Search topics on this blog

Showing posts with label Scotland's currency post-independence. Show all posts
Showing posts with label Scotland's currency post-independence. Show all posts

Saturday, 2 June 2012

Scotland’s currency – the unionists' last resort: the pound, the euro and a’ that …

From the over-excited young audience member in last Sunday’s debate who called Nicola Sturgeon a liar, through Johann Lamont at PMQs, and former Chancellor Nigel Lawson, the unionists think they have got the SNP on the ropes over an independent Scotland’s currency, the Bank of England as lender of last resort, and the seat on the monetary policy committee (MPC). Alf Young in the Scotsman on Saturday also jumped aboard the bandwagon, and since we all know where Alf stands on independence, I won’t bother quoting from a thoroughly superficial attack on the SNP. You can read it here.

Unionists have been given aid and comfort in this attack by the more insular  section of SNP supporters who believe that to be truly independent, Scotland must have its own currency. The real true believers in this group also are against membership of the EU and probably against having any truck with anybody or anything after independence that does not meet their definition of being authentically Scottish. Their vision of independence owes more to mist-shrouded visions of Caledonia than the uncomfortable economic realities of the modern world, and just what the transition to independence some four to five years down the line will require of the Scottish Government and of Scotland.

I am not sure how all this is playing with the electorate and whether it will affect their choice in the autumn of 2014. Economic and monetary theories are probably not not well understood by the average voter, and given the lamentable record of economists in contributing to a stable world economy, their ferrets-in-a-sack fights over economic remedies, and the disastrous politicisation of economic debate, the voter can be forgiven for asking what the hell economists really know about the price of mince.

As for me, my economic understanding is roughly equivalent to that of Alan Johnson, MP who, when he became Shadow Chancellor for a time from 2010, had to find a primer on economics to give him some idea of what was going on. (I did cover economics as part of the Institute of Personnel and Development exam syllabus in 1968, which as one laconic Lancastrian friend observed, would not have qualified me to run a ‘toffee shop in Wigan’, i.e a sweetie shop in Glesca.)

The core points in the unionist argument are as follows -

1. Scotland is not going to be become independent if we (the Tory,Labour/LibDem Coalition against Scotland’s independence) can help it, but if it does, it won’t really be independent if it still has sterling as its currency.

2. Alex Salmond really wanted to join the euro: he was wrong on that, therefore he is wrong on this.

3. An independent Scotland would not have any influence in a currency union with the UK, much less a seat on the MPC, and would be wholly at the mercy of the Bank of England on monetary policy, and since the B of E is invisibly controlled by the UK (sic) Government and the Treasury, Scotland’s financial independence would be an illusion – the control of fiscal levers and policy would make no difference.

Now it seems to me, with my Ladybird Book of Basic Economics in my hand, that these simplistic arguments should be relatively easy to rebut, but although the SNP Government may have rebutted them piecemeal in various forums, they have been making a bit of a pig’s breakfast of rebutting them in single, coherent, accessible statements, and are certainly losing the PR war at the moment.


This is an attempt to talk the language that the average voter might begin to understand, so a warning shot to the ravening hordes of PPE graduates and professional economists – don’t try to bury me alive in complex conflicting arguments and academic references which have more to do with the political axe you are grinding than economic facts – haul your wagon to one of the many learned journals who publish this kind of thing, and have fun quarrelling with your peers over arcane theories.

1. Scotland is not going to be become independent, but if it does, it won’t really be independent if it still has sterling as its currency.

The idea that there is some pure, unalloyed version of independence in the complex interdependent world we live in is fantasy, as it is in individual life. Independence includes the right to decide with whom we cooperate, with whom we form alliances, when we cooperate and when we walk away, and whether that cooperation and those alliances are on trade, on economic controls, on defence, or in cultural, social, humanitarian and sporting policies and joint ventures.

And to forestall yet another ludicrous unionist old chestnut, our present membership of the UK does not already give us such sovereignty – it involves the surrender of the right to decide, the surrender of the sovereignty of the Scottish people on all but the few devolved matters the sovereign UK deigns to permit us to exercise some control over.

It might be nice at some point in the future to have an independent Scottish currency, Equally it might be appropriate to remain in sterling, or to join the euro, or join some other currency union as yet unknown. What will be even nicer is that the sovereign Scottish people will make that decision – nobody else.

