Andrew Wilson, former SNP MP and head of corporate lobbying firm Charlotte Street Partners, has outlined his “roadmap for independence” in an interview in The Herald on Sunday. He envisages that Scotland could be independent by 2026, and would continue using pound sterling informally thereafter, until such time (perhaps five to ten years) “that it’s no longer in our interests”. Wilson envisages an independent Scotland being a member of the EU during that time.
It’s worth stating first of all that this isn’t agreed SNP policy. The party passed an amended motion at its 2019 spring conference “to authorise the preparation of a Scottish Currency as soon as practicable after a vote for Independence with the aim that the currency be ready for introduction as soon as practicable after Independence Day”. Practicality is a technical matter, a very different thing from when Wilson or anyone else judges it to be “in our interests”.
Second, Wilson does not explain how an independent Scotland could be a member of the EU while using the currency of a state outside of the EU. The European Union’s entry requirements for membership are very clear on this point: “The acquis in the area of economic and monetary policy contains specific rules requiring the independence of central banks in Member States”. Clearly, Scotland would not have an independent Central Bank, a point Wilson accepts when he says the country would not initially have “monetary sovereignty” under his proposals.
There are many other issues with Wilson’s proposals – he says the “monetary policy situation that we have now would continue” after independence, but every macro-economist on the planet would tell you that Sterlingisation is nothing like the current monetary set-up, where Scotland is part of the Bank of England’s jurisdiction – but for the sake of brevity, we will just focus on one point Wilson makes about the problems of introducing a Scottish currency on “day one”, which he describes as “risky towards the economy”.
“We’ve big integration with the rest of the UK – mortgages, pension, wages,” Wilson stated. “So if you were to say right from day one that we’ve our own currency, then you don’t know what’s going to happen to your pay, your pension.”
Actually, it’s very easy to explain what would happen: this is not new, unknown territory we are entering into here; currencies have changed before (and will again). As Peter Ryan, an IT expert in financial services, explains in this practical guide to setting up a Scottish Currency, upon an independence vote a transition phase to move from Sterling to a Scottish currency would be immediately established. Over this transition period, the new Scottish pound would maintain value equivalence with Sterling, so that “1.00 ‘Scots’ would be equal to £1.00 in a similar manner to the Irish Punt and Sterling having equivalent value for much of the 20th century.”
Ryan goes on: “The end of the transition period would be marked by the introduction of the physical currency; the notes and coins, in the same way that the issuance of Euro notes and coins on 1st January 2002 marked the end of the 3 year changeover period when the Euro currency was introduced.”
As far as bank accounts and payments go, citizens would have the choice of converting their currency from Sterling to the new currency during the transition on a one to one basis, which would simply be facilitated by banks establishing Scottish sort codes, or thereafter doing so “subject to foreign exchange transaction costs”. There is of course much more to say than this (Ryan explains in detail what would happen with mortgages, ISAs, etc) but you get the picture: this is all fairly standard currency transition stuff.
If we are talking seriously about what is “risky”, the idea we can just go without monetary powers is pretty wild. The pandemic has only re-affirmed the importance of monetary sovereignty in a highly unstable world. Indeed, the only serious proposal for Sterlingisation other than Wilson’s has come from Sam Bowman of the Adam Smith Institute, which describes itself as a “neoliberal” think-tank. Bowman advocates Scotland returning to the “free banking” of the 1800s. What proposal sounds more “risky” to you?
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