JOHN Swinney claims the situation is “crystal-clear”. An independent Scotland would “retain sterling as its currency and there is absolutely no provision requiring Scotland to join the euro”. If and when the economic circumstances are right to do that, it will only happen if we Scots approve the switch in another referendum.
I don’t know what crystals our finance secretary has been consulting. Hope it’s not the ones that Caplin woman used to try out on Cherie Blair. But now the independence debate has been dragged out of the long grass and on to this week’s headlines, such crunch questions can be dodged no longer.
The vote on the SNP’s historic mission may still be nearly three years away, if our First Minister has his way. That’s more than enough time to scrutinise, in exhaustive detail, exactly what we are being asked to say “yes” to. Answers to the currency question, far from being as clear as pebbles on the bed of a Highland burn, seem to me buried beneath a brackish peat bog of confusion.
That sterling-first, euro-later strategy was hotly debated by the SNP itself in conference in October 2009. Some in the party wanted no truck with another referendum. They wanted to be in the euro right away. Mr Swinney’s more cautious approach won the day and featured the following month, as paragraph 3.34 of the then-minority SNP administration’s white paper on options for constitutional reform, Your Scotland, Your Voice.
It’s been the party’s line on Scotland’s currency post-independence ever since. In the meantime, we’ve all been through one of the worst recessions in a century. Nearly three years of rock-bottom central bank interest rates. A succession of individual sovereign debt crises. Continuing commercial bank vulnerability right across the continent. And widespread fiscal austerity, lacklustre growth and rising joblessness.
The existing eurozone has been rocked to its core. There is no guarantee the existing 17 members will still all be in there by the end of this year, let alone by the autumn of 2014. If a core eurozone does survive longer term, it will be on the basis of much greater fiscal integration to bolster its creaking monetary union.
Is that the kind of eurozone the SNP still aspires to join? Its silence on the subject would shame a Trappist monk. But the very next line of its 2009 white paper (paragraph 3.35) offers a strong steer: “A monetary union necessarily limits monetary policy discretion and flexibility. Greater emphasis is therefore placed on fiscal policy to address the Scottish economy.”
If to survive the eurozone morphs into a tighter monetary and fiscal union, taking its lead from Germany on everything from sustainable borrowing levels to corporate tax rates, where does an independent Scotland, assuming the others want it in, then find the freedom to manage its own economic destiny, as it has repeatedly said it wants to do?
The SNP can argue that, if that is how the eurozone does evolve, it would not constitute economic circumstances in which an independent Scotland would be minded to join. But that begs the unresolved constitutional question: Would a newly independent Scotland have to go through an accession process for membership of the wider European Union, one condition of which would be joining the euro?
Before all that plays out, of course, the SNP wants to “retain” sterling. Keep the pound. Possibly, on the scenarios I’ve been exploring, for quite some time. But the terms on which that might happen are not within its control either, as George Osborne made clear to ITV’s Laura Kuenssberg on Thursday. “Alex Salmond has said Scotland should join the euro. That means giving up the pound,” he told her.
In background briefings, Treasury officials went much further. They acknowledged the rest of the UK couldn’t stop an independent Scotland using the pound, in much the same way that Panama uses the US dollar or Kosovo the euro. But it would have no influence on UK monetary policy and offer no access to the financial firepower of the Bank of England as a lender of last resort in times of economic difficulty.
Symbolically, Scottish banks might no longer be permitted to issue their own Scottish banknotes. The pound notes we would keep in circulation before joining the euro would have Bank of England printed on them! This threat will doubtless be portrayed by Mr Salmond and his colleagues, in the weeks and months ahead, as another example of Thatcher-esque vindictiveness on a small country simply trying to stand on its own two feet.
But the sabre-rattling from within the Treasury may well have been provoked by what our First Minister had told Jon Snow on Channel 4 News the previous evening. Any independence settlement, Mr Salmond suggested, would leave Scotland with 90 per cent of North Sea oil revenues and our population or GDP share of the UK’s national debt.
Asked by Snow if he would also accept a share of the UK government’s £187bn exposure to Royal Bank of Scotland, Mr Salmond declined. He went further. He blamed the Treasury for causing the whole mess in the first place through poor regulation and suggested it should pick up the whole tab. But our First Minister is on very shaky ground on this one.
His Braveheart letter to Fred Goodwin on becoming First Minister in May 2007 offering “any assistance my office can provide” and “good luck” with Royal’s consortium bid for ABNAmro, signed “Yours for Scotland, Alex”, took 18 months of FOI action to prise out of the Scottish Government. It is now doing the rounds again.
In March 2008, when it was already clear that RBS and the other big Scottish bank, HBOS, were in deep trouble, our First Minister was telling an American audience that, with those two banks, “Scotland has global leaders, today, tomorrow and for the long-term”.
And in August of that same year, after RBS had taken a further £12bn from shareholders in a rights issue but announced a whopping £692m first-half loss, he issued a remarkable press release describing RBS as “one of the highest-performing financial institutions in the world”.
His former employer would, he opined, soon “overcome current challenges to become highly profitable and highly successful once again”.
Later, he blamed “spivs and speculators” for bringing Royal to its knees. Now one of its main cheerleaders when it was borrowing and buying its way to global domination blames the UK Treasury and says it can take all the consequences. Of course, the UK government also controls 81 per cent of RBS’s shrivelled shares. If Mr Salmond doesn’t want any of the exposure, he won’t want any of that ownership either.
Indeed, with Bank of Scotland now just a brand name for that other troubled monster, Lloyds Banking Group, and the Clydesdale still owned by Australians, an independent Scotland might just end up with Airdrie Savings Bank as its biggest locally-owned bank. Six hundred years of proud banking history, as well as a 300-year-old Union all up in smoke. And a currency with Bank of England printed on it. Quite a political sell, that one.