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Peter Jones: Independence or the pound - which?

An independent Scotland could face the sovereign wishes of an rUK that does not want a currency union. Picture: Contributed

An independent Scotland could face the sovereign wishes of an rUK that does not want a currency union. Picture: Contributed

  • by PETER JONES
 

WHEN POLITICIANS accuse each other of desperation and panic, I tend not to listen, reckoning that it is the usual campaign hyperbole that tries to turn a minor slip of the tongue into a monumental credibility-destroying gaffe.

But I begin to think that it is an accusation that can be fairly levelled at Alex Salmond over the currency issue in this referendum.

There are certain tools that can be used to make the political equivalent of a clinical diagnosis of desperation. One is whether the arguments being used to shore up a position that has come under attack are robust or fatuous. And Mr Salmond is now making claims which, under any serious inspection, are complete nonsense.

In an article in a Sunday newspaper, he wrote that Labour leader Ed Miliband’s “hasty gambit to include a block on Scotland’s continued use of the pound in Labour’s next Westminster manifesto” would be “saying to Scots ‘I will defy the sovereign wish of the people in a referendum’”.

On umpteen grounds, this is gibberish. Actually, the only sovereign wish that will be expressed in the referendum will be the answer to the question: “Should Scotland be an independent country?” If it is Yes, the sovereign will of the people will be that Scotland becomes independent.

If Mr Miliband said he would prevent Scotland from becoming independent, then that would certainly defy Scotland’s sovereign will. But he isn’t saying that at all. He is saying that Scotland can be an independent country if that’s what people want, but they won’t get a sterling currency union.

I’ve read through the independence manifesto (Scotland’s Future, the 650-page version) a couple of times, and nowhere does it say in it that the rest of the UK is obliged to accept everything in it. In fact, it says several times that after a Yes vote, there will be negotiations with the rest of the UK.

To me, negotiations mean that everything is negotiable and nothing is certain. The Scottish Government might get everything it wants, but that’s about as likely as tomorrow being the end of the world.

And if we are talking about sovereign wills here, why is the Scottish sovereign wish the only one that matters? Aren’t the people of England, Wales and Northern Ireland allowed a sovereign wish as well? If they say they don’t want a currency union, why shouldn’t that sovereign wish be respected?

I suppose it could be argued that there is no obvious means of expressing that – short of inviting them to hold a referendum on the issue. But if political parties put that proposition in their manifestos and a majority of MPs standing on those manifestos get elected, that could be taken as the requisite expression of that will. In that event, whose sovereign wish matters the most?

That question can be answered by examining another of Mr Salmond’s assertions – the claim that the pound belongs as much to the people of Scotland as it does to everyone else in the Union.

The simple legalistic response is that the pound belongs to everyone in the Union, but if some choose to leave it, then they give up the right to use the pound. All serious legal opinion agrees that England, Wales and Northern Ireland would constitute the continuing UK under international law. So if they, via their elected representatives, say they will keep the pound and won’t let Scotland share it, how could Scotland dispute their right to 
do that?

In what court could these competing claims be advanced and weighed against each other? There isn’t one. And in any case, if there was such a court, a simple argument that the continuing UK could advance would be that it is not stopping Scotland from using the pound.

As Mr Salmond has said, Scotland could use the fact that sterling is an internationally tradable currency. Scotland wouldn’t even have to buy the initial stock of money – we already have it in our bank accounts and wallets. Since Mr Salmond has said using sterling unofficially is “quite attractive”, the rest of the UK could say “on you go, find out just how attractive it is”.

Actually, any disinterested party with knowledge of how modern financial systems work who has looked at this thinks it is extremely unattractive. The big problem is that Scotland would not have a central bank. Ruling out a currency union also means that Scotland doesn’t get to share the Bank of England.

Arguments that the Old Lady of Threadneedle Street is as much Scotland’s bank as everyone else’s are as watertight as a fishing net. The key point here is that any central bank has to be backed by the taxpayers of the country whose money it is supervising.

Why? Because in the event of a crisis that needs a few billion to fix, it isn’t just a matter of the bank printing those billions – the money has to be borrowed from someone who has to be paid interest. And as everyone knows to their cost, taxpayers foot that bill.

But if Scots are not paying taxes to the UK Treasury, they would not be standing surety as the Bank of England’s ultimate backstop. No Scottish taxpayers means no work for Scotland by the Bank of England.

Of course, you could come to an arrangement in which there was an agreement to pool taxes for these macro-financial purposes, which would also entail some sort of political agreement as well. Guess what – these things are called a fiscal and political union, exactly what we have now and what the European Unions is laboriously trying to construct to prevent further euro crises.

And that leads to the final and conclusive diagnosis that Mr Salmond is indeed desperate. All the evidence which has piled up on this question points to a simple conclusion – Scotland can have a currency union or independence, but not both. Mr Miliband could argue legitimately that by ruling out a currency union, he would be fulfilling, not thwarting, any Scottish sovereign wish for independence. How desperate is that?

 

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