Pro-independence Scots are misguided in wanting to retain the British pound

The SNP must run its own economy policy and create a sound currency

Share

The oddest thing about the great Scottish currency is why so many in the pro-independence camp actually want to retain the British pound. It is true, whatever the politicians say, that a currency union between Scotland and England could theoretically work – but only at vast cost and with permanent instability and, ironically, loss of Scottish sovereignty.

As the protracted traumas of the eurozone demonstrate all too graphically, without a binding fiscal and banking union– and, with it, large transfer payments between the participants – such an arrangement is forever unstable. In the single currency area, the Greeks and others resent being bullied by their paymaster Germany, an economy so large and successful that it inevitably dominates decision-making. With the English economy approximately 10 times larger than the Scottish one, the degree of influence that the Bank of England and the English Treasury would exert over Scottish economic policy would be similarly suffocating, and not necessarily in the Scottish interest – surely the very opposite of what free-minded Scots such as Alex Salmond seek.

At least now in the UK the Scottish send representatives to Westminster and, through them, hold UK ministers and the Bank of England to account. They also have a Secretary of State for Scotland in the Cabinet, and Scottish accents (albeit sometimes representing English constituencies) heard in government. That would all disappear.

Quite apart from that, the Scottish financial sector is simply too large, and therefore too risky, to admit into any currency union, even if a fiscal compact could be settled. The Scots would be free to use sterling or the euro or the US dollar – or the Vietnamese dong, for that matter – as a means of exchange and store of value, but they would have no influence over London’s interest rate policy or any right to use sterling assets to protect their banking sector if it ran into renewed problems.

The UK as a whole had barely sufficient money to rescue the Bank of Scotland and RBS as British institutions; as foreign, Scottish ones the English taxpayer would have no obligations to them. The English authorities might voluntarily lend Scotland sterling, but it would be a voluntary arrangement based on the need to protect a vital trading partner.

Fundamentally, if the English don’t want to let Scotland into sterling, whether rational or not, there is nothing that Edinburgh can do about it: the Scots can throw the Royal Navy’s nuclear subs out of Faslane if they wish – there are plenty of needy English ports happy to take them.

If all the SNP rhetoric about a proud new nation being able to chart its own course is to mean anything, it must mean the right to run its own economy policy and create a sound currency. Other smaller European nations have done so – Switzerland and Norway spring to mind. Then, again, if the Scots want to be full-hearted Europeans, as the SNP claims, then they could revert to their old policy of joining the euro – where they would have a seat on the European Central Bank’s decision-making committees and a voice in the EU Council of Ministers. Or they could build the Scottish pound as a currency as hard as Aberdonian granite. Sterling is simply a poor choice for Scotland. There are better options for all concerned.

React Now

Latest stories from i100
iJobs Job Widget
iJobs General

Recruitment Genius: Project Implementation Executive

£18000 - £23000 per annum: Recruitment Genius: They work with major vehicle ma...

Recruitment Genius: Chiropractic Assistant

£16500 per annum: Recruitment Genius: A Chiropractic Assistant is needed in a ...

Recruitment Genius: Digital Account Executive - Midlands

£18000 - £26000 per annum: Recruitment Genius: They work with major vehicle ma...

Recruitment Genius: Web Developer

£28000 - £30000 per annum: Recruitment Genius: This company provides coaching ...

Day In a Page

Read Next
With an eye for strategy: Stephen Fry’s General Melchett and Rowan Atkinson’s Edmund Blackadder  

What Cameron really needs is to turn this into a khaki election

Matthew Norman
An Italian policeman stands guard as migrants eat while waiting at the port of Lampedusa to board a ferry bound for Porto Empedocle in Sicily. Authorities on the Italian island of Lampedusa struggled to cope with a huge influx of newly-arrived migrants as aid organisations warned the Libya crisis means thousands more could be on their way  

Migrant boat disaster: EU must commit funds to stop many more dying

Alistair Dawber
NHS struggling to monitor the safety and efficacy of its services outsourced to private providers

Who's monitoring the outsourced NHS services?

A report finds that private firms are not being properly assessed for their quality of care
Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

The Tory MP said he did not want to stand again unless his party's manifesto ruled out a third runway. But he's doing so. Watch this space
How do Greek voters feel about Syriza's backtracking on its anti-austerity pledge?

How do Greeks feel about Syriza?

Five voters from different backgrounds tell us what they expect from Syriza's charismatic leader Alexis Tsipras
From Iraq to Libya and Syria: The wars that come back to haunt us

The wars that come back to haunt us

David Cameron should not escape blame for his role in conflicts that are still raging, argues Patrick Cockburn
Sam Baker and Lauren Laverne: Too busy to surf? Head to The Pool

Too busy to surf? Head to The Pool

A new website is trying to declutter the internet to help busy women. Holly Williams meets the founders
Heston Blumenthal to cook up a spice odyssey for British astronaut manning the International Space Station

UK's Major Tum to blast off on a spice odyssey

Nothing but the best for British astronaut as chef Heston Blumenthal cooks up his rations
John Harrison's 'longitude' clock sets new record - 300 years on

‘Longitude’ clock sets new record - 300 years on

Greenwich horologists celebrate as it keeps to within a second of real time over a 100-day test
Fears in the US of being outgunned in the vital propaganda wars by Russia, China - and even Isis - have prompted a rethink on overseas broadcasters

Let the propaganda wars begin - again

'Accurate, objective, comprehensive': that was Voice of America's creed, but now its masters want it to promote US policy, reports Rupert Cornwell
Why Japan's incredible long-distance runners will never win the London Marathon

Japan's incredible long-distance runners

Every year, Japanese long-distance runners post some of the world's fastest times – yet, come next weekend, not a single elite competitor from the country will be at the London Marathon
Why does Tom Drury remain the greatest writer you've never heard of?

Tom Drury: The quiet American

His debut was considered one of the finest novels of the past 50 years, and he is every bit the equal of his contemporaries, Jonathan Franzen, Dave Eggers and David Foster Wallace
You should judge a person by how they peel a potato

You should judge a person by how they peel a potato

Dave Hax's domestic tips are reminiscent of George Orwell's tea routine. The world might need revolution, but we like to sweat the small stuff, says DJ Taylor
Beige is back: The drab car colours of the 1970s are proving popular again

Beige to the future

Flares and flounce are back on catwalks but a revival in ’70s car paintjobs was a stack-heeled step too far – until now
Bill Granger recipes: Our chef's dishes highlight the delicate essence of fresh cheeses

Bill Granger cooks with fresh cheeses

More delicate on the palate, milder, fresh cheeses can also be kinder to the waistline
Aston Villa vs Liverpool: 'This FA Cup run has been wonderful,' says veteran Shay Given

Shay Given: 'This FA Cup run has been wonderful'

The Villa keeper has been overlooked for a long time and has unhappy memories of the national stadium – but he is savouring his chance to play at Wembley
Timeless drama of Championship race in league of its own - Michael Calvin

Michael Calvin's Last Word

Timeless drama of Championship race in league of its own