Money, money, money

I don’t care what currency an independent Scotland uses.

I’m also not an expert on currencies, monetary policies and economics in general.

So the last thing I ought to do is write a blog post on the topic with all the misplaced self-confidence of an over-entitled amateur.

However, this is precisely what I am about to do. I’m writing this not because I want to pad out my limited understanding of currency, but because I have become increasingly convinced over the last while that me not having a firm opinion on what currency an independent Scotland should use not only doesn’t matter and is actually quite okay, but in fact demonstrates something about independence that I am not sure enough people are talking about.

To get to that point, let’s summarise – briefly, and with all the flaws of my ignorance – the three basic options for currency in an independent Scotland.

Keeping the pound

Actually, I’m cheating, because this is two options in one. Both of these possibilities rest on the continued use of Pound Sterling as an independent Scotland’s currency.

One way of doing it is arbitrarily – just using it without seeking anyone’s opinions or permission, particularly that of the UK Government or its central bank, the misnamed Bank of England. Nobody can stop a country using a currency as long as it does all its official counting in it. Even banning the carrying of notes and coins out of the remnant UK if you’re heading to Scotland – a dystopian bureaucracy no UK Government would surely be stupid or spiteful enough to do – would only lessen circulation and not actually stop the use of it.

The other option is – as the Scottish Government proposed in the run-up to the 2014 independence referendum – an agreed arrangement, whereby (for instance) the Bank of England would be run jointly by the UK and Scottish governments, or at least its monetary policy made jointly or somehow including official representation from Scotland.

Either way, it’s the same stuff in price labels, pay checks and pockets.

The advantages of this are obvious: continuity, minimal fuss and disruption, and smooth trading over the new border. It also separates the constitutional question of independence from the policy question of currency. It might make sense to see how the economy of an independent Scotland develops and then change the currency – if indeed that’s needed – as and when the government of the day sees fit or as circumstances change.

The disadvantages revolve around the idea of control. Even if there was an equitable sharing of the pound’s governance and regulation between the two governments, the country that is ten times bigger will always have greater influence in terms of how the economy impacts on monetary policy. Indeed, it would be absurd for the converse to be true and for an independent Scotland to dictate monetary policy to a much larger rUK.

Yes, we might argue that Scotland doesn’t have much control over the pound as it is, so nothing changes with independence, but that does raise questions about whether the opportunities independence presents are going to be grasped at all in this area.

Creating a Scottish currency

Another option, which the SNP’s recent conference voted to adopt as party policy, is the establishment of a new, separate currency for an independent Scotland. Perhaps there will need to be a transition while this is organised, so the option might require keeping the pound for a while (in one or other of the two formats above).

The advantage of a separate currency, as I see it, would be the idea of total control. A Scottish central bank would, under the direction of the government, set monetary policy and monitor how the currency was doing. The decisions, while influenced by regional and global economic conditions just like any currency, wouldn’t be directly beholden to decisions in London, Brussels or elsewhere, and we could match the currency to the economic priorities of the government of the day.

Also, as a currency backed up by an oil-rich economy, Scotland’s replacement for the pound (whatever we’d call it) would be one of the strongest in the world, and means Scots travelling or trading abroad will get a lot more bang for their buck.

The flipside, of course, is that a strong currency could deter tourism or inward investment, and changing your currency as you cross the border might be a hassle for some.

Joining the euro

The third main option for an independent Scotland is to join the euro. Albeit such a move would impossible for at least a few years, because any member state needs to set up a central bank and then align various fiscal bits and bobs (I told you I’m not an expert) with the euro for a spell in order to make the transition a smooth one. So this option technically involves using one of the other two options first for a bit before we end up here.

The advantages of the euro are clear, because they’ve already been stated and explored elsewhere in the eurozone and among those who might join it. A single currency across the EU is basically the natural conclusion of a common market – if we are trading smoothly together, it seems reasonable that we should do so using the same currency. It removes transaction fees and exchange costs, makes the cost of goods and services easily comparable across the eurozone, and thus makes trade, holidays and so forth considerably easier.

And on a personal level, my frequent trips to the eurozone in the past few years have created the irritation of keeping separate bags of inactive currency, paying fees when abroad and so on. The only plus is that so many of my trips are to different eurozone countries and thus I can keep the same coins and notes for them all.

The negatives of the euro are, I confess, the toughest things to write about because I just don’t know them well enough. Which is why I am, in principle, a fan of the euro whether we are independent or a part of the UK. There are legitimate concerns about how an EU currency might serve the interests of a small country, and how the competing priorities of the eurozone members might align (or not) with those of Scotland, especially when Scotland is still so closely linked in trade to the rest of the UK. But I do love the idea in principle, like much of the rest of what the EU stands for.

Which one?

Having written all that out I still can’t decide. Though it has clarified in my mind that I don’t find the negatives of either a separate currency or the euro all that off-putting. Every country in Europe has one or other of those options, and there’s no reason why either can’t work for an advanced economy like Scotland’s.

Whether we create a new currency or join the euro, I am not convinced having different money from the rest of the UK is all that much of an inconvenience. After all, every single bit of international trade the UK does is with a country that uses a different currency from us, and it’s just something the world of trade and business deals with as routine. There’s nothing to suggest that Scotland, uniquely, will be incapable of trading effectively with its nearest neighbour just as the UK does with its trading partners.

As for changing money, every British tourist and traveller does this when they go abroad, and while it is a mild inconvenience it’s something that’s easy to forget about when so many transactions are electronic.

Also, the need to bear in mind Scotland’s economic alignment with the UK is not actually a long term concern. The whole idea of independence is to pursue distinct priorities and therefore in years to come Scotland might develop much deeper economic links with the EU, especially if it is a member and rUK is not. After all, Ireland, upon independence, was heavily linked to the UK’s economy (hey, maybe that was part of the problem?) and today trades so much more with Europe and the wider world.

I still don’t care

Weighing all that up, perhaps I’m slightly inclined more to a new currency or the euro than I am to keeping the pound, but I honestly see plenty plusses and few minuses to each of the three choices – or at least, few enough minuses that none of them individually become reasons for Scotland not to become independent.

And the reason I’m not fussed about not caring is that whichever option we choose isn’t inherent in the question of whether we become independent or not, but what we choose to do with those new powers. Who can predict where an independent Scotland might go in ten, twenty or fifty years’ time? Maybe we’ll join the euro soon, later or never. I’ve no idea. The point is, however, we’ll have the ability to choose.

And I trust us – our people, our experts, our politicians – to make the right decision at any given time based on the information available. That is both the freedom and the responsibility that defines what independence is all about.

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