That the SNP would dismiss yesterday’s announcement on currency by George Osborne should not come as a surprise to any of us.
Alex Salmond and Nicola Sturgeon have taken to the airwaves to complain of “bluff, bluster and bullying” by those nasty big boys from Westminster. It’s actually quite brazen to sit there and say, having been told a very firm “no” that the answer was really yes. But their aim was to whip up fury amongst their own supporters, to incite an emotional reaction in those who don’t like English Tories telling things like they are.
That was always going to be the huge risk of Osborne’s gamble and the jury is still out on whether Danny Alexander and Ed Balls were right to agree with it. Those voters who are undecided, who instinctively might veer towards yes but are worried by the uncertainties of independence might be propelled back towards them in the face of what they might perceive as a reactionary and petulant manoeuvre. Except that doesn’t quite work when one of the people agreeing this, Danny Alexander, is a highlander through and through.
From what I can see in my social media timeline, and I’m discounting people already involved in politics, those who were already committed to voting yes are outraged, those who were already committed to voting no are pleased and those who don’t know are splitting fairly evenly. That’s only a small sample of family and friends. It’ll be interesting to see the first proper poll.
I am still in two minds about whether this is the right thing to do as I wrote the other day. I do, though, completely see the rationale behind being honest with the voters ahead of the referendum. It’s really important that Scots know what they are voting for. I said then that Osborne needed to be logical, reasonable and measured in his tone. By and large, he was. In fact, he was quite cold and forensic. I’m not normally one for giving added publicity to anything that George Osborne says, but he summed up the whole independence debate quite well with this observation:
People in Scotland are being asked to accept two diametrically opposite things at the same time.
That with independence everything in Scotland will change
and at the same time nothing will change.
The SNP wants to bring about fundamental change, but are giving false reassurance to people that things will stay the same, they’ll still use the pound, they’ll still have the Queen and they’ll barely notice independence. If that’s the case, what’s the point? Leaving the UK is a huge decision that will require changes in every aspect of our lives, and will involve massive risk and uncertainty. To pretend otherwise is wrong. If Osborne’s move yesterday gets more people realising that, then it will have succeeded.
The SNP’s line has been that the UK Government is bluffing and they will still be arguing for a currency union because that’s what’ll happen in the event of a yes vote. They have refused to give out any details of their Plan B. The tone of the debate on Twitter has been of the “You can’t stop us using the pound, na na na na na” variety. I’ve heard nationalists on discussion programmes also talk about using the euro or the dollar, like it’s really easy to do and there is no downside. Prominent pro independence folk like Jim Sillars and Dennis Canavan, neither of them every likely to be on message for the Yes campaign at the best of times, have repeated their calls for Scotland to have its own currency.
The Scotland Office’s Scotland Analysis paper on currency looked at the four options considered by the SNP’s Fiscal Commission and concluded that in every event Scots would be worse off out of the UK. Quelle surprise, I hear you say, but it makes sense. A new country doesn’t have a proven credit history. How tough do individuals find it to get credit for the first time? Well, it’s the same for countries, who generally have to pay a higher rate of interest. That feeds back to more expensive mortgages and borrowing costs for businesses for citizens.
Then of course there’s the fact that if you just use someone else’s currency, you don’t have a proper central bank, or lender of last resort. It was quite scary to hear SNP minister Fiona Hyslop suggest on Brian Taylor’s Big Debate today that the bank bailout in 2008 just benefitted the city of London. I was under the impression it protected the savings of ordinary people and their jobs, too. If there is nobody to give your banks liquidity when they need it, and they all do from time to time, a hitch quickly becomes a crisis.
You can’t really accuse someone of bullying when you then infer that taking your share of the national debt is conditional. Trying to get your own way by threatening not to fulfil your obligations is not far off blackmail. All the nonsense being put about by nationalists that it’s the UK’s debt abd nowt to do with them will amount to nothing when lenders make an independent Scotland borrow at exorbitant rates, if they allow it to borrow at all. Starting life as a pariah state that doesn’t pay its dues is not a good prospect. The idea that the SNP can just walk away from that debt is like me saying I’m not paying income tax because I’ve lost Child Benefit.