2. Alex Salmond really wanted to join the euro: he was wrong on that, therefore he is wrong on this.

Resisting the urge to laugh at the utter naivety of this argument, I will simply say that what anybody said about the euro, about economics, about international banking and finance over four years ago is now almost completely irrelevant in the light of the economic and financial chaos that has engulfed the world. With the exception of a few prophetic voices crying in the wilderness, nobody foresaw it in any meaningful sense, least of all the economic and political theorists. Great fun can be had by selectively picking quotes of yesteryear, but it contributes nothing to an adult debate.

3. An independent Scotland would not have any influence in a currency union with the UK, much less a seat on the MPC, and would be wholly at the mercy of the Bank of England on monetary policy, and since the B of E is invisibly controlled by the UK (sic) Government and the Treasury, Scotland’s financial independence would be an illusion – the control of fiscal levers and policy would make no difference.

First, a few facts -

Currency unions exists all over the world, and can be one of three kinds – informal, formal, or formal with additional rules. They are entered into to maximise economic efficiency in a geographical region.

Scotland doesn’t need permission to use sterling – it is an internationally tradable currency, like the dollar, and if an independent Scotland continues to use it, it de facto has entered into an informal currency union with rUK.

To take the arrangement beyond the informal would require negotiated agreement with rUK. Such an agreement could only be reached during the wide-ranging negotiations that will take place after the YES vote in autumn 2014. The present UK Government is not going to enter into such negotiations, formally or informally, in the lead-up to the referendum when it is fighting for a NO vote. To do so would be to admit, de facto, that Scotland was likely to become independent. (Johann Lamont more or less did just that at FMQs.)

(If sensible politics and diplomacy were a feature of the present UK Coalition Government and Opposition, there would probably be confidential discussions taking place right now. Regrettably, there is little evidence of anyone in the Coalition Cabinet, or in the Scottish Office, or the Holyrood Opposition capable of the sophisticated approach that this would demand. There are undoubtedly such people in the diplomatic services. But to use diplomats would involve acknowledging that Scotland is likely to become an independent country.)

The Bank of England is the Central Bank of the United Kingdom. Gordon Brown gave the Bank of England operational independence in monetary policy in 1997, and it became responsible for setting interest rates through the Bank's Monetary Policy Committee, independent of Government.

The members of the MPC are the Governor of the Bank of England, two deputy governors, the Bank's Chief Economist, the Executive Director for Markets and four external members with financial expertise directly appointed by the Chancellor. A representative from the Treasury also sits with the Committee at its meetings. The Treasury representative can discuss policy issues but is not allowed to vote.

Its role is to set interest rates, to issue banknotes (Scotland still issues its own) and to contribute to “protecting and enhancing” the financial system. It has the right to use a process called quantitative easing to ‘print money’ (which is not printing more banknotes!) usually in crisis situations such as the recent banking collapse. The MPC does this by electronically creating new money to purchase assets, thus increasing the national debt. (Between March 2009 and January 2010, the MPC authorised the purchase of £200 billion worth of assets, mostly gilts – UK Government debt) This injects more money into the economy.

An independent Scotland will have full control of every aspect of the financial measure – fiscal levers – necessary to run the Scottish economy, raise taxes, etc.

If it uses a currency other than its own - e.g. the euro, sterling, the dollar – its interest rates would be set by the central bank of that currency. Scotland would therefore be subject to the monetary controls and monetary policy of that central bank.

The strength of a currency depends on the economic performance of the country issuing it, and the perception of that country, its currency and its economic performance by other countries. This determines the exchange rate, normally defined against the dollar.

For a newly independent Scotland to launch its own currency in a favourable world economy would have been a bit of a gamble: for it to launch its own currency in the current chaotic economic climate, or to join the euro would be lunacy. Sticking with sterling is the prudent, sensible option, either informally or within a currency union with rUK. This is not the time for macho posturing, indeed there is never such a time …

For the Bank of England and rUK not to accept the reality of an independent Scotland, with full fiscal control, using sterling, without having an observer equivalent to the present UK Treasury advisers would be illogical. Lyndon Johnson’s memorable phrase of “better inside the tent pissing out than outside pissing in” comes to mind. Since the criteria the chancellor uses for selecting the four independent special advisers is unknown to me, I can offer no advice other than to say that a special adviser with an insight into, and special knowledge of Scotland’s finances would make sense.

A currency union beyond the informal also makes sense to any objective adviser.

As for Johann Lamont’s nonsense about consulting the Bank of England or the UK Treasury in advance, I refer to my comments above. Expect no objectivity from them until we have a decisive YES vote and negotiations have commenced.

