This is my perspective as a Scottish voter, neither currency expert, economist, politician nor banker, but very definitely a nationalist, a left-winger and a professional negotiator. Read it in that context, please!
THE CURRENCY QUESTION
THE RATIONALE FOR A NEW CHOICE
Fiscal Commission identified four main options -
MONETARY UNION with rUK – STERLING
MONETARY UNION with EU – EURO
NEW SCOTTISH CURRENCY - Fixed exchange rate
NEW SCOTTISH CURRENCY - Floating exchange rate
(N.B. The New Scottish Currency options includes either using sterling (‘the pound’) as the new currency or designating a new Scottish unit of currency (e.g. ‘the groat’)
The currency option can be presented alternatively as -
Monetary union with rUK – the pound
Monetary union with EU – the euro
New Scottish currency, floating or fixed – the groat
Continuing to use the pound, floating or fixed – the pound on sterlingisation)
The recommendation of the Commission was -
MONETARY UNION with rUK - STERLING
The Scottish Government declared this to be its choice of currency arrangement and announced its intention to negotiate the terms of monetary union with rUK after a YES vote.
The UK Government has declared this option to be totally unacceptable, in a variety of forums and statements from the PM, the Chancellor, senior advisers and Better Together leaders.
This UK position can be viewed by the Scottish Government from two main perspectives, and response options developed accordingly.
It is not an outright rejection, but a referendum campaign tactic to influence the Scottish electorate into voting No (the UK’s primary objective in the pre-negotiation phase)
If this fails as a referendum tactic and there is a YES vote, the tactic is converted to an anchoring statement aimed at enhancing UK negotiating team’s response to the Scottish Government’s opener of a currency union.
The UK Government really means it: they will not - under any circumstances - accept a currency/monetary union with an independent Scotland.
THE CURRENCY QUESTION: THE RATIONALE FOR A NEW CHOICE
On both Perspectives One and Two, the same three responses are available -
Hold currency union position till the referendum
Adopt a new plan of Scottish currency/sterlingisation and withdraw plan to negotiate a currency union
Adopt a new plan of Scottish currency/sterlingisation but reiterate continued willingness to negotiate a currency union
Move to Scottish currency under sterlingisation plan – withdraw plan to negotiate a currency union
Immediate media brief, maximum publicity, most supporters happy, many non-SNP YES people much happier. Electorate in the main probably relieved and supportive.
Scottish currency perceived as greater independence, more Scottish control.
Control shifts to SNP Government (no longer dependent on negotiation - anticipates control after YES vote and independence)
Opposition on backfoot, panicked, reactive. Immediate plans activated to prepare for Scottish currency, civil service briefed, etc.
Presented as a retreat by UK, ‘fallback to Plan B’, cave-in under pressure, etc.
New attack on alleged negatives of Scottish currency option - expert negative arguments (e.g. Carney) mined for negative critical analysis
Share of national debt occupies centre stage, claims of reneging, defaulting, etc.
Spotlight on the new institutions and regulatory framework cited as potential weakness.
Pegging to sterling categorised as powerlessness, dependency.
Adopt a Scottish currency-sterlingisation plan but reiterate continued willingness to negotiate a currency union
As under previous option, but with advantage of being seen still open to preferred option, flexible, displaying concern for rUK interests and relationship.
Even if UK cautiously enters currency union negotiations, powerful Scottish fallback already in place.
Potential of frustrating expectancies of YES supporters and non-SNP parties already on board for Scottish currency.
Danger of pressures building to force Scottish Government to abandon negotiation on currency union. Uncertainty for those contracted to new Scottish currency institutions.
SOME PREVIOUS BLOGS
You will also find an abundance of video clips on the currency argument, from every conceivable perspective, on my YouTube Channel – simply enter search term ‘currency’ in box