One of the great things about the independence debate is that we get Jim Naughtie back for our version of the Today programme a couple of days a week. This morning, he got closer than anyone else has done so far to getting Salmond to admit that there would have to be an alternative proposal at some point:
JN: Does that mean in the event of a yes vote you go into negotiations without another option in your back pocket?
AS: Well let me say for the third time Jim that the fiscal commission working group set out all of the monetary policy options for an independent Scotland but recommended the best one was a sterling area and that’s the one that we’re going to be articulating and that’s what you’d expect us to do….
JN: OK Alex Salmond says there is no alternative –
AS: No I didn’t say that Jim, I said
JN – I’m just checking
AS – Try again, I said the Fiscal Commission Working Group set out a range of monetary policy options for an independent Scotland…
Willie Rennie encouraged Salmond to get on with telling us his Plan B:
The penny has finally dropped. The First Minister has effectively conceded that the Sterling Currency union with the UK will not happen.
He pointed towards the options in his fiscal commission but he needs to tell us which one he’d choose. Would it be the Euro or a separate Scottish currency?
The clock is ticking. With 10 days until Scottish Cabinet meets in the North East, the First Minister can’t turn up empty handed. I am clear that the only way to keep the UK pound, and all the benefits which come with it, is to keep the strong UK family of nations. Now that Alex Salmond is without his Plan A he has a duty to tell people in Scotland what his Plan B is.
If Salmond goes into the referendum without fully explaining his alternative, then he’ll be asking the voters to pay the biggest game of chicken in electoral history. His comments to Naughtie suggest that he knows that even if he’s not prepared to explicitly say so just yet. His original suggestion that they’d just wait it out till after 18th September has been exposed as bluff within 24 hours. If he wants examples of bullying, bluff and bluster, he could easily look in the mirror.
* Caron Lindsay is Editor of Liberal Democrat Voice and blogs at Caron's Musings
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30 Comments
So Fiona Hyslop thinks the bailout only benefitted London? Kind of surprising that someone who used to work for Standard Life would forget about its close neighbour and competitor up the road, Scottish Widows, which is owned by Lloyds, or its former best pal on the other side of Princes Street Gardens, the Bank of Scotland (bailed out as part of HBOS.)
I think there was also another small bank which was affected by this – it was run by a bloke called Goodwin, I think? Surely she must have known a few people who worked there too….
To be honest Caron it wasn’t just the FM and Depute FM who were calling it bullying. Most European media reported it as a threat by Osborne. the BBC news site has “Will Osborne’s ‘bullying’ backfire?”
However I must admit to some confusion creeping in over what Sir Nicholas and Osborne’s position really is.
The BBC report states: Sir Nicholas “strongly” advised against a currency union with an independent Scotland “as currently proposed”.
And.. “One of the concerns raised by Sir Nicholas in his advice to Mr Osborne was that an independent Scotland might only take sterling for a short period of time. But Sir Nicholas suggested that, if an independent Scotland committed to a longer-term currency union, his advice might be different.
In the cold light of dawn this hardly seems the firmest of No’s
And it rather begs the questions – what alternative proposal and what timeframe would Sir Nicholas need to see offered before he changed his advice?
The relish with which some , including alas party members who should know better, have seized upon this with all the juvenile glee of” yah boo sucks to you Scotland” is depressing.
If there is a Yes vote in September I would hope a more pragmatic and good neighbourly approach is taken. Certainly as someone who hopes to see increased Lib Dem representation in the 2016 Scottish Parliament which will have to consider the matter I would want to know what our own Plan B is when we take it to the electorate in our 15/16 campaign.
Does Danny Alexander intend to do a volte face if the vote is for Yes on 18th September, and support negotiations for a currency union, or will he then follow Michael Ancram, Malcolm Rifkind etc and seek an English constituency?
Could Salmond explain why, in the event of a yes vote, the residual UK should be expected back the currency and underwrite the banks of a foreign country?
Robin Bennett 14th Feb ’14 – 4:28pm
Does Danny Alexander intend to do a volte face if the vote is for Yes on 18th September,
He has already done a volte face, only a few year ago he was in favour of currency unions. He was part of Britain in Europe at the time. But he does not know what he will be doing after September because the top civil servant in The Treasury has not issued him his instructions yet.
