The media is once again full of stories of dire consequences for Scotland if we dared to vote for independence in 2016. This latest bout of scaremongering comes from the wise men and women from the UK Treasury, headed up by our Chancellor, George Osborne. It is worth bearing in mind just who it is that is making these scary claims. The UK Treasury is not some neutral, academic institution, only interested, in a disinterested way, in the truth and nothing but the truth. The Treasury and its leaders, George Osborne and Danny Alexander, are part and parcel of the UK government and as such wholly committed to keeping Scotland in the UK. They are as likely to produce a balanced report on Scottish independence as the Catholic Church is to produce a balanced report on same sex marriage. Secondly, the Treasury has a track record of getting things wrong, spectacularly wrong. Remember this was the body, under the leadership of Gordon Brown, which presided over the UK’s slide into financial meltdown. The same body which is now presiding over the apparently endless stagnation of the UK economy. Whatever the UK Treasury has to say on anything has to be taken with several buckets of salt.
Even taken with several buckets of salt, the Treasury’s latest contribution to the independence debate is at best silly and at worst deliberate scaremongering. When it comes to what currency an independent Scotland should use, I find it useful to think in terms of two timeframes and three options. The two timeframes are our old friends the short/medium term and the long term. The first takes us from independence in 2016 through to 2020 or 2024. This is the period covered by the first and second terms of parliament after independence. During this period, what I tend to regard as the transitional period, Scotland will continue to use sterling as its currency. There are no ifs or buts about this. Continuing to use sterling as our currency is not something that George Osborne or anyone else in the UK Treasury can stop us doing. This is the first option for an independent Scotland. Just continue to use sterling without any formal link/arrangement with the rest of the UK. Perfectly feasible, has happened with other newly independent countries in the past. The key point is that nobody can stop us doing this. The second option for this transitional period is for Scotland to formally join with the rest of the UK and set up a currency union. This is what the SNP are proposing. There is much merit in this proposal, both for Scotland and for the rest of the UK. It would give Scotland some input into the decisions of the Bank of England, something which we do not have at the moment. But if the rest of the UK wants to be as nasty as the Treasury is suggesting, then a currency union may not happen. In which case Scotland just uses sterling and we are no worse off than at present.
The two options outlined above are for the transitional period, roughly 2016 – 2024. During this period all of us in Scotland, including the various political parties, will closely scrutinise and monitor how effective continuing to use sterling as our currency is. This is where the third option enters into the scene. This is for Scotland to issue its own currency. Many people argue that we should go for this option straight off. However I have discounted this on the pragmatic grounds that the SNP have consistently rejected this option and are strongly committed to staying with sterling. And as the SNP will have the final say during the negotiations in the lead up to independence, this is what will happen. However after independence those in favour of establishing our own currency will have plenty of time and opportunity to make their case and convince the electorate to vote for them in parliamentary elections. By then of course we may have decided that on balance continuing to use sterling is the better option. The point is that it will be our decision. For a more detailed rebuttal of the Treasury report see this article in Wings Over Scotland.