George Kerevan (“What’s your Plan B on currency, Mr Carmichael?” Perspective, 15 November) is quite right to ask Alistair Carmichael what is the remainder of the UK (rUK)’s Plan B for sterling if Scots start their own currency; just as the Yes Campaign should be pressurising rUK on a whole host of issues.
What intrigues me, however, is why Mr Kerevan’s Plan B for an independent Scotland, would be to use sterling in any case, thereby ensuring an independent Scotland would have absolutely no control over its “own” monetary policy or interest rates. These would be controlled by the Bank of England, with no reference to the economic conditions in Scotland. Many of us would say, “so what else is new?” but the difference would be that there would be no reason for an independent Scotland to follow such a course.
Mr Kerevan makes a sound case for Scotland having its own currency, listing all the advantages which Scotland would have in terms of the strength of its balance of payments, thereby giving an inherent strength to a Scottish currency, whereas the rUK’s balance of payments would get steadily worse because of the inherent weakness of its balance of trade. That has been the known situation for many years, which makes it all the more mysterious why the SNP insists on retaining sterling at all.
Mr Kerevan goes to some length to explain how rUK needs Scottish exports and how withdrawal of the revenues from those exports would immediately adversely impact the rUK’s current account.
He then goes on to claim that this is why rUK would be foolish not to agree to a currency sterling union.
The question still remains however, why an independent Scotland would want one if, as Mr Kerevan points out, it would simply be propping up rUK, to the detriment of its own citizens.
Deputy First Minister Nicola Sturgeon is on record as saying she hopes the currency union with sterling “lasts for many years”. Notwithstanding the fact the rUK is unlikely to agree to have a currency union, why would an independent Scotland even want one?
The view expressed by Colin McKay, head of the Scottish Government’s strategy unit, that Alex Salmond cannot guarantee retention of sterling, is not new. Many of us have been saying this, in despair, as he has clung to this policy which has two fundamental flaws.
Assuming independence, for two separate countries to form a currency union requires a treaty. A treaty requires both to agree. If one says no, there can be no treaty and no currency union.
The second flaw is political. The “sterling policy” is a gift to the coalition government, as they can snooker it at any time during the referendum debate, and there is nothing Alex Salmond can do about it. We must hope that before he sent the white paper to the printers, he took account of the work of Margaret and Jim Cuthbert, Jim Fairlie and others, and that we shall see a Plan B in that document.