Bank of England Monetary Policy Committee

Saturday, 26 November 2011

Playing the man not the ball

From time to time, men – they always are men – present themselves at my door and want to ask me questions. Sometimes they sport an identification tag with a photograph or flash some kind of an ID, But as Raymond Chandler used to say through his character Philip Marlowe – “Anyone can flash a tin badge – you can buy them at the five and dime.” These days, with a computer, a printer and a cheap plastic laminator, anyone can mock up an ID. So I’m wary of the guys at the door.

They have their counterparts in the cold callers, who have closely similar approaches, and are a pretty even mix of men and women.

Phone rings.

“Is that Mr. Curran?”

“Who’s asking?”

“Is that Mr. Curran"?”

“Who are you?”

“I’m doing a survey …”

“Who are you? Who do you work for?”

“Do you want to save money?”

“What are you selling?”

“I’m not selling anything

“**** off.”

My closing response, discourteous though it may seem, is the distillation of all my experience in communications and behavioural skills, and is demonstrably effective, with a certain elegant finality to it.

(There are many variants on cold caller approach, on the doorstep or by telephone. Unfortunately for the caller, I know them all, because I have worked with such companies as a consultant, and I know all the pitches, all the evasions, all the blocking tactics.)

However, my concern to know the identity of the caller, their organisation, and what they stand for, and above all, what are they selling, when it manifests itself in response to political questions, is called playing the man, not the ball.

Hiding at the bottom of page 15 of The Times today is Lorraine Davidson in a small commentary piece – Put-downs may prove an own goal for the Nationalists.

Before I play the woman, not the ball, let me address her content. Lorraine’s theme is that the Scottish Government and its ministers, described as “the ruling SNP Administration”, are not engaging constructively with arguments, but questioning the right of those asking questions to enter the debate and engaging in put-downs.

I may have missed it, but I can’t recall Lorraine referring to the UK Government as “the ruling Tory/LibDem administration”, but I’ll let that one pass. She elects to champion Iain McMillan as “the latest in a long line of prominent people to have put his head above the parapet”.

The parapet she refers to is the Unionist Coalition of unionist party politicians, unelected Lords, unelected commercial interests, unelected legal personages, et al, who may be described as the British Establishment - those who perceive themselves to have a deep vested interest in maintaining a system that has served them well, but has not served the people of Scotland well.

The parapet is the massive and forbidding rampart that protects them against any real representative democracy, and protects the rich, the privileged and the unelected from the will of the people.

Now, when these people elect to fire a volley at the elected Government of Scotland, representative of the people in a way, through their electoral mandate, that no other government and no other party in this disunited Kingdom is, they are disturbed to find that there is a return of fire, and they bob below the parapet, fuming with indignation at the temerity of the people for firing back.

But this is not how Lorraine sees it. Her long spell as spin doctor to Scottish Labour, her hard work on her hagiographical biography of Luck Jack, the eponymous Jack McConnell, former Labour First Minister and now an unelected Lord of the UK, and her deep links to the Labour Party, must understandably, and wholly subliminally and unconsciously, influence her view of UK politics.

She sees no need to look at just how representative the CBI is of Scottish industry and Scottish industrialists, nor to question how representative Iain McMillan’s views and statement are even of its existing members, anymore than she feels the need to examine, or quote from the abundant material on the exact nature, history and criminal activities of Citigroup in the US, another organisation that ‘put its head above the parapet’.

Anybody who does so, or who questions Lord Robertson of Port Ellen - another Labour politician turned unelected Lord, who has had a glittering and enriching career based on defence, i.e. war, armaments, NATO and all thing nuclear - is playing the man and not the ball, and engaging in put-downs. Naughty Nats!

Let me explain it simply for you, Lorraine. It’s all politics, and all this talk of objectivity and people being above politics is just so much self-serving cant. Polly Toynbee, someone Lorraine might just respect, given her impeccable Labour and Left pedigree, said it all when she observed that those who claimed to be above politics were inevitably right-wingers.

Before I help you to understand the great game that is being played, let me first deal with Iain McMillan, Companion of The British Empire, whom we can safely assume is proud of being a CBE, and grateful to the political system, namely, the UK, that awarded him the honour, even if the radically shrunken British Empire now essentially consists of the four nations of the UK, the other nations of the empire having long since achieved their independence of it.

Iain McMillan is not apolitical, anymore than anyone else who enters this debate is – he is a unionist, and is committed to the continuation of the UK in its present form and opposed to Scotland’s independence. He has an absolute democratic right to hold this view publicly – he is not a civil servant, therefore he may enter the political argument as an individual holding unionist views.

