Joining sterling zone would be best option - Swinney

FINANCE secretary John Swinney has insisted that a sterling zone would give an independent Scotland the powers and flexibility it needed.

He challenged opponents’ claims that the country would face “severe constraints” over fiscal and monetary policy. And on a day when a Treasury paper appeared to signal that the rest of the UK might reject such an move, Mr Swinney made clear the SNP would be pressing for it.

The Scottish Government’s Fiscal Commission – which includes economists Professor Andrew Hughes-Hallett, Professor Sir Jim Mirrlees, Professor Frances Ruane and Professor Joseph Stiglitz, and is chaired by Crawford Beveridge – concluded a sterling zone would be in the “overwhelming interests” of both Scotland and the rest of the UK.

It said if an independent Scotland used the pound, it would mean sterling’s balance of payments being supported by Scottish assets, including North Sea oil and gas, which increased the UK’s balance of payments by £40 billion in 2011-12.

Mr Swinney said: “A sterling zone, with the pound as a shared currency, will provide the full flexibility to set tax and spending decisions to target key opportunities and challenges in Scotland. The sharing of the pound between an independent Scotland and the rest of the UK is the common-sense position supported by the Fiscal Commission.

“Their expert report – having examined several possible currency options – concluded that sharing sterling with the rest of the UK is the best option, offering freedom and flexibility for Scotland to develop our own taxation and spending policies to boost growth and address inequality.”

The Scottish Parliament controls 7 per cent of Scotland’s revenue base – it is due to increase to 15 per cent under the terms of the Scotland Act.

Mr Swinney said: “With independence, Scotland will control 100 per cent of our revenues, which is what it needs to be to build a stronger economy and fairer society.

“The combination – which only comes with independence – of keeping the pound, accessing Scotland’s abundant resources, and taking decisions on tax and other economic policies that are right for Scotland – is the best way to boost jobs and growth.”

He repeated the disputed claim that, while Scotland would be the smaller partner in a sterling zone, it would be the stronger economy. He said: “Scotland’s finances are consistently stronger than the UK’s – generating more revenue per head than the rest of the UK in each one of the past 30 years – and Scotland has had a lower fiscal deficit than the UK over the past five years. With the additional economic levers that independence will provide, and the up to £1.5 trillion asset base provided by Scotland’s oil and gas reserves, an independent Scotland will stand on a strong financial footing.”