The case for a Scottish currency on day one of independence

Ian Stewart FCIBS - Chair, Scottish Currency Group (SCG) Banking & Finance Team

I am often asked, “Why do we need our own currency on independence?”

A good, indeed, critical question for those of us who want to see Scotland flourish through independence. In fact, many people believe Scotland already issues its own pound and although Scottish banks do have their own distinctive notes, these are underwritten by the Bank of England (BoE) and issued under its license.

There are many reasons to have our own national currency and a google search will turn up many specialist papers on money and monetary systems. Such papers have their place as a great deal of technical and academic work needs to be done to get the best solutions for our new currency systems. They are also of value in responding to the inevitable attacks we will face from our unionist opponents.

However, I’m more interested in the simple facts that can be understood by the average voter, too busy with everyday challenges to seek out learned papers and who may find them a turn off anyway.

The answer to the question I posed, “Why do we need our own currency on independence?” is simple:

The British State and its control of both our media and the banking payment systems.

Imagine the headlines, “Westminster vetos Scotland using the U.K. payment systems if it votes for independence” printed in bold all over the media?

Also imagine, if Westminster follows through and cuts our access to payments systems, going to the supermarket on day one to find that all card systems are down and you can’t get cash out of the ATM?

This veto and others during the campaign and separation negotiations can be avoided if we have done the preparation to issue our own currency on day one, after the transition period, when Scotland becomes a state again.

Setting up a new currency is simple but needs planning. It’s not difficult to set up a new currency. It involves creating a Central Bank, Treasury, Regulatory Board, Payment System and Stock Exchange - all well paid jobs and career opportunities in Scotland. However, it does need advance planning. Based on consultations with a number of European central bank officials, SCG estimates it would take two years of planning and a further two or three years to implement.

The opportunity then presents to decentralise Government departments across our major cities so Glasgow, Dundee, Aberdeen, Inverness and Edinburgh all benefit from these developments.

Having our own currency is important for both political and economic reasons

First, political, it’s now eleven years since the 2014 referendum and many Scots reading this might not have been of voting age and therefore not aware how critical the currency issue was to the debate.

That criticality was proven live on TV in an Independence debate watched by millions. The then leader of the SNP, Alex Salmond, said Scotland would “share the UK pound, it being our currency too”. In reply, the then UK Chancellor of the Exchequer, Alasdair Darling, stated, “You can’t share the UK pound after independence Alex, so what is your Plan B?” Alex was wrong footed and, for whatever reason, was unable to respond with a Plan B.

Many, like those of us in the SCG, realised immediately that the Cause was lost, as did Alasdair Darling.

It was known later that the BoE had formed a provisional Board of Directors to facilitate Scotland sharing the UK pound after independence and I can only assume Alex had not foreseen the political torpedo devised by his fellow Scot. In economic terms sharing the pound made perfect sense to the BoE as it promised least volatility to the value of the UK pound in international markets.

However POLITICS trumps all other issues when it comes to something as threatening to the British Establishment as Scottish Independence.

In the Independence Movement, we must remember our opponents have all of the influence, media exposure and the politicising powers of the British state behind them. A State that is well practised in the craft of deception. We must never again be so politically exposed as we were in 2014. Second, economic, it is and always was a nonsense to claim that Scotland could be ‘independent’ when sharing the UK pound as has been the position adopted by the SNP.

To be independent, a country needs to have both Fiscal and Monetary Power (set and collect taxes, issue all currency used within the State, set interest rates and manage the exchange rate if required). In terms of currency it is the latter, ‘monetary power’ that is critical.

An independent Scotland with its own central bank and treasury would have the financial capacity to transform the lives of its citizens. Under Westminster and specifically the failed economic doctrines of Thatcherism and Neoliberalism, Scotland’s natural and infrastructure assets have been sold to the world.

Scotland has been so de-industrialised over the past fifty years, that Government intervention on a scale not seen since the end of the Second World War will be necessary to carry out the transformation that is needed.

We share the vision of Scotland’s resources and assets being brought back to the people of Scotland, controlled and managed here, creating well paid jobs and careers for our own people. Like any ‘normal’ country and in stark contrast to today where Scotland is treated by Westminster as an economic colony to be pillaged, our resources extracted for the benefit of the City of London.

Scotland has vast resources of water, land, oil, gas, energy renewables to name a few, but to use these to revitalise our country we need the monetary capability to run a significant deficit for a number of years. That deficit, otherwise called ‘borrowing’ is ‘by the State, from the State’. The Government, via the Treasury tells the Central Bank to make funds available.

There is no reliance on collecting taxes, nor any reliance, when you issue your own currency, on borrowing from the Bond Markets or anywhere else. The important thing for sustainable, noninflationary spending is not the size of a state deficit but what that spending is used to fund. Productive investment in public assets, services and infrastructure which support our economy as opposed to tax cuts for the wealthy and large scale de risking of corporate activity and PFI schemes which increase the problems of inequality.

As a currency issuing State, Scotland would then be self financing with our own Treasury and Central Bank funding our own economic regeneration under the direction and oversight of our own elected government. But only if we issue our own currency from DAY ONE, not if we share the GB pound nor by adopting the Euro.

So much is possible with independence and our own currency. These are just a few of the things we could do:

• Renationalise the generation, distribution and supply of our electricity and gas resources.

• Use our abundant ‘renewable’ energy as an affordable base for our industrial strategy. Instead of just being sent down to England, nationalise it, taking it by compulsory purchase if necessary, out of the hands of offshore investment trusts and private equity funds operating in tax havens and from the private landed gentry (around 500 of whom own most of Scotland).

• Make the network work in the national interest of all of us, not just the few!

• Re-establish oil refining with a state of the art new oil refinery at Grangemouth

• Carry out a programme of rented public housing built across Scotland

• Invest in roads, rail and ferry infrastructure, including subsea tunnels to connect our islands, like our Scandinavian neighbours

• Invest in our NHS, not just to treat our people but in preventative guidance

• Increase the State pension to the European average, giving our elderly population an income on which they can live a respectable retirement

• For the young, with the interest rate set in Scotland by our own Central Bank, there’s the opportunity for a fixed 2.5% mortgage over the entirety of a thirty year guaranteed mortgage.

• And, as Tommy Sheridan stated in the 2014 campaign, “we will eradicate banks …… food banks, by establishing a fit for purpose benefit system”

The choice is ours

The choice of which policies to deliver is political. The first Government of an independent Scotland will decide which to carry out. A Government chosen only by the people of Scotland based on the party Manifesto. I hope to see the above ambitions in that Prospectus for an Independence Scotland!

It would be a new ‘Scottish Enlightenment’, a new ‘Nova Scotia’.

It can be delivered by us taking the normal levers of power.

Currency is essential- not “nice to have”

If Barbados can do it- Scotland surely can too!