Allan Massie: Currency talk more than bullying

In England and Wales there is fear about the stability of a currency union. Picture: AFP/Getty

The currency story has been a long and tortuous one, with many shifts. Once upon a time there was to be a Scottish pound. That was back in the early days of the oil boom, and some economists warned that a Scottish “petro-currency” would soar so high that Scottish exports would be priced out of the market.

Then, in the Eighties and Nineties, the years of the Nationalists’ doldrums, there was little talk of the currency, though later Alex Salmond was to speak of the pound sterling as a millstone round our necks. Accordingly, breaking free of the constraints of the British State, an independent Scotland would sign up for the euro – which would have required us first to create a Scottish Central Bank.

But the financial crash and the troubles of the eurozone stopped that plan in its tracks, for the SNP realised they had no chance of selling it to the Scottish electorate. So we had yet another U-turn, and were told that we would keep the pound sterling after all – for the time being anyway.

The pound, we were assured, was ours to use. Nobody could deny us the right to do so. This is undoubtedly true. However, after consulting his team of eminent economists, among them two winners of the Nobel Prize, Mr Salmond decided that we would also enter into a full currency union with the state from which we were separating. This would mean that we accepted the supervision of the Bank of England, and its role as the lender of last resort. It would also – probably – require the Scottish Government and Parliament to accept some restriction of their fiscal freedom, some harmonisation of tax rates with the Rest of the UK (rUK). It would mean less than full independence, but, while this might irk some nationalist zealots, it would be reassuring for many who would be happy to think that while things would change, they would in this important respect remain much the same.

Mr Salmond’s Wise Men told him that a full currency union would be the best for Scotland and also for the rUK. This was good news, for it was just what, at that moment anyway, he wanted to hear. The advantages of a currency union for Scotland are clear. In such a union Scotland would not have to finance its trade and payments deficit with the other parts of the present UK; the cost of this has been put at £30 billion a year. Moreover, without such a union, the Scottish currency would be legal tender only within Scotland, and cross-Border payments would require foreign currency reserves in the form of English pounds, dollars or euros.

Seen from the other side of the Cheviots – from England and Wales – and indeed from Northern Ireland across the Irish Sea, things look a bit different.

The first politician to point this out wasn’t the Chancellor of the Exchequer, George Osborne, but the first minister of Wales, Carwyn Jones, who opined that a currency union with an independent Scotland would be bad news for Wales, and therefore unacceptable. Mr Jones is a member of the Labour party. So opposition to a currency union was not just a piece of Tory bullying, even before Labour’s Ed Balls and the Liberal Democrats’ Danny Alexander chipped in to say they agreed with George. Nobody after all could reasonably suggest that the first minister of Wales was a playground bully twisting Alex Salmond’s arm.

Now it’s quite possible that the eminent economists who said that a currency union would be best for what remained of the UK also are correct. There would be advantages: less disruption of cross-Border trade, maintenance of good feelings, other intangible benefits.

However, there would also be risks: the requirement to bail out Scotland if things went wrong and the Scottish Government ran up an unmanageable debt. The history of the eurozone’s troubles may not offer a fair analogy. Nevertheless the possibility of England having to play Germany to Scotland’s Greece is not one likely to commend itself to the English electorate.

We tend, naturally enough, to look at the prospect of independence only from the Scottish point of view, and we do so whether we are in favour of it or not. This attitude is enshrined in the provisions for the referendum; it’s a matter for the Scottish electorate alone. Fair enough, you may say; it’s up to us to decide.

So indeed it is, and the British government has undertaken to respect the outcome of the referendum. It is prepared to allow us in Scotland to go our own way. No obstacle will be put to our secession if the Yes camp win a majority, however bare that may be. There will be no British re-run of the American Civil War. No equivalent of the Black and Tans will be sent north to try to coerce us. But – and it is a very big but – a but which should be written BUT in capital letters – the terms of separation would not be ours to decree unilaterally. This is the reality that the Osborne-Balls-Alexander rejection of the SNP’s wish for a currency union has brought us bang up against. Mr Salmond, of course, says that it’s a matter to be negotiated, and that in the course of such negotiations Westminster will see sense and all will be happily resolved.

But it sometimes seems that Mr Salmond’s idea of negotiations does not involve much in the way of give-and-take, is rather a matter of “what I say is good sense and that’s the end of it.” As for his deputy Nicola Sturgeon’s assertion that if we should be denied a currency union, we would refuse to accept responsibility for our share of the National Debt, this is petulant and stupid. An independent state that began by repudiating debt would find it very hard to attract investors.

The truth is of course that the Yes Campaign is calling for a divorce, and in any separation the one choosing to go his or her own way doesn’t call all the shots and usually has to make concessions. Meanwhile the party being deserted will naturally feel aggrieved and resentful, and in that mood, will usually strike a hard bargain, protecting his or her own interests. Which is why, for the time being anyway, Westminster has ruled out a currency union. It has no interest in smoothing the SNP’s road to independence, and why on Earth should it have?