Independent Scotland to stick with sterling
John Swinney: Urged to rethink college cuts, Picture: Dan Phillips
JOHN Swinney claims today that an independent Scotland would keep the pound for the foreseeable future, pushing membership of the euro back until at least the middle of the next decade.
In a marked hardening of the SNP’s position on its choice of currency, the SNP finance secretary declares he “cannot foresee the set of circumstances” that would lead a Scottish Government to call a referendum on joining the euro.
Mr Swinney said that in effect ruled out any membership of the euro for “the medium term”, pushing the SNP’s consideration of euro membership well into the mid-2020s.
The claim is certain to send ripples across Europe, with EU states watching keenly as Scotland sets out the terms for a potential negotiation after independence. SNP ministers argue an independent Scotland would inherit the UK’s opt-out of the single currency and therefore be able to choose if it wants to opt in.
The claim will be seen as a further attempt by the SNP to win over the thousands of undecided voters across Scotland who may back independence if their concerns about the economy, and the thorny issue of an independent Scotland’s currency, can be assuaged.
However, it contradicts warnings by some European legal experts who say Brussels would demand an independent Scotland agrees a binding deal to sign up to the euro within a specified timetable as the price for EU membership.
It also follows a report by the House of Commons Library last year which said it was “by no means clear” whether Scotland would inherit membership of the EU – thereby forcing it to join the euro as a new member state. In an interview with The Scotsman, Mr Swinney was asked whether the SNP’s default position for the future was that it would now retain sterling.
He said: “I can’t foresee a set of circumstances that will see the economic conditions being correct for the euro for some considerable time,” he said. “It would be difficult to define that but it feels neither to me like the short term or the medium term.”
Mr Swinney said that, instead, he was planning for a lengthy and solid agreement with the Bank of England which, he envisages, would act as Scotland’s new central bank, and as its lender of last resort.
He also revealed he would enter into a “dialogue” with the Bank of England about his spending plans before pressing ahead with them, in order to provide reassurance that they would not get out of control.
The UK government would not, however, be given a say over those plans, he insisted.
His comments come amid warnings from economists that a sterling-based Scotland could lead to a similar situation which developed across the eurozone, where countries such as Greece took advantage of the single currency to order a wave of profligate spending. Mr Swinney said: “In whatever scenario you look at there would have to be the function for government engaging in dialogue with an independent monetary function – a Bank of England, or in a euro context, an ECB – to make sure there was fiscal order to the plans . . . you must be prepared to sign up to fiscal discipline.”
He went on: “That is not something I think is in any way an imposition. That is a strength.”
However, Mr Swinney said he would not discuss his spending plans with the UK government. He also scotched claims that borrowing rates would be higher in Scotland than in the rest of the UK because it was borrowing in a “foreign” currency. He said: “It’s the currency we operate today. It’s the currency that is backed by the Bank of England.”
Turning to the relationship with Europe, the finance secretary also said he believed that EU attempts to create a fiscal union were effectively doomed to failure, as he hit out against attempts to impose a “federal” system on individual member states across the continent.
Scotland would uphold fiscal discipline, he said, but it would not accept having its tax-rates set by Brussels as the price of EU membership.
Such a move could set Mr Swinney on a collision course with European Commission chiefs and EU leaders who are pressing for a tight fiscal bond across the EU to prevent a re-run of the current eurozone crisis.
He said: “I don’t think the federal agenda has got a prospect of advance because it requires the diminution of flexibility within individual jurisdictions and I just don’t think that is a proposition.
“I don’t think you can get to the position of fiscal union in the EU and I don’t think it will be desirable.”
Mr Swinney said that, instead of a fiscal pact across the EU, there should be an agreement by member states to observe a tight discipline over spending.
“What there has to be, and what I think there will be, is a prerequisite about fiscal discipline. I think that is entirely desirable. Countries should be able to run themselves as they see fit, but they cannot do that in a fashion that lacks fiscal discipline. Whoever you are – Greece, Germany or an independent Scotland – you must have fiscal discipline,” he said.