If however he enters the public debate as Director of the CBI in Scotland, he may only claim to represent his member companies, and must do so as the spokesperson for interest groups that are not democratically structured.

It is highly unlikely – but possible -  that he can say with absolute confidence that he has a mandate from a majority of his member companies to oppose Scotland’s independence, unless of course he can point to the procedure, meetings, votes and individuals that gave him such a mandate. Even if he had such a mandate, it can be said with absolute certainty that the employees of his member companies who were eligible to vote in the May 2011 Scottish Parliamentary election gave no such mandate the their employers to speak on their behalf. They did, however, give a mandate to the Scottish Government.

Iain McMillan therefore may take a view, presumably after some form of consultation with his members (rather than quoting opinion polls about “what business leaders say”) on what he feels are the key issues for his member companies if Scotland achieves its independence, including their competitiveness and matters of fiscal and monetary policy that concern them, as a relatively narrow interest group. In other words, he may request – not demand – that his organisation be consulted about appropriate matters, and have the opportunity to offer their expertise on technical aspect of the implications of independence. Such a request would undoubtedly be responded favourably to by the Scottish Government.

But this is not how he has gone about things, as far as I can judge from reports on his public utterances. If I may focus on the BBC Scotland Business report of 24th November 2011 - CBI Scotland demands answers on independence planslet me say that neither he nor the CBI have a right to ‘demand’ anything from the Scottish Government. Only the voters of Scotland may demand answers from the government, as a sovereign people, regardless of which party they voted for, and they have the democratic mechanisms to make such demands. namely their elected representatives who sit in the Holyrood Parliament.

Who did he choose to address his ‘demands’ to? Why, 700 business leaders at the Institution of Civil Engineers at their annual dinner. Since it is unlikely that the 700 were polled, or sampled as to their views either before or after the dinner, we cannot know exactly what the balance of their views was.

Iain McMillan said that answers were needed on issues such as currency and cross-border taxation ahead of a referendum, and the questions should not be “brushed aside”. What he is saying, or more accurately, what he has the right to say, is that -

major Scottish companies must know before the independence negotiations commence how both the Scottish Government and the UK Government intend to formulate their opening positions

what the core issues and points of disagreement are, and what might appear to each team – the SNP and the UK teams – as the deal-breakers.

Such requests are reasonable, but not before a referendum. The people who have a democratic right to information before the referendum are those eligible to vote in that referendum, the electors of Scotland.

Iain McMillan will have a vote in that referendum as an individual, as will every director, manager and employees of his members companies who are eligible to vote – and each vote will count for exactly the same.

It’s called democracy, and it is what should determine the fate of nations. In the UK, as presently structured, it does not.

What is required before the referendum is enough information for the voters of Scotland to decide on whether they give their  elected government a mandate to enter into negotiations with the UK government on Scotland’s independence or not, or whether they wish to retain the status  quo and remain in the UK. (They may also possibly demonstrate a wish before the referendum to have a third option – to remain in the UK but have radically increased powers for Scotland, colloquially known as devo max).

Let’s look at Iain McMillan’s other statements -

“No one should be in doubt as to what independence means.”

No one is, Mr McMillan – the Scottish electorate is one of the most sophisticated in the world, and it certainly doesn’t need the help of unelected bodies and individuals hostile to independence to tell them what it means.

It means Scotland leaving the United Kingdom and the rest of the UK becoming a foreign country.”

That is of course factually true, but the choice of words seems pejorative and seem intended to be so. Perhaps Mr. McMillan would like to make exactly that statement to all the Commonwealth countries, and those that are not part of the Commonwealth but were part of the British Empire?

Perhaps he would like to remind the Taoiseach of Dáil Éireann that the Republic of Ireland left the UK and became a ‘foreign country’. Perhaps he would advise the Queen to remind the heads of the Commonwealth nations that by leaving the Empire they became ‘foreigners’? President Obama on his next visit? Or perhaps Her Majesty could delegate this unpleasant task to the Duke of Edinburgh, always a plain-spoken man?

That is the stark reality and it would be a huge step to take.”

Well, yes, Mr. McMillan, I think we know that, except it is a reality that a large number of Scots regard as anything but ‘stark’. What they do regard as stark is a UK Government that, in attempting to remedy the disastrous economic circumstance created by the previous UK Government, is displaying even more mind-bending incompetence than the last one, and systematically destroying the live of tens of millions of ordinary people.

Iain McMillan says it is legitimate to ask questions of the SNP as the referendum approaches. No, it’s not, Mr. McMillan, but it is legitimate to ask questions – not ‘demand answers’ – of the elected Government of Scotland as the referendum approaches. And the place to ask such questions is not at a series of dinners with unelected bodies or individuals, nor to relay them through the media, but to put them directly to Government in the proper manner.

