As Brexit looms ever closer, so does the prospect of a second independence referendum for Scotland, according to First Minister Nicola Sturgeon, with the Scottish Greens leader Patrick Harvie reinforcing that view by alluding to the option of independence being the last remaining hope for Scotland to remain as a member of the single market.
However, although much has changed politically since 2014, many of the fundamental flaws in the economic arguments put forward by the Yes campaign still exist. The most notable was the pitfall in the SNP’s white paper plan for independence regarding currency.
The question over what currency would be adopted post-independence and, then First Minister, Alex Salmond’s plan of a shared pound in a currency union with the rest of the UK, is thought to be the ultimate error which led to a 10-point victory for the Better Together campaign, by individuals on both sides of the debate.
David Low, a businessman from Glasgow and owner of the digital currency Scotcoin, said that he knew Mr Salmond had lost the referendum upon announcing the plan for a currency union.
Patrick Harvie, who was a leading figure in the Yes campaign in 2014, also disagreed with the First Minister’s position, and claimed that a currency union would not provide “maximum economic control to run a fairer economy,” arguing that a separate Scottish currency should be a “fundamental aim.”
Those who fought to keep Scotland as part of the United Kingdom also dismissed the currency union bid, with Kezia Dugdale describing the policy as, “ill thought out.”
Joseph Stiglitz, a Nobel-prize winning economist, and economic advisor to the Scottish Government, believed, during the independence campaign, that a currency union was the most viable option, as it provided stability during the transitional period, with the Bank of England continuing as the lender of last resort, however, in August 2016 he admitted that the proposal, in hindsight, may have been a “mistake,” but continued to argue that the Euro would also not be a favourable option.
Mr Stiglitz now believes that a free-floating Scottish pound would be the most desirable choice, as such a move would help to “stimulate the Scottish economy,” thus decreasing the Scottish deficit and improve Scotland’s fiscal position.
He cited foreign examples of small countries with their own currency, such as Iceland, which “had one of the deepest downturns in 2008” but because of its independent currency, “had one of the strongest recoveries.”
Stiglitz also highlighted that if Scotland were to use a new currency, then this should help to keep the doors open to reinstating its membership of the European Union, as there is a clear precedent of countries continuing with their own currency while remaining members of the EU. A leading economist for JP Morgan agreed with the point made by Stiglitz, and emphasised, that although there is a technical obligation for all EU members to join the Euro, there is no set timescale for when this needs to happen. The willingness to accept states as members of the EU, without having to adopt the Euro, such as Sweden and the United Kingdom, debunks the argument made by some unionists that an independent Scotland within the EU would have to introduce the Euro.
Last year, researcher, Dr Craig Dalzell, released a document detailing nine different options in which Scotland could take in terms of its currency. The paper outright dismissed the plan from 2014, stating that a currency union would be, “practically, politically, and legally impossible.” Instead, Dr Dalzell’s study concluded that the campaign for independence should put forward a case for the creation of a new Scottish currency, while pegging it to the Pound Sterling in the immediate years after independence, in order to “allow the markets to settle.” Glasgow University principle, Anton Muscatelli has said that this would be a “good option” but how the currency was pegged could “be reassessed over time … as economic strategy develops.” The plan is reportedly being considered by the SNP, however, a spokesperson made clear that, “any change in policy on currency would be required to go through the normal party process.”
While Dr Jim Walker, Chief Economist of Asianomics Group, wholly supported this idea of a new currency, he questioned how legitimate the case was for pegging it to the British Pound, stating that “with Brexit, the Pound Sterling is likely to become one of the world’s weakest currencies,” and suggested that a Singapore-style modal would be a more desirable option, where there would be a “multi-currency basket” in which case “ the Scots Pound would reflect the movements in currencies of its biggest trading partners,” to avoid “[tying] the fate of our own currency to a sinking British Pound.”
The SNP MP, Joanna Cherry, also reflected the point made by Dr Walker, saying, “Scotland might not want to be part of the pound if it sank in value after a Brexit vote.”
There is a broad consensus between experts, that the economic arguments of the first independence referendum must undergo a transformation. The Yes campaign must shelve the ‘Plan A’ for currency and begin to unveil a stronger Plan B alternative – a new Scottish currency. It wouldn’t be wise to pretend that everyone will be won over by this idea, nonetheless, a fresh Scottish currency will appear as a more credible plan to many people, and a genuine attempt to face up to the important and complicated issues, which a newly independent country will endure. As for what form a new currency should take: pegged to the pound, pegged to a multi-currency basket, or free-floating; that debate must go on.
It is clear that there has to be new and bold approach advancing into the next independence referendum, as it would be pointless to rehash the same mistakes from the past. The SNP’s stance, in 2014, of selling a Scotland, which would be different but not too different, failed to win over enough of the electorate. However, they can be forgiven for their error, with the historical public aversion to too much change. Nevertheless, in these new and unprecedented political times, which we find ourselves in, it is becoming increasingly apparent that change will be inevitable, whatever path we decide to take as a country. Therefore, this is the ultimate time when we should to bite the bullet, and present a courageous and ambitious vision for Scotland, and not be frightened to admit where this will cause change. Until this happens, the economic demons from the past will continue to linger and inhibit the independence movement.