Leave the UK, Leave the UK Pound
Better Together Chair and Former UK Chancellor, Alistair Darling, on the confusion surrounding the Nationalists position on our currency.
This morning John Swinney repeated again what the nationalists have been claiming for months. That Scotland would be guaranteed to keep the pound if we vote to leave the UK next year. “You can bank on it,” he assured Scots. In fact the nationalists can offer no certainty on what currency Scotland would use if we left the UK.
Let there be no doubt: the SNP Government cannot promise that we would keep the pound.
The nationalist currency policy has changed several times in the last few years creating total confusion. For years they said we should join the Euro because the pound was, in Alex Salmond’s words, “a millstone around our necks”. Then the Eurozone went into crisis and the European currency became too unpopular. So, with no sense of irony, they proposed creating a Eurozone-style Sterlingzone between Scotland and England as separate states.
Nicola Sturgeon has said that we own the pound as much as the rest of the UK. But the pound is not a physical asset, it is a system. This isn’t like dividing up a record collection after a break up. If we leave the UK and the UK’s monetary institutions, like the Bank of England and UK Treasury, we leave the UK pound.
There is no Sterlingzone now, we are one UK with one UK currency, the UK pound. The notes are different sometimes, but the pound is a single UK currency, our interest rates are set by the Bank of England.
To keep the UK Pound after we have left the UK, we would need to ask the country we had just walked away from to set up a messy Eurozone-style Sterlingzone. After the failings of the Eurozone, and given that the rest of the UK would already have the pound and the security of the Bank of England, would they go out of their way to set up Eurozone type arrangements? We have no way of knowing whether it would.
To be clear: this is not about England saying that Scotland couldn’t stay in the pound. If we choose to leave the UK, it would be us leaving the UK pound. There is no easy or certain way to get back in. After having been found-out on NATO and EU membership, the SNP should stop pretending that Scotland will automatically inherit things.
Of course it may not be the Government in London that decides a currency union isn’t a good idea. Alex Salmond’s former economic adviser, Professor John Kay has said that the tight controls placed on Scotland by such a deal would be incompatible with the idea of independence.
So, even if both a separate Scotland and the rest of the UK could agree a deal to create a Eurozone-style currency union, we would be giving up control of our taxes, our budget and our interest rates to what would then be a foreign country.
The nationalists have refused to plan for any other currency plan other than getting a deal with the UK. This is hardly a strong position from which to enter into negotiations. We would have to accept whatever conditions the Parliament in London demanded, a Parliament that we would no longer send representatives to.
We cannot, as the SNP have said in the past, just use the pound informally, in the way Panama uses the Dollar. That would mean no central bank standing behind our banks or our mortgages.
So, the unattractive choice the nationalists are offering us is losing the pound or losing control of our economy. It is little wonder many nationalists are now calling for there to be a separate currency.
It is not sustainable for the SNP Government to pretend they have no plan B. Even they would not be so irresponsible as to leave us without a workable currency policy. They should tell us what the plan B is.
It is now a month since I wrote to the First Minister asking questions on this. Why won’t they give us answers? Because a separate currency would be a disaster for Scotland’s economy. It would be bad for jobs because we would have to change currency at the border with our biggest trading partner, the rest of the UK. It is bad for our mortgages and credit cards. It means higher interest rates because a new currency backed by a smaller economy would not command confidence in international markets.
The only way to keep the UK pound as Scotland’s currency is to stay in the UK.