 

Amidst the ongoing air of crisis in Brussels over the future of the Euro, John Swinney is this evening expected to rule out an independent Scotland joining in the euro for at least a decade.

Publishing extracts of his lecture at the David Hume Institute in Edinburgh the Scotsman reports that the Scottish finance secretary will say to those gathered:

I can’t foresee a set of circumstances that will see the economic conditions being correct for the euro for some considerable time. It would be difficult to define that but it feels neither to me like the short term or the medium term.”

In reiterating the SNP’s policy that independence should mean Scotland should retain sterling as its currency with the Bank of England as its central bank, Mr Swinney, the Scotsman reports will outline how he is planning for a “lengthy and solid agreement” with the Bank of England as Scotland’s lender of last resort.

Meanwhile, seeking to make contrasts between an independent Scottish government and the economic path taken by the UK coalition, Swinney today argues in a guest piece for the Scotsman:

My vision of an independent Scottish economy is one in which monetary policy acts to underpin price and macroeconomic stability, supported by fiscal and economic flexibility to promote growth and create jobs. Price stability is the key to creating an environment that is conducive to trade, investment and economic growth.

Indeed, this is one reason why all major industrialised economies including the UK, the Eurozone, Japan, Australia, New Zealand, Canada and the USA have established independent central banks with the core focus upon maintaining price stability.

Scotland would continue with such an arrangement post-independence in a sterling zone with the Bank of England responsible for monetary policy.

But monetary policy cannot directly tackle youth unemployment, promote innovation, boost skills, target overseas investment or promote investment in key sectors. To address these issues we need greater fiscal powers and an opportunity to use them.

This vision, he said, compares with George Osborne’s plans which, he declares are:

“Proving to be self-defeating with borrowing now rising.”

The finance secretary’s remarks come as Whitehall appears to be in some state of confusion about whether Scotland would or would not be able to keep the pound.

Speaking just last month to the BBC in Scotland, Scottish secretary Michael Moore made clear that he did not see any legal problem with Scotland maintaining sterling. This as George Osborne gave an implicit threat to ban Scotland from keeping the pound.

Assessing Swinney’s thinking on the issue meanwhile, the Scotsman’s editorial has argued that his remarks raise more questions than they answer, concluding:

The more we learn of the Nationalists’ plans for an independent Scotland, the less we know for sure.

That is the only conclusion to be drawn from the interview with finance secretary John Swinney, which we publish today. Mr Swinney, a respected figure less prone than some colleagues to resort to the politics of assertion, has revealed significantly more about the SNP’s economic thinking. But for every answer, more questions arise.

Take the issue of the currency Scotland would adopt after independence. We learn, surprisingly, that the SNP believes Scotland will be part of the sterling zone for at least a decade.

On the face of it, this is welcome clarity with Mr Swinney ruling out any attempt to join the eurozone and stressing his determination to bring certainty and financial stability to a newly- independent Scotland.

Yet this attempt not to scare the unionist horses raises further policy questions. What will Scotland’s relationship with the Bank of England be exactly? How will it interact with and influence what will in effect become a mini-European Central Bank, the central bank for the nations of the former United Kingdom?

See also:

Scottish independence would leave Trident dead – and the MoD don’t careKate Hudson, February 1st 2012

Miliband to outline vision of a fairer UnionEd Jacobs, January 30th 2012

Salmond’s Scottish referendum is a textbook example of a leading questionAlex Hern, January 27th 2012

Questions multiply over financial status of an independent ScotlandAlex Hern, January 20th 2012

SNP: Cam’s “economic uncertainty” argument is nonsense; we’ll stick to our timetableHumza Yousaf MSP, January 9th 2012

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19 Responses to “Swinney on Scotland currency – more questions than he answers?”

  1. Political Planet

    Swinney on Scotland currency – more questions than he answers?: Ed Jacobs asks whether the elaboration of the SN… http://t.co/rwp9VkSu

  2. Anonymous

    Lets see. Eurozone – a mess because separate countries sharing one currency.

    Salmond wants to set up the same in the UK with Sterling.

    I think the appropriate form of words, its take a hike, and whilst you are at it, pack up a Barnett formula share of the debt, plus RBS and HBOS those pesky Scottish banks that screwed up.

