IN HIS article (Perspective, 1 May), Eddie Barnes raised some interesting issues on the debate about whether the Scottish Government should have a Plan B with respect to the currency of an independent Scotland.
As is now widely known, the Scottish Government is to stick with a sterling zone arrangement in the eventuality of Scotland becoming independent and doesn’t want to countenance a more “radical” alternative because “acknowledgment of a shift in its currency plan would make the plan vulnerable to market attack” … “even if couched in the vaguest possible terms”.
However, in the document published by the Scottish Government on 23 April, 2013, entitled Currency Choices for an Independent Scotland, there is this stark and unambiguous statement: “The Scottish Government is clear that post-independence it will always be up to the people of Scotland, and their elected government, to decide what our currency should be.”
In other words, even if the Scottish public votes for independence with a sterling zone, on day one of independence that agreement may be torn up and a different currency option adopted.
This is simply not a tenable or credible way to proceed with the design of an independent Scotland’s currency arrangement, since it means that if there is a Yes vote for the current independence plans there will be massive capital flight from Scotland, greatly undermining the Scottish economy. In essence, this statement means that the Scottish Government’s present currency proposal is already dead in the water.
The only credible currency option for an independent Scotland is an independent currency and, rather than wasting resources on defending the existing proposal, the effort should surely now be placed on just what that currency regime would look like for a Scotland in which North Sea oil would be a key element on its economic balance sheet.
Adam Smith Professor of Political Economy
University of Glasgow