And it is legitimate for the Government of Scotland, through its ministers, to either answer these questions, or say that they cannot be answered at any given point in time, either because they are either premature, irrelevant, or would prejudice the negotiations on independence after a consultative referendum delivers a mandate to negotiate.

Iain McMillan, in his after-dinner speech on the 24th, said

The SNP leadership says that an independent Scotland would keep the pound sterling until such time as the euro may be adopted.”

Sorry to cavil, Iain – it’s something like what the First Minister of Scotland said, albeit not quite right, as Scottish Government policy. (The SNP is a political party, one that formed the Government.)

What the FM has said repeatedly is that Scotland would retain sterling until such time as it was to its advantage to move elsewhere, and only then if the people of Scotland so wished in a referendum. Scotland would only join the euro when the euro system was stabilised, only when it was to Scotland’s economic advantage, and only with the support of the people of Scotland in a referendum. FM Politics Show 6 Nov. 2011 = 7.5m in

I’m sure you didn’t want to misrepresent the FM’s position, Mr. McMillan – things sort of just come out after a meal, don’t they?

I.McM:But that begs the question – would the rest of the United Kingdom permit an independent Scotland to use its currency? It might not. And if it did, are there likely to be conditions attached. So, has the SNP fully explored the currency issues?”

There are indeed questions here – why don’t you ask them of George Osborne, or Michael Moore, or even David Cameron?

Only they can say whether they would ‘permit’ an independent Scotland to ‘use their currency’. Only they can say whether or not ‘there are likely to be strict conditions attached.’

But I imagine that they would be reluctant to answer them for exactly the same reasons as the Scottish Government might be reluctant to answer the other questions to which you ‘demand’ answers – that they are premature, that they would prejudice negotiations, that they anticipate the outcome of a referendum that is at least two years away.

Or perhaps for a more likely reason – that the UK Government, George Osborne, David Cameron and Michael Moore don’t have a clue, as they demonstrate every day, as they continue their incompetent, disorganised approach to the economy and to Scotland.


What this debate is about is a 300-year old political deal, reached in contentious circumstances, by a mix of intimidation and bribery that has has not been delivering for the people of Scotland, a formerly independent nation.

In fact, it has not been delivering for the people of England, Wales and Northern Ireland either, but it has delivered handsomely for a tiny, unrepresentative, unelected and obscenely rich and privileged elite concentrated in the south-east of England. The Tory, Labour and LibDem elected – and unelected – politicians in Scotland have cooperated with that elite, are part of it, and are committed to the perpetuation of it, despite that fact that it impoverishes the lives of the vast majority of those who have voted for them.

In May 2011, the Scottish electorate delivered  a massive, decisive mandate to a party committed to ending that union, but only if the democratic will of the people of Scotland wished it to end. That party, the SNP, has always recognised that some of their electoral support comes from voters who do not want to end the union completely, but who wish to radically redefine it, and a decision must therefore be made closer to the referendum, which is at least two years away, whether that choice should be offered in a separate, additional question to a simple YES/NO for or against independence.

Politically, ranged against the SNP Government, we have a failing UK Coalition Government that has not a vestige of a mandate in Scotland, an unelected House of Lords, an unelected hereditary privileged class, a shadowy coalition of money and power, with war and armaments as the core of their obscene wealth and influence, and an English legal establishment that seeks to challenge the ancient autonomy of Scottish Law in the name of human rights, by establishing a UK Supreme Court that didn’t exist before to interpose itself between the Scottish people and the European Court of Human Rights – a court that claims special rights and function in relations to constitutional matters just at a time when constitutional matters between Scotland and England are centre stage.

There are no objective bodies or institutions in the UK, and no one is above politics. The idea that there are somehow objective bodies and individuals out there who can stand loftily apart from politics and who are in possession of objective facts is nonsense. Fact do exist – they are blindingly obvious to ordinary people – as is the fact that they are manipulated by vested interest groups.

And those who claim to be apolitical and above the facts are always of the right, always have a vested interest, and are often entirely undemocratic. The people understand the difference – they know what is happening to them, and when they are preached at by the rich and privileged who profit from a system and a society that ordinary people are suffering under, they know that a change is overdue and they know what to do about it.

The auld lies will nae wash any mair, and the evidence of that rages across the globe. Scotland will make its change democratically and peacefully, unless someone is stupid enough to deny the Scottish people their democratic rights.