  3. Pulp Ark

    Swinney on Scotland currency – more questions than he answers? http://t.co/tqIU9E3a #A_Britain_We_All_Call_Home #euro #muslim #tcot #sioa

  4. leftlinks

    Left Foot Forward – Swinney on Scotland currency – more questions than he answers? http://t.co/YTkT4aSx

  5. John Ruddy

    I dont think theres any arguments over whether Scotland could USE Sterling – its really about the terms.

    The problem is, the nationalists seem to think that they can dictate terms, that what they say now is what is going to happen later. It doesnt work like that.

    We could end up using sterling, but have difficulties exchanging it, problems borrowing using it and of course our interest rates set with no concern for Scottish conditions.

    Or, we could have no difficulties, everything will continue as it does currently, and the Bank of England will consult in Scotland before changing interest rates.

    Or, something in between, which will be gained by giving up soemthing else in return.

    The problem is we dont know – and in fact we wont know. We just need to be honest.

  6. Jonkarra

    You only have to look at the lessons of the euro to see that without close political union a currency union is a bad and in the long term unstable and unworkable proposition. If Scotland wants to go its own way fine, they can even use Sterling if they want but Sterling should only be run by the rest of the UK for the rest of the UK and if that doesnt suit an independant Scotland well basically tough! We should not tie ourselves into a currency where another country can make disasterous decisions which have a negative impact on us. We have seen where that leads with the Euro.

  7. D M Gordon

    Swinney on Scotland currency – more questions than he answers?: Amidst the ongoing air of cr… http://t.co/OKZgF8hl #News #Scotland #UK

  8. Allison McDonald

    RT @leftfootfwd: Swinney on Scotland currency – more questions than he answers? http://t.co/4fNA1scG

  9. SCOT NETWORK

    Swinney on Scotland currency – more questions than he answers? http://t.co/1SLUF2Hu

  10. SCOT NETWORK

    Swinney on Scotland currency – more questions than he answers? http://t.co/EtFKd2UA

  11. Newsbot9

    Yes, keep arguing that the England should violate international norms. After all, acting like raving lunatics is what your party is good for.

  12. Newsbot9

    Well, realistically you’d need to pay to use it. How much? Well…

  13. Robert CP

    Swinney on Scotland currency – more questions than he answers? http://t.co/enkNWg7W by @edjacobs1985

  14. Anonymous

    The norm is that Scotland should take its shit with it, when its leaves the UK.

    Like everything in life, you shouldn’t leave your rubbish behind for other’s to pick up.

    Just like Labour and its debts.

    So if your gold plated pension ends up being paid out by Scotland, watch out. With 50% of all employees employed by the state they are going to have a few problems making good on that.

    However, since its off the books, that means they don’t intend paying it.

  15. Angus McLellan

    You’ll look in vain for evidence that Australia or Canada or Ireland or New Zealand were charged for the privilege of letting sterling notes circulate or for pegging their currency to sterling at par for decades. For a whole 55 years in Ireland’s case, 1928 to 1978. The Irish Free State didn’t even get round to issuing any currency until 1928, six years after independence.

    Of course using sterling wouldn’t be without economic cost, but a decision on currency could easily be deferred for a fair number of years while more pressing matters were dealt with. And by that time it might be possible to obtain a cross-party consensus on the issue, something which would be very difficult at an early date.

  16. John Ruddy

    The thing is, we are in a totally different situation here. The SNP talk about the bank of England being the lender of last resort for Scotland – that must surely come with a price? The economies now are so much larger, with so many more transactions. Thos examples are from the days when there were currency controls and couldnt take more than £10 out of the country!

    Bear in mind, the Scottish banks are already charged for the privledge of printing their own notes. That could change. That charge could be cancelled and replaced with a transaction charge.

    The point is that there are still so many unknowns here. We are all aware of the eocnomic issues of using someone elses currency (it doesnt matter whether its the Euro, the Dollar or Streling). The problem is what happens during the negotiations to get a better deal. Something else has to give.

  17. Angus McLellan

    Are we not aware today of the problems of having interest rates set to suit others? So are people in Newcastle and Belfast and Cardiff and Liverpool. What that tells us is that Portugal’s problems are of an entirely different magnitude from those of a hypothetical independent Wales or Scotland. As for exchange controls – you don’t look old enough to remember those! – those aren’t a concern if “use sterling” is taken literally.

    A final point. Imagine that the vote goes in favour of independence. Would you really want the SNP to be taking all of the decisions immediately, in a headlong rush, which would influence the shape of an independent Scotland for decades, or would you prefer a more leisurely approach where others had a say?

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