@ Robin Bennett
“Does Danny Alexander intend to do a volte face if the vote is for Yes on 18th September, and support negotiations for a currency union”
There will be no negotiations for a currency union. It is not in the UK’s interests to have a currency union with a foreign country. That’s the whole point. It’s been said loud and clear. Salmond needs to face up to it, rather than putting his fingers in his ears and shouting “lalalala..”, which is effectively what he is doing now.
@ Alex Dingwall
“Most European media reported it as a threat by Osborne”
Most European media are hostile to the unity of the United Kingdom, because it suits other countries to have a smaller entity, broken up into parts they can boss around at their convenience, doesn’t it? Do you think the French or the Germans wouldn’t secretly be rubbing their hands in glee at the prospect of the dismemberment of one of their longstanding competitors?
“In the cold light of dawn this hardly seems the firmest of No’s”
What conceivable doubt could there be about it? How could it possibly be acceptable to the British public to have to underwrite the financial sector of a foreign country, which is what we would be doing?
“The relish with which some , including alas party members who should know better, have seized upon this with all the juvenile glee of” yah boo sucks to you Scotland” is depressing.”
It’s not relish. It’s a determination to make things clear so the Scottish people can make up their minds when the vote in September. They should not be allowed to be told that they can have a currency union when that is not on the table, nor will it be. To pretend otherwise would be dishonest. I, like most of us, sincerely hope they decide to stay and not to sacrifice the many advantages all parts of the UK receive from the union, the pound among them.
It strikes me, Caron that quite a lot of current and former Scottish Lib Dems would react to the Osborne et al approach as bullying. Certainly a friend of mine who is a current LD would, I think take very badly to it.
If the next GE has no outright winner and the SNP have enough MPs to decide who will govern I imagine that a common currency zone is not such an impossibility after all. And as a habitual liberal, and son of Scots, alas it is being seen as an attempt at bullying. It will backfire.
Osborne: “People in Scotland are being asked to accept two diametrically opposite things at the same time. That with independence everything in Scotland will change and at the same time nothing will change.”
Yes, that’s bullying. It’s getting away from saying, reasonably, that we just can’t manage to run a currency union because currency unions don’t work. Instead it’s saying, hectoringly, that we’ve got the SNP hopelessly tied up in knots and so they’re totally stuffed.
That is a wonderful way to persuade the Scots that, never mind whether it’s workable, they will simply have to vote Yes, otherwise they are kowtowing to the English at their most insufferably arrogant!
@Leekliberal . Yes, you echo my feelings. The Scottish people are absolutely entitled to choose or reject independence for Scotland. What they are not entitled to do is demand (via Mr Salmond) that the enormous financial risk attached to Scottish independence is borne by the (mainly) English tax-paying electorate – many of whom are far from wealthy (especially in the area where I live). I am not a Tory or LibDem, but yesterday I believe that both Osborne and Alexander described honest financial reality; whilst to me (a bolshy, republican East Anglian) Salmond seems to be a rather childish and victim-status nationalist who always seems more than ready to “take his ball off the park” and go home to mum.
There is not going to be a currency union because the people in England, Wales and Northern Ireland would not be willing to use their money to prop up a foreign country. End of.
What would the commentators have said if Osbourn, Balls and Alexander had said’ we’ll wait until after the 18th September to decide on this’. They would have been pilloried for not making a definitive statement about an issue that is rather important for the voters of Scotland to be aware of before they vote.
Since when is stating the truth bullying? When did making clear what the options really are justify reneging on debts?
Salmon has been rumbled. he just doesn’t want to admit it.
Tim13 – Well then your friend has fundamentally misunderstood what independence means. If the Scots were to vote to leave the UK, then the institutions of the UK would serve the interests of the rest of the UK only. Those institutions are not there to serve people that have voted to leave. This is not bullying, it is constitutionalism of a sort practised around the world. A future Scottish government could have no expectation that the institutions of the UK would work in the interests of anyone other than the citizens of England/Wales/NI. I really don’t understand how this is, ‘bullying.’ Independence from the institutions of the UK means just that. Unless you have some other view?
There are, of course, options that Scotland could pursue – pegs, crawling pegs, euro (maybe) or it could issue a SCP, but if the only plan for currency independence rests on the consent of what would be foreign institutions then there isn’t a plan. That’s not London’s fault.