Mr Swinney said it was such “indiscipline” that had led to the eurozone crisis – not the fact that the single currency had brought together such different economies as Greece and Germany.
Mr Swinney will set out his case on independence and the economy during a lecture tonight at the David Hume Institute in Edinburgh, arguing that, at a time when the UK government is coming under fire for cutting “too far and too fast”, an independent Scotland would pursue a different course.
He accuses George Osborne of “lacking a vision” or a growth plan for the country, and argues that a Scottish Government would relax the UK government’s austerity measures.
Asked whether he would like to be known as a “chancellor” in an independent Scotland, he said: “I think the terminology of the post that I hold would be essentially a finance minister’s post. We don’t tend to preoccupy ourselves with the baubles of life.”
And pressed on whether Scotland could still issue its own bank notes, given that it would be taking its currency from the rest of the UK, he said: “I think there’s a pretty clear legal basis on which the banknotes are currently issued and I cannot foresee any circumstances that would change the ability to issue those banknotes.”
On the question of Scotland’s currency, the House of Commons Library report last year said Scotland could retain or lose the UK opt-out, depending on the political negotiations that would follow Scottish independence. “It is by no means clear whether or not Scotland would retain membership of the EU automatically if it gained independence,” the report stated. It said that the matter was likely to boil down to a “political” decision.
“Member states with their own domestic concerns about separatist movements might argue that Scotland should lose its membership on independence, and hold up or even veto its accession,” it warned.
Such a move would see Scotland having to reapply for EU membership, and forced to accept the euro as its currency in time
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Comments
There are 474 comments to this article
Page 1 of 32
famous15
Friday, February 3, 2012 at 08:52 PM#472. I was reading your input with interest till I choked on your words commencing "The English have patiently allowed etc etc" Breathtaking arrogance. The British government has no legitimacy to rule Scotland. You are a colonial bully. Be off with you.
OxfordDon
Friday, February 3, 2012 at 12:48 AM467 OxfordDon. Bit like the non reporting of Moorish Dancing then? Assume you mean Morris Dancing (rather than our Islamic friends the Moors) but that's an English tradition whereas I was suggesting that Shetland's celebration was less than Scottish hence lack of reporting- too subtle for you perhaps but then again you're from Flemish stock but born in Scotland. Sorry to reciprocate the rudeness but it's difficult on these pages to put an argument without suffering insults from those who happen to have a different opinion.
OxfordDon
Friday, February 3, 2012 at 12:34 AMSorry I was unclear on an earlier posting. the scenario I was positing was: 1) Assuming the rest of the UK was not in favour of BOE being the bank of last resort for a country that has left the Union and why would it , why would the Bank of England stand behind that country or anyone who invested in it? 2) Why would anyone in the rest of the UK remain invested in inistitutions outside the UK having decided to be invested in the UK rather than anywhere else etc?. Even if independent Scotland matched UK guarantees who would risk their investments to a government over which they had no control? This is far from scaremongering- Edinburgh's financial institutions need to spell out the dangers starting with the amount of funds they hold on behalf of investors in the UK excluding Scotland and how they would deal with their exodus I have a huge affinity with the Scots but many people I speak to in England are tired of the constant complaining north of the border and they seem happy for Scotland to exit the Union if that's what is wanted For them it's less to do with economics- you are in a Union that redistributes wealth according to need- but if a member is unhappy let them go and stand on their own two feet but there can be no hedging of bets or expectations that the remaining Union will include Scotland in its decisions to award contracts or trade etc. The decision to exit the Union will be momentous but far more for Scotland than the rest of the Union. If nationalists think otherwise why don't they hasten the day for a referendum or are they just helping out the rest of the UK for a little longer out of the goodness of their hearts? I find it hard to believe that they are prolonging the referendum to continue making a disproportionate contribution to the rest of the UK. Finally, remember that the English have patiently allowed a situation where parliaments exist in Scotland, Wales and Northern Ireland for their own domestic matters with no interference from England but when it comes to English domestic matters those other parliaments have the right to vote on matters affecting England only. Imagine the hue and cry if roles were reversed. England is waking up to this irrespective of how Scotland will vote.
