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5 November 2020updated 26 Jul 2021 5:19am

Why the SNP still doesn’t have a good answer to the currency question

An independent Scotland would face immense challenges whether or not it retained the pound.

By Chris Deerin

One of the most impressive things about the 2014 Scottish independence campaign was the sheer depth of detail with which voters engaged. They were reading and talking and thinking hard. You would overhear super-informed exchanges in supermarket queues and pubs, at bus stops and football matches, in the hairdresser’s. I well remember standing behind two elderly men in the local Tesco who, in ripe Forth Valley accents, were debating the currency question with a real grasp of the minutiae.

Scots are a serious people and independence is a serious issue, and so, intellectually speaking, voters tooled up. We were all such experts, for a few months at least. In the intervening years a fair bit of that complex policy knowledge has necessarily dwindled, its brain-space taken up by the demands of Brexit, Covid-19 and Trump instead, but the muscle memory is there. For non-economists, issues such as currencies are the kind of thing you learn about when you have to.

It is time for those detailed public conversations to begin again – if from behind masks and at a safe distance. With independence currently the preferred option of the majority, and Scotland on a seemingly unstoppable conveyor belt to indyref2, it is necessary that the unavoidable downsides of breaking up the UK be reinterrogated. 

[See also: Scotland’s dreaming: why the SNP appears unstoppable

The matter of a Scottish currency was never satisfactorily addressed in 2014, and was one of the key causes of the Yes side’s defeat. Alex Salmond’s insistence that an independent Scotland could keep the pound in a formal currency union with the rest of the UK was fatally dismissed by Westminster. 

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Gambling with sovereignty and identity is all very well and to a degree inhabits the abstract plain; even warnings about debt and deficits and a generation of hefty austerity can be processed and tholed as a matter of team spirit. But the threat to one’s own means of existence – the personal debt, the credit cards and the mortgage, the value of one’s pension – strike home at a more intimate level. On this it’s not about “us”, it’s about “me and mine”. It remains Nicola Sturgeon’s most formidable obstacle.

The SNP have made great strides since 2014, helped in large part by the near-psychotic behaviour of Westminster. Brexit has been an act of GBH on the Union. Sturgeon has led with authority and empathy – if not always efficacy – and this has compared well with Theresa May’s “computer says no” approach and now Boris Johnson’s empty suit-ism. Enough soft No voters have been persuaded to switch sides that a consistent run of polls has put backing for separation in the mid-50s.

Those from the Better Together campaign know that a straight re-run of Project Fear is unlikely to achieve the same result next time. Even its success six years ago came on terms that have poisoned the debate ever since. But they are struggling to construct a case for the Union that plays to heart rather than head, perhaps inevitably given the unpromising source material of Brexit and Boris and, until relatively recently, Jeremy Corbyn. Who are these people, ask many Scots – what have they to do with us?

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[See also: How Rishi Sunak’s charm offensive in Scotland could backfire on the Tories

So far, so promising for the SNP. But they are far from home and hosed. Even now, when so much progress has been made in so many areas, currency especially remains the party’s Achilles’ heel. They cannot even agree among themselves about the best route, and the internal debate has turned vicious. 

The Sustainable Growth Commission, chaired by economist Andrew Wilson and charged by Sturgeon with plotting a fiscal route to and beyond independence, attempted to introduce rigour to the process and buy the leadership some breathing space – proposing what Sturgeon called a “careful, managed and responsible transition” to a separate currency.

Under Wilson’s plan, a newly independent Scotland would retain the pound for perhaps a decade until a series of tests had been met, including bringing debt and the budget deficit under control, the building up of currency reserves, and the judgement that a new currency would fit trade and investment patterns better than the pound. The nation would then move to its own currency.

[See also: Nicola Sturgeon: Britain’s most powerful woman

Critics complain, fairly, that this would leave the Bank of England controlling monetary policy in an independent Scotland for the foreseeable future, and with no need to take account of Scottish circumstances. There would be no access to fiscal transfers or the range of potential Bank of England interventions – Covid-19 providing a timely example. The need for an enforced period of spending restraint, in effect real-terms cuts, is attacked by left-wingers as undermining the very purpose of independence and condemning Scotland to the neoliberalism they hope to escape. Former SNP MP George Kerevan complains that this would “allow the City of London financial institutions to dictate an independent Scotland’s decisions”, based on their lending charges. The mild-mannered Wilson has become something of a bête noire.

Those critics favour the establishment of a central bank and a new currency on a much shorter time frame and demand the leadership goes back to the drawing board. This route would bring some scary problems of its own. The new currency would not long maintain parity with the pound, and would quickly find itself at the mercy of international capital markets. Scotland would lack the means to fight its corner. Those credit cards, mortgages and pensions would likely enter a tumultuous era of revaluations and redenominations.

There is no easy or safe answer to the currency question, and this could still prove to be the pro-Union side’s trump card. Scots will wear a lot for values and principles but they’re not daft, and assaults on home and hearth, against which they would find themselves defenceless, could force them to think again. In the end, excitable rants about progressive new horizons and socialist utopias don’t pay the supermarket bills.