Politics muddies the waters of Scotland and the pound

It's simple, until it's not.

Simon Wren-Lewis digests the Treasury's report on the relationship an independent Scotland would have with sterling and the Bank of England (rUK is his shorthand for the UK excluding Scotland):

The real problem for Scotland is that, in forming a sterling currency union, it will be dealing with a government that thinks like Germany. What is worse, although Germany can sometimes be persuaded to go against its austerity instincts for the sake of European unity, after an independence vote rUK is unlikely to let its heart strings be pulled in a similar way! The problem for Scotland is that the rUK can provide something that in fact costs it very little, but the absence of which would cost Scotland a great deal, so rUK will be able to ask for a high price. Unless the new Scottish government is prepared to pay for a Bank of England LOLR role with some of its oil revenues, it may find it has nothing to bargain with. If no agreement can be found, the Treasury paper is quite right to conclude that using sterling unilaterally would not be attractive for Scotland. So rather than accept damaging fiscal restrictions, the new Scottish government may end up with its own currency after all.

George Osborne is right to present the Treasury's analysis as a stumbling block for the SNP, in other words; but he's slightly disingenuous in pretending that he has nothing to do with that fact.

As Wren-Lewis points out, politics muddies all waters. Normally, the study of Optimal Currency Areas is relatively simple: the more alike two countries are, the greater the benefits of having a shared currency, and the lesser the disbenefits. That's why the euro is such a startlingly bad idea on paper – there's basically no possible group of countries less economically, socially and politically coherent than the eurozone. And in in nations like rUK and Scotland, which are pretty damn similar, the whole deal comes down to one basic question: is the loss of flexibility of monetary policy a worthwhile cost to pay for those benefits?

But that assumes that there is any way a currency union between rUK and Scotland could actually exist as a union. It's a political, not an economic question: what possible scenarios can we imagine in which the Bank of England would view the Scottish economy as anything other than entirely subordinate to the interests of rUK's? And, moreover, what possible scenarios can we imagine in which an actually existing rUK government – as short-termist, economically-illiterate and vindictive as they tend to be – would allow that to happen?

It may just be the case that the rUK would be better off if the Bank of England carried its policy equitably, allowing the rUK to take a hit to ensure the continued strength of Scotland, which would be on of its biggest, if not the biggest, trading partner. But it's nigh-on impossible to imagine a rUK government letting the Bank of England incorporate that rationalisation into its mandate.

Compared to questions of fair allocation of public debt, North Sea Oil and monarchs (Scotland can have em, frankly), the question of Scottish monetary policy might seem boringly technical. But it's one of the most intractable problems standing in the way of Alex Salmond's dream.

Floating away. Photograph: Wikimedia Commons

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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Calum Kerr on Governing the Digital Economy

With the publication of the UK Digital Strategy we’ve seen another instalment in the UK Government’s ongoing effort to emphasise its digital credentials.

As the SNP’s Digital Spokesperson, there are moves here that are clearly welcome, especially in the area of skills and a recognition of the need for large scale investment in fibre infrastructure.

But for a government that wants Britain to become the “leading country for people to use digital” it should be doing far more to lead on the field that underpins so much of a prosperous digital economy: personal data.

If you want a picture of how government should not approach personal data, just look at the Concentrix scandal.

Last year my constituency office, like countless others across the country, was inundated by cases from distressed Tax Credit claimants, who found their payments had been stopped for spurious reasons.

This scandal had its roots in the UK’s current patchwork approach to personal data. As a private contractor, Concentrix had bought data on a commercial basis and then used it to try and find undeclared partners living with claimants.

In one particularly absurd case, a woman who lived in housing provided by the Joseph Rowntree Foundation had to resort to using a foodbank during the appeals process in order to prove that she did not live with Joseph Rowntree: the Quaker philanthropist who died in 1925.

In total some 45,000 claimants were affected and 86 per cent of the resulting appeals saw the initial decision overturned.

This shows just how badly things can go wrong if the right regulatory regimes are not in place.

In part this problem is a structural one. Just as the corporate world has elevated IT to board level and is beginning to re-configure the interface between digital skills and the wider workforce, government needs to emulate practices that put technology and innovation right at the heart of the operation.

To fully leverage the benefits of tech in government and to get a world-class data regime in place, we need to establish a set of foundational values about data rights and citizenship.

Sitting on the committee of the Digital Economy Bill, I couldn’t help but notice how the elements relating to data sharing, including with private companies, were rushed through.

The lack of informed consent within the Bill will almost certainly have to be looked at again as the Government moves towards implementing the EU’s General Data Protection Regulation.

This is an example of why we need democratic oversight and an open conversation, starting from first principles, about how a citizen’s data can be accessed.

Personally, I’d like Scotland and the UK to follow the example of the Republic of Estonia, by placing transparency and the rights of the citizen at the heart of the matter, so that anyone can access the data the government holds on them with ease.

This contrasts with the mentality exposed by the Concentrix scandal: all too often people who come into contact with the state are treated as service users or customers, rather than as citizens.

This paternalistic approach needs to change.  As we begin to move towards the transformative implementation of the internet of things and 5G, trust will be paramount.

Once we have that foundation, we can start to grapple with some of the most pressing and fascinating questions that the information age presents.

We’ll need that trust if we want smart cities that make urban living sustainable using big data, if the potential of AI is to be truly tapped into and if the benefits of digital healthcare are really going to be maximised.

Clearly getting accepted ethical codes of practice in place is of immense significance, but there’s a whole lot more that government could be doing to be proactive in this space.

Last month Denmark appointed the world’s first Digital Ambassador and I think there is a compelling case for an independent Department of Technology working across all government departments.

This kind of levelling-up really needs to be seen as a necessity, because one thing that we can all agree on is that that we’ve only just scratched the surface when it comes to developing the link between government and the data driven digital economy. 

In January, Hewlett Packard Enterprise and the New Statesman convened a discussion on this topic with parliamentarians from each of the three main political parties and other experts.  This article is one of a series from three of the MPs who took part, with an  introduction from James Johns of HPE, Labour MP, Angela Eagle’s view and Conservative MP, Matt Warman’s view

Calum Kerr is SNP Westminster Spokesperson for Digital