Libra Personified
Thursday, February 2, 2012 at 11:48 PM"PS my wife is from Shetland stock". I'm from Flemish stock but I'm from Scotland.
Libra Personified
Thursday, February 2, 2012 at 11:41 PMShould I log out again to let the JP know to let slip the pups of war?
Libra Personified
Thursday, February 2, 2012 at 11:38 PM467 OxfordDon. Bit like the non reporting of Moorish Dancing then?
Libra Personified
Thursday, February 2, 2012 at 11:36 PM"464 Colonialtoff Thursday, February 2, 2012 at 10:47 PM Libra personified. Now you are ranting and making a fool of yourself. This news article is about Scottish currency. Yet another Salmon luvvie. If you can't think of a solution to a minor triviality like your country needing a currency. Just rant. What do you lot think you are going to do? Go down the supermarket with a barrel of oil. Or perhaps use milk bottle tops and herrings." ========================================================== Oh, my incontinence pants are full.
OxfordDon
Thursday, February 2, 2012 at 11:32 PM"77 OxfordDon ▬ "PS I saw little coverage of Shetland's Up Helly Aa celebrations in Scottish papers." .................................. You think you have stumbled across something not quite right in that ? .... well done Sherlock --- It's called divide and rule......... "Scottish Papers" ! ..... was that a joke or did you use that description out of ignorance? ..... FYO The so-called Scottish national newspapers are all either owned , printed, or have their editorial policy decided in a board room in a country that is not called Scotland." Not sure how it's divide and rule if there is no reporting. My observation was why Scotland's press, if as you say , owned outside Scotland, did not report this as a non- Scottish celebration i.e. Viking roots celebration but you seem to be aying that the "English" press was supressing the story. I would have thought the English-manipulated Scottish press would have done the opposite. I'm ready to admit my ignorance Dr Watson if you can enlighten me. PS my wife is from Shetland stock so we have a legitimate interest.
Libra Personified
Thursday, February 2, 2012 at 11:30 PMI just love playing with your blinkered views - eben to the extent of throwing in the typo or twa to give you some comfort for your gums,
Libra Personified
Thursday, February 2, 2012 at 11:26 PMJust thought I'd log out to see who ould regroup. Caught you all, Nobody dan respond to my original questioning of the BBP to the Euro o r Scotland';s share of the Bank of "England". With harpies like my detractors, I feel the best for Scotland in the future. ============================================= For you, 464 Colonialtoff, 462 rider000 and 3 Vote 'NO (just for good measure).
Colonialtoff
Thursday, February 2, 2012 at 10:47 PMLibra personified. Now you are ranting and making a fool of yourself. This news article is about Scottish currency. Yet another Salmon luvvie. If you can't think of a solution to a minor triviality like your country needing a currency. Just rant. What do you lot think you are going to do? Go down the supermarket with a barrel of oil. Or perhaps use milk bottle tops and herrings.
Vote 'NO'
Thursday, February 2, 2012 at 10:44 PMApparently the Fat Comptroler's approval rating has peaked. Actually fallen. Honeymoon over? He shoulda called it he shoulda called it....
rider000
Thursday, February 2, 2012 at 10:42 PM460 Libra Personified .............. You have just placed 11, almost consecutive posts none of which are in any way related to the article. You clearly are someone of many words bit devoid of anything to say. You probably would benefit from your own little Jerusalem, build a wailing wall in your back garden, you'll find it very therapeutic.
Libra Personified
Thursday, February 2, 2012 at 10:39 PMnighty night. Busy day tomorrow .Got my Dyson vac back doday - you should see the blue fluff on my carpets - mostly from ex-unionists who have joined the separation light camp sinse 1999.
Libra Personified
Thursday, February 2, 2012 at 10:28 PMMaybe they want Jerusalem as the national anthem because they couldn't get it.
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