SNP ‘should begin preparatory work’ on Scottish currency after independence
DOUGLAS Ross was blushed in the Commons this week over the SNP’s supposed lack of a monetary plan should Scotland become an independent country.
He also got himself into hot water, so strayed from the subject of the debate and was reprimanded by the vice-president for having rambled on independence when he should have been talking about the crisis of the cost of living.
The substance of his request, however, deserves to be studied.
The SNP has a currency policy – and that’s different from the last round around the independence issue.
In 2014, the SNP preferred the option of keeping the pound sterling and entering into a monetary union with England – where the Bank of England acted as the central bank, setting monetary policy and interest rates.
Then-Bank of England Governor Mark Carney said the idea would be “inconsistent with sovereignty”, in recognition of the importance of a country having full control over its own currency.
But there was another option. It wasn’t in the white paper – which outlined the SNP’s vision of independence – but it was held by many, including Yes Scotland chairman Dennis Canavan, the Scottish Greens and the Jimmy Reid Foundation. It established a new independent Scottish mint.
This is now official SNP policy, following a vote at its conference in 2019. Against party leader Nicola Sturgeon’s wishes, members voted to switch to a new currency “as soon as possible”.
It was widely reported at the time, so it’s unusual for Ross to claim they don’t have a policy.
There are, however, differing opinions on how long it would take to set up and whether this could lead to Scotland becoming a member of the euro.
Dr Tim Rideout, the man behind the SNP’s decision to adopt a new currency as soon as possible, has championed the agenda within the party for five years.
He thinks it will take around four years to set up an independent Scottish pound. He is already planning to set it up with his think tank, the Scottish Currency Group. Its members include Jon Egilsson, former chairman of the Central Bank of Iceland’s supervisory board, and Ian Stewart, former senior banker at the Royal Bank of Scotland. Rideout estimates the cost of setting up the new currency at around £50 million and envisions a Scottish central bank staffed by around 800 people.
Scotland won’t be able to use sterling for long, Rideout has warned, and he’s confident a short-term deal could be struck with the Bank of England.
“Using someone else’s currency just doesn’t work, there’s a good reason why no country does,” Rideout says.
“It’s economically illiterate. With the approval of the Bank of England, we can use sterling for a few months, but any longer you risk breaking down.
In his camp is SNP MP Angus MacNeil, chairman of the Commons Trade Committee, who believes Scotland should move to a new currency as quickly as possible.
He said: “It’s not a big complicated problem. Only if you have limited knowledge or a small imagination do you worry in any way about currency. Many currencies in Europe have been implemented much faster than people expect for the Scottish currency.
“We are already dithering with independence, do we have to dither a few more years before the economy works.”
Two examples often used by those within the SNP advocating the new position are those of Slovakia and Estonia – both of which succeeded in setting up currencies about a year after these countries joined independence.
Toni Giugliano, Head of Policy Development for the SNP, said: “Slovakia and Estonia demonstrate that small independent nations can move to their own currencies very quickly.
“My vision would be for Scotland to adopt its own currency certainly within the first year of independence.
“Personally, I think we should prepare the ground during the transition period.”
Speed is key in the minds of independent mint adherents – planning should start immediately and the changeover to a new Scots pound should take place as soon as possible.
Kairin van Sweeden, executive director of Modern Money Scotland and co-host of the Scotonomics podcast, is another advocate for preparing to create a new Scottish currency as soon as possible – even before Scotland officially leaves the UK.
The gap period leaves room for risk. But van Sweeden argues the risks are already there and that the Bank of England – which ‘doesn’t work for Scotland’ – already means the country is ‘currency limited’ in how it can respond to times of crisis economic.