Scottish independence: The simple reason why SNP don’t want to talk about currency
If May’s Scottish Parliament election is to be about independence, the SNP needs to explain what currency the new country would have and the effects on salaries, pensions, savings and investments
The Deputy First Minister, Kate Forbes, is someone who has admirers across the political spectrum. She is undoubtedly a talented politician, and is someone who possesses real moral courage, as was illustrated when she stood for the SNP leadership in 2023 and was unapologetic about her Christian beliefs, even though that cost her support among some SNP members, if not the wider public.
Forbes is seen by the business community as one of the few people in the SNP government who genuinely seems prepared to listen to and understand their concerns. Her frustration at being limited in what she can advance in a Cabinet full of people with zero understanding of how the economy works can only be imagined, and it remains a source of regret to many that she has taken the understandable decision to step back from front-line politics at next year’s election.
Forbes’ frankness and honesty was illustrated again last week, when it came to light that she had warned SNP members in her constituency not to publicly discuss plans for an independent Scotland’s currency.
Lack of detailed proposals
A minute from a party meeting in Skye two months ago, produced by Iain Stewart, a branch member, shows Forbes told them: “We must avoid publicly talking about currency. The priority is an element of stability and then move to a Scotland currency.” An SNP spokesman said the party would not comment on “hearsay” but did not challenge the veracity of the minute.
John Swinney has made it clear that a majority of seats in Holyrood after next May’s election will be treated as a mandate to hold another independence referendum. That being the case, one would expect the SNP to be well-advanced in their plans as to how an independent Scotland would operate, which would include detailed proposals for a new currency.
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The fact that someone as senior as Forbes, Swinney’s deputy, is telling party members not even to discuss the issue, is the strongest indicator so far that there has been simply no new work done in this vital area.
The question of the currency which would be adopted by an independent Scotland was one of the key weaknesses of the 2014 Yes Campaign. Then the proposal was that Scotland would continue to use the pound in a currency union with the rest of the UK. This was quickly shot down by the then Chancellor, George Osborne, who made it clear that it would not be in the interests of the remaining UK countries to have a currency union with a country that would have a massive financial deficit, after which the SNP struggled to come up with a credible alternative.
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Scotland’s deficit problem
The reality is that there is simply no good option for currency in an independent Scotland. Sterlingisation with a currency union might be the most credible and stable suggestion, but it does depend on England, Wales and Northern Ireland playing ball. It’s hard to see why they would want to, given Scotland’s fiscal deficit would be more than double that of the UK as a whole, and far above that of any other European nation.
There might be a logic to an independent Scotland seeking membership of the EU, joining the euro, and indeed that might be a necessary condition of EU accession. However, that process requires Scotland to have its own currency first, so could not be implemented in the early years of separation.
That then takes us to the third option, which is a new Scottish currency, which seems to be where the SNP are currently heading. There is a logic to that, as the arrangement most independent countries operate. Yet we have absolutely no notion from the SNP as to how that might work in practice.
With the fiscal deficit as it is, how would the central bank of an independent Scotland be able to borrow at affordable rates on international money markets? What would be its credit rating? (Spoiler alert: many times lower than that of the UK currently).
International currency speculators
What would this mean for those who hold assets, such as stocks and shares, investments, or pensions currently delineated in sterling? Would these automatically be transferred into the new currency, or would they have the choice to retain these in sterling?
What about those working for companies and organisations based elsewhere in the UK? Would they have the option of continuing to be paid in sterling, or would they be required to take payments in the new Scottish currency?
If the new Scottish currency is to be pegged to the pound, to avoid an immediate collapse in value, how would that link be sustained in the face of pressure from international currency speculators? How could a new central bank with no track record find the resources to defend such a currency link?
Wheelbarrows full of cash
In the event that the new currency was free-floating, what would there be to prevent a sudden and dramatic collapse in value? What are the risks of super-inflation, and the Weimar Republic-type scenario with wheelbarrows of cash being trundled through the streets of Portree?
There are simply no answers coming forth from the SNP to any of these questions, and against that backdrop it is not surprising why Forbes doesn’t want the issue discussed. Nor is there any evidence of serious work going on behind the scenes to produce a currency plan that is credible and sellable to the Scottish people.
If the SNP want the coming Holyrood election to be about independence, they need to start coming up with some answers, and fast, on what independence would actually mean, for our salaries, pensions, savings, and investments. Without that, no one is going to take much of what they say seriously, even with a messenger as ostensibly credible as Kate Forbes.
Murdo Fraser is a Scottish Conservative MSP for Mid-Scotland and Fife
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