Bill Jamieson: Where’s the demand for a Scottish pound?

Andrew Wilson proposed a series of economic tests for leaving sterling. Picture: Gordon Terris/PA
Andrew Wilson proposed a series of economic tests for leaving sterling. Picture: Gordon Terris/PA
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From a business perspective, the prolonged uncertainty over Brexit has been a killer. It has put investment plans on ice, caused companies to stockpile in the event of “no deal”, undermined business confidence and, with a few honourable exceptions, made the UK a no-go area for foreign investment. Overseas investors have certainly given our quoted companies a wide berth, with the UK All Share Index being one of the worst performers in the developed world. Arguments over hard borders and the Irish backstop continue to rage.

Many might well consider the experience of the past two and a half years should cause the SNP to blow cool on demands for it to push quickly for a separate Scottish currency and all the associated hassle in the event of the party securing victory in a second indyref. But that is the call moving swiftly up the agenda for the forthcoming party conference. It promises to be a bunfight.

Former first minister Alex Salmond was anxious to keep the Scottish currency issue off the agenda in the 2014 referendum for fear it would scare off apprehensive voters. What would happen if you had a mortgage in English pounds but found yourself paying back in a weaker Scottish currency? How would business feel finding itself manufacturing in one currency but invoicing in another amid exchange rate fluctuations?

The issue looked to have been kicked into touch by the report last year of Andrew Wilson’s Scottish Growth Commission. This poured cold water on demands for a Scottish currency by setting a series of tests. These had an effect similar to the tests imposed by then chancellor Gordon Brown on his euro-enthusiast prime minister, Tony Blair. Wilson’s prerequisites included bearing down on borrowing and debt to “sustainable” levels, bond market confidence and sufficiency of foreign and financial reserves.

But the killer test was this: would a separate currency meet the needs of Scottish residents and businesses for stability and continuity of their financial arrangements, and would it command wide support?

Now, I may have been mixing in the wrong circles, but I cannot divine any evidence whatever of a surge in support for a separate Scottish currency among businesses or residents. Where is the popular demand? What would Scottish firms gain? And would the benefits outweigh the additional conversion and insurance costs that would almost certainly attend transactions?

It also seems strange that, while many in the party are EU Remain supporters and sympathetic to the “ever closer union” agenda of the EU Single Market and Customs Union, they should treat a shared sterling with such anathema and demand withdrawal?

My sense is that the vast majority of Scottish businesses – from large corporates to SMEs – are utterly fed up with constitutional politics and view the prospect of a second referendum, never mind a separate currency, as a living nightmare. Meanwhile, good luck with the debt and deficit reduction should matters ever advance this far. I look forward to hearing an explanation of why Scottish austerity is less of a vote loser than the UK variety.

Why May’s Brexit deal is the worst option available

So now we’re down to the wire: support Theresa May’s Withdrawal Agreement, or delay Article 50, or head for “no deal” at the end of the month.

“None of the Above” may be a popular choice. But talks aimed at securing legal guarantees about the Irish backstop have foundered, and negotiations between British ministers and EU officials have been described as “difficult”, with the EU insisting there has been no breakthrough. In the Commons decision time is now at hand with a second vote on the Prime Minister’s deal due on Tuesday.

MPs may be tempted to vote for a delay. But a short Article 50 extension of under three months would make no practical difference. Indeed those in favour of Leave may ironically prefer a long extension of 21 months, as recommended by former prime minister Gordon Brown. Why? While this would have the same practical result as the “implementation” period in the deal, the UK would be better off because we would still have a vote and representation in EU institutions and the European Parliament.

Unlike the deal, we would be free to leave on 1 January, 2021, without being trapped in the “backstop” Protocol. And while our financial liabilities during the 21-month extension would be the same as under the deal, we would have no obligations afterwards. We would not be subject to indefinite ECJ jurisdiction after 2020 and we would not be subject to EU state aid controls after 2020, nor to Commission and ECJ “long tail” powers after that date.

In addition, as Martin Howe QC argues, we would have more time to prepare for a no-deal Brexit, enhancing our negotiating power with the EU, and also more time to develop and deploy alternative customs control methods on goods crossing the Irish border.

A three-month extension, he points out, provides at most three more weeks of negotiating time because the European Parliament will dissolve on 18 April prior to its elections. If a deal is not agreed by then it will no longer be possible for it to be approved by the European Parliament – legally required under Article 50 before the EU can formally conclude the deal.

But a 21-month extension would be better from a Leave perspective. Unlike the Prime Minister’s proposed implementation period, the UK would continue to be represented in EU institutions, and continue to exercise a vote and veto (where unanimity is required) over new EU rules. And we would not be bound by the backstop protocol, which under May’s deal would kick in on 1 January 2021.

As for the financial position, under an Article 50 extension, we would automatically be liable to contribute to the EU budget up to the end of 2020 – just as we would be under May’s deal, up to the end of the transition period to the end of 2020. The big difference is that under May’s deal, we would be liable for huge additional ongoing financial liabilities after that date. These will be adjudicated on by the ECJ and not by a neutral independent body.

If MPs take “no deal” off the table, better a 21-month delay, it seems, than a fearful acceptance of a deal virtually unchanged from the one already defeated by a massive 230 votes.