Personally I would think some sort of a peg is the most likely option in the event of a yes vote – at least for the short term, but I can absolutely see why the parties would not be keen on a currency union. Look at the Eurozone for some idea of the risk that would be inherent. I certainly don’t think that the so-called ‘zero option,’ that the republics of the Former Soviet Union followed would be a very good idea, even if the debt-free bit plays well on the internet.
Sorry but if Scotland votes to be separate then that should mean separate. They will no longer have an obligation to pitch in to problems affecting the rest of the UK and the rest of the UK should have no risk or obligation in the other direction. Otherwise why bother?
In fact if England follow suit where does that leave Wales and Northern Ireland? After all the Salmond logic that Scotland is a net contributor could easily be used for England. …
Mick Taylor – Indeed. I would suggest that saying that no decision on a currency union would be made before a referendum would have been bullying.
You are also right that we will almost certainly see some sort of debt-allocation. The ex-Yugoslav countries split the debt up (though I think the IMF offered some advice) and got on with it, and they were in conflicts at the time! The post-Yugoslav currencies stabilised pretty quickly even with debts, although they did get some debt-relief along the way. I don’t know if Salmond has any plans for debt-relief were he to seek to establish and SCP and a lender of last resort in Edinburgh.
The No campaign appear to be demostrating the textbook way to lose a referendum (ably supported by the Scottish Lib Dems):
http://livingonwords.blogspot.co.uk/2014/02/danny-alexanders-currency-union-u-turn.html
I am bemused by this. I have little to say for Salmond (other to admire his abilities as a politician) and I have no doubt it’s a matter of pots and kettles. (and frying pans too).
But does anyone think that if Scotland voted yes, there would not then be some very serious negotiations on everything under the sun, including currency arrangements? And that the residual UK government would not look hard at what was best for the residual UK. Which might well – in spite of all the difficulties – be a currency union?
Just because Salmond himself may be a blustering blagger does not mean that he is always wrong on everything. Or on this particular issue.
Just because Salmond and the SNP are a pot does not mean that the London-based political establishment are not a collection of non-credible kettles.
Tony
More than a few comments about the arrogance of Scotland’s First Minister to suggest a currency union was or is viable. The FM however did not just come up with this idea and perhaps it will help colleagues if they recall where the original proposal for a currency union came from in 2013.
The report: was titled “Currency Choices for an Independent Scotland: Response to the Fiscal Commission Working Group”. The Fiscal Commission Working Group, a sub-group of the Scottish Governemt’s Council of Economic Advisers, consisted of four eminent economists,
Professor Andrew Hughes-Hallett,(Professor of Economics & Public Policy at George Mason University and visiting Professor of Economics at the University of St Andrews; former consultant for the World Bank, the International Monetary Fund, the Federal Reserve Board, the United Nations, the OECD, the European Commission and various central banks
Professor Sir Jim Mirrlees, (Emeritus Professor of Political Economy. University of Cambridge and recipient of the 1996 Nobel Prize in economics)
Professor Frances Ruane (director of the Economic and Social Research Institute (ESRI) )
Professor Joseph Stiglitz, (University Professor at Columbia University, recipient of the 2001 Nobel Prize in economics and former World Bank chief economist,)
The working Group was chaired by Crawford Beveridge (former Chief Executive of Scottish Enterprise)
The report stated:
“The Working Group considered four options
o Sterling;
o The Euro;
o A Scottish currency pegged to Sterling; and,
o A flexible Scottish currency.
“Scotland could choose any of these options and be a successful independent country. ”
“Following a detailed analysis of the various options, the Working Group – “commends to the Scottish Government retaining Sterling as part of a formal monetary union, and believes that this provides a strong overarching framework for Scotland post-independence.”
[Paragraph: 2.4]
The Working Group also noted that – “the preferred model would be for Scotland to enter a formal monetary
union with the rest of the UK with the Bank of England (the Bank) operating as central bank for the common monetary area (the ‘Sterling Zone’).”
[Paragraph: 3.29]
The Scottish Government is clear that post-independence it will always be up to the people of Scotland, and their elected government, to decide what our currency should be. However, the present Government has the responsibility of negotiating what the best starting point would be for an independent Scotland.
