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Hugh Reilly: Scotland could use the pound anyway

If Westminster refuses to share the pound, Scotland could use it anyway. Picture: Getty

If Westminster refuses to share the pound, Scotland could use it anyway. Picture: Getty

  • by HUGH REILLY
 

SCOTTISH INDEPENDENCE: The historical and contemporary precedents knock arguments against a currency union into a cocked hat, says Hugh Reilly

LAST week, I popped into the centre of the British government’s universe, London, for a few days. Walking into a bar, I ordered four meals (no, I’m not clinically obese; I was with three other people). As with airports, London extorts prices that do not relate to the cost of similar goods outside its avaricious bubble.

“That’ll be £59.80,” said the barman, his eyes in Lee Van Cleef mode, icily challenging me, I thought, not to proffer any Scottish funny money. I was the Clydesdale Bank pound-slinger feared in every watering hole that side of the Tweed. The nerve-jangling, high-pitched whistling of Ennio Morricone’s them to The Good, The Bad and The Ugly filled my head, drowning out Pharrell Williams’ Happy playing on the pub’s sound system. Abiding by the smoking restrictions and being a tad health-conscious, I chose not to draw on a thin cigar dangling from my dried lips. Reaching slowly for my wallet, I pulled out three crisp Robert the Bruces and slammed them on the bar. “Keep the change, bartender,” I said with understated sarcasm.

To be honest, in my four days of being close to the madding crowd, never once was my Scottish sterling rejected by English businesses. The greed for money in London is such that even toy-town currencies are accepted without protest. The observable truth of how a real economy operates demonstrates the absurdity of Better Together’s position that an independent Scotland should be denied the use of sterling. With the UK struggling to emerge from the financial crisis swamp, it would be a Pyrrhic victory of epic proportions for Westminster to childishly say “the pound is ma baw” and run away. Certainly, it would be a welcome boost to the money-changing industry whose exploitative rates of exchange would make Shylock blush. However, putting ideological stubbornness before economic pragmatism is not a recipe for profits, jobs and growth.

Of course, we wouldn’t even be discussing currency union if it were not for the lust for material gain that led to Scotland ceding its sovereignty in the first place. In the 1690s, the Kingdom of Scotland’s wealthy elite thought it a wonderful wheeze to ape the colonising antics of Angle-land. The Darien Scheme (or the Darien Disaster) was an ill-thought-out plan to settle a part of Panama. Then, as now, London did its best to thwart a successful independent Scotland. Thanks to England, investment from Hamburg and Amsterdam was withdrawn at the last minute, forcing Scots capitalists to totally fund the (mis)adventure.

Nobles and landowners plunged between a quarter and a half of all the money circulating in Scotland into the Central American black hole. Broke – and with the concept of pay-day lending still centuries away – the ragged-trousered dukes and mercantile class begged England for political and economic assistance. In 1707, the Act of Union led to the Scottish pound being valued at one shilling and England refusing to write off Scottish debt.

Three hundred years on and Scotland’s relationship with its southern neighbour is perceived by many to be that of two little boys, the weaker of the chaps having fallen off his wooden horse. But it seems there is no room on the horse for two. Unionist parties are galloping mad to think that Scotland will yield its legal right to maintain its present currency. History will judge the stance of the British parties to be nothing more than a fit of outrageous pique.

Should the Scottish population vote for independence next month, Alex Salmond has said that the new nation will seek a fair agreement on Scotland’s share of the assets and debts of the UK. However, given the unionists’ intransigence over the currency issue, the First Minister has stated that Scotland would not take on its share of British liabilities. This perfectly logical counter-menace has caused howls of faux-rage among Britain-firsters. More upsetting for them is the fact that a Nobel laureate agrees with Salmond’s position. Sir James Mirrlees, a member of the Scottish Government’s Council of Economic Advisers, said: “Britain inherits the debt if it refuses a currency union.”

If Salmond flounces into the Treasury and casually drops an IOU note into its coffers, the impact on sterling would be catastrophic. The UK’s credit rating would collapse and the pound would fall against major currencies. For this reason alone – and, believe me, there are others – the pre-referendum posturing of the anti-self-determination parties is a cross-Border embarrassment.

It could be the case that Scotland would use sterling only for a transitional period before joining the euro. While Eurosceptics never tire of poking fun at the bankrupt economies of Mediterranean Europe, they steadfastly ignore the fact that the continent’s powerhouse, Germany, manages just fine using the euro. Personally, my choice would be to leave the EU, its rampant corruption and financial mismanagement being a scar on international society. Norway seems mightily content with its non-EU, non-euro lot, its citizens enjoying a standard of living that Scots can only dream of.

But how ironic would it be if history repeated itself and Panama, once again, played a pivotal role in the economy of Scotland? If the Westminster cabal persists in refusing to share the pound, Scotland could simply continue to use the currency. The US dollar is the currency of Panama and, yes, a US dollar has the same value in Panama as it enjoys in Texas. Shadowing the pound would mean that the Bank of England – a private institution – would shoulder responsibility for controlling inflation. However, with independence, a Scottish government would have total control over taxation and spending. If sharing another institution, that is, the monarchy, is seen as desirable by unionists, it beats me why they obdurately oppose sharing the currency.

To paraphrase Harold Wilson’s speech of November 1967, reasonable people know that “the pound in your pocket” will still be the same pound in an independent Scotland. I’d bank on it.

 

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