Scottish First Minister Nicola Sturgeon will unveil a bold new vision for the Scottish economy tomorrow in the wake of her pledge to “restart the debate” on independence.
The announcement has stoked speculation that Scottish National Party (SNP) leader will call for the use of pound sterling to be discontinued in favour of a national Scottish currency.
Would an independent Scotland ditch the pound?
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Tthe 354-page blueprint, due to be published by the SNP’s Sustainable Growth Commission, “will recommend that the pound be used on an unofficial basis immediately after independence before moving to a new currency pegged to sterling”, reports The Daily Telegraph.
Economics professor Ronald MacDonald, of Glasgow University’s Adam Smith Business School, told the newspaper that tens of billions of pounds in foreign exchange reserves would need to be raised to protect the currency from economic shocks.
MacDonald warned that pegging the currency to sterling was a particularly “bad idea”, since it would require a far higher level of reserves - potentially hundreds of billions of pounds - to “defend it from market attack or if Scotland’s economy performed poorly relative to the remainder of the UK’s”.
However, Scottish independence campaigners told Scottish newspaper The National that they want Sturgeon to go further than the commission’s proposals. The Yes Edinburgh North and Leith group said they have long argued that “in order to truly function and flourish as an independent state, [Scotland] needs at its disposal, the full range of monetary and fiscal levers”.
A statement from the group added: “We are very concerned... that the Growth Commission’s preferred position involves a period of sterlingisation before moving to a Scottish currency only after a series of economic tests have been satisfied.
“While perhaps designed to make its economic plans look prudent, it serves to increase the complexity surrounding the currency question and will increase uncertainty in the minds of the voters.”
What are the other options for an independent Scotland?
The SNP proposed a currency union ahead of the 2014 referendum that would have seen the country continue to use the pound.
But “a formal arrangement was ruled out by then-chancellor George Osborne in a move that was widely seen as being a key factor for Yes losing the vote”, says the BBC.
Bank of England governor Mark Carney, however, has said it would be economically possible for an independent Scotland to have a currency union with the rest of the UK.
Earlier this week, Carney was asked by MPs on the Commons Treasury Committee whether he believed a currency union also required a political union.
He replied: “No, from the strict economics, it doesn’t.”
Carney added that it was for “others to judge” whether a political union was essential for Scotland to continue using the pound, “in comments that some pro-independence campaigners will claim as a softening of the Bank of England’s stance on a currency union”, says The Scotsman.