The full report is publicly available: http://www.scotland.gov.uk/Publications/2013/04/5881
I am bemused by all this; in the polls, the opponents of Scottish independence *in Scotland* regularly display an absolute majority, while the proponents of independence struggle to stay in the mid-30s. Speculating about a possible independent Scotland in ways that seem calculated to belittle and antagonise Scots is pointless and ultimately counterproductive. The best thing those who want the UK to stay united can do is to shut up and say nothing; this done, the case for independence will collapse of itself. Attempts to bully or provoke Scots can only strengthen the pro-independence party, which — while unlikely to result in a victory for the Yes vote, could result in that worst of all possible outcomes, a close and ambiguous result.
@ DA – ” Instead it’s saying, hectoringly, that we’ve got the SNP hopelessly tied up in knots and so they’re totally stuffed.”
So, if he had said the same thing in a nice way it would not have been bullying?
Sorry, I cannot see that what has been said by the three is bullying.
It is a consequence to an action initiated by another.
@David Allen – it is not ‘bullying’ for Osborne to point out that Salmond appears to be trying to have it both ways, it’s just debate.
@Alex Dingwall
Thanks for your contributions to this debate. It is good to have authoritative quotations and references.
@David-1
Surely the best thing is to skew the polls as the last thing that is needed is a lot of pro-union supports deciding they don’t need to actually vote…
@Alex Dingwall – I don’t think many people are arguing that a currency union wouldn’t be a good deal for a post-independence Scotland. The point is that it isn’t something a post-independence Scotland can deliver unless the rest of the UK agrees to it. If they won’t, then the Nats need to explain what they will do, of the options that are actually available to them.
I think Salmond is just sore because his “Project Unicorn” (putting forward an imaginary wondrous world where Scotland obtains everything it wants without negotiating or bearing in mind the interests of the UK) has been rumbled. Hence the passive aggressive stance: “You won’t give me everything I want. You’re so mean and horrible. You big, mean bully you.”
The problem is, Plans A+, B and C (Using Sterling without UK consent, own currency and Euro) aren’t particularly appetising and nor would they, now, just seven months from the referendum, look particularly convincing. Salmon’s unicorn has stumbled badly and switching to a different one, mid-race is going to be a virtual impossibility.
I guess the simple point here is that one side does not unilaterally decide on a union of any type. Salmond is within his rights to state that he would seek a monetary union and those holding the finance brief for the main three rUK parties are entitled to state their viewpoints. As all three were negative then the idea is probably dead in the water.
The experience of the Irish Free State (1922-1937) and then Eire is appropriate for this debate.
From Wikipedia:
http://en.wikipedia.org/wiki/Irish_Free_State
Has anyone offered to speculate on how currency problems in this imaginary independent Scotland would affect the economy of the RUK?
I wasn’t aware of the report that Alex Dingwall cites, but its conclusions seem quite reasonable. Capital markets like stability and any of those choices: continued use of Sterling, a switch to the Euro, or a Scottish currency that is guaranteed to be pegged to either the Euro or Sterling (think Switzerland or Denmark, for example), would provide confidence that the new nation’s monetary policy would be stable. The concern would be around a productivity gap such as that which has left the Eurozone periphery condemned to eternal deflation/austerity.
The argument that is being made by the “NO” campaign is really just an emotional one based on the (correct) assumption that most people are conservative and don’t like change in the fundamental certainties of their lives. Harold Wilson suffered at the ballot box after devaluation and his “the pound in your pocket has not changed” speech. Telling the Scottish people “you can’t keep the pound if you vote yes” is a clever campaigning tactic, nothing more.
It’s interesting to see the he mask slipping on so many English Lib Dems when it comes to Scottish issues; the bile is truly amazing and shows why the Lib Dems are finished as a serious force in Scottish politics for at least a generation. There is no real commitment to a federal UK or any further devolution. Essentially it seems what England says goes ; the real breaking point may come when England votes to leave the EU under the leadership of your new, best friends the Tories.
Further devolution isn’t on the table here, it is independence. And I struggle to see how a currency union would work, especially one where UK taxpayers pick up the tab for any run on a Scottish bank.
If Salmond wanted devo max, he should have asked for it