What Shall We Call It Now?

When I got home yesterday evening two door-drops greeted me, one from the UK Government (Five Ways we Benefit by Staying in the United Kingdom) and one from the Scottish Government (Scotland’s Future: What Independence Means for You).

The former states as follows:

The pound is one of the strongest and most stable currencies in the world. Staying in the UK is the only way Scotland can keep the strength of the Bank of England and the pound as we have now. Setting up a new currency for an independent Scotland would be costly and risky.

Three claims. Each of them true. None of them overstated. None of them exaggerations. None of them scaremongering. No threat to “take away the pound”. No nonsense about an indy Scotland “not being able to use” the pound. Just three accurate, carefully worded, true statements.

By contrast, the latter states as follows:

We’ll keep the pound. An independent Scotland will keep the pound. After all, it’s as much Scotland’s currency as it is the rest of the UK’s.

Three claims. Two of them deliberately misleading; one of them demonstrably false.

Here, in a nutshell, is the problem we now face in Scotland. This ought to be, but in fact is not, a clean argument between two honest visions of Scotland’s future. What we in fact have is an argument in which one side tries to be reasonable, fair and clear and in which the other side has a marked disregard for the truth. What on Twitter has been called #yesperation has evidently started to cloud the judgment of the Scottish Government.

It may very well be that an independent Scotland would keep the pound. As I have written before, there is little the rUK could do to stop this. The pound is a freely traded currency on the money markets. Any state could adopt it as their unit of exchange should they so wish. But no state does so. Why? Because to use the currency of a foreign power would mean surrendering the entirety of your monetary policy to that power. This would make your country more dependent on that foreign power, not independent of it.

In order to use the currency of a foreign power without surrendering sovereignty over your monetary policy you have to enter into a formal currency union with that power. And this is what the SNP say they’d like an independent Scotland to do: “our proposal is for a formal currency union with the rest of the UK”. The SNP insist that “this makes sense” for the UK economy, despite the fact that the Chancellor George Osborne, the Shadow Chancellor Ed Balls, the Chief Secretary to the Treasury Danny Alexander and the Permanent Secretary to the Treasury Sir Nicholas Macpherson have each given lengthy and compelling reasons explaining why entering into such a currency union with an independent Scotland would be contrary both to the economic and to the political interests of the rUK. See here for all the detail. This is why they have formally ruled out a currency union with an independent Scotland. And this is why the UK Government door-drop carefully states that “staying in the UK is the only way Scotland can keep … the pound as we have now”. What the Scottish Government door-drop should have stated is “we’ll keep using the pound, despite the fact that once we are independent it will be the currency of a foreign power”.

The pound does not belong to Scotland. The statement “it’s as much Scotland’s currency as it is the rest of the UK’s” is false. The pound is the UK currency. It belongs neither to Scotland nor to England but to the UK. If Scotland votes Yes next month, Scotland will have voted to leave the UK. Leave the UK and you leave the UK’s public institutions, including the UK pound. This has been clear for months and months and months, yet still the Scottish Government are in denial about it. But you no longer have to take my or any other No campaigner’s word for it. Last month Lawyers for Yes wrote on their website that it is “true to say that the public institutions of the UK would become the public institutions of rUK” and that “the Bank of England is a UK body and the pound is the UK’s currency, and as ‘institutions’ of the UK they would stay with the UK”.

There you have it. Lawyers for Yes admitting that what the UK Government have said is correct and that what the Scottish Government continue to say is wrong in law. In the law we have a word for what the SNP are doing. That word is misrepresentation.


10 thoughts on “What Shall We Call It Now?

  1. I am less angry than sad that the Scottish government has resorted to such trickery and evasions in order to put their case. We are the nation that produced David Hume and Adam Smith, who gave our children a decent education long before our neighbours, whose – admittedly over-stern – Calvinist heritage taught us to be honest and straightforward. Salmond and the Yes campaign could have taken the moral high ground. They could have said “all these problems face us, but it will be worth it”. Instead they have ducked and dived and done everything to persuade us to vote for them, except give us the full facts and take responsibility. Salmond’s Scotland is built on illusion and false promises; it is not the Scotland I want, either independent or part of the Union.

  2. I can say, I think, with almost certainty, that the only reason why a currency union is in the independence manifesto is because the Scottish Government polled uncommitted voters who said they preferred to keep the currency. The Government is totally focused on getting over the finishing line. If a policy helps get them there it’s in the White Paper and if its doesn’t it’s out. Whether the policy makes sense in an independent Scotland is not considered.

    Possibly the policy makers assumed the UK would turn them down and they would go for an independent currency,or possibly they thought a transition period to an independent currency would be useful. The main thing is all that could be sorted out once the vote was in. They didn’t count on the UK government spearing their plans quite so emphatically before the vote happened.

    Having accused they other side of “Bluster, Bullying and Bluffing”, they aren’t in a position to turn round and say they were bluffing themselves all along about the currency union. So now they are shackled to policy that even they don’t believe.

  3. As you’ve written before, they’ve tried so hard to de-risk independence that they’ve veered entirely into propaganda. I question whether the SNP truly believe their claims or realise now that they’re in too deep to come clean. Either way, they’re misleading the Scottish people.

  4. The SNP can’t even come up with three claims. It’s actually two claims, one repeated. “We’ll keep the pound. An independent Scotland will keep the pound”. This is pretty much identical to what Salmond said several times in the debate.

    The ‘argument’ seems to involve repeating this endlessly, claiming it would be best for the UK , repeatedly because “we say so”.

    The only adduced arguments for it are :

    1) the unnamed minister in the Guardian
    2) the transaction taxes that may arise.

    The former is one person’s view at best ; the latter will simply force businesses who deal mostly with rUK to move to rUK to avoid transaction taxes. You can bet that the rUK government will encourage Scots businesses to move to the North of England.

    With respect to 1) did anyone else think Alex Salmond’s reliance on quote mining yesterday was just weird ?

    • Once again a precise and excellent article on this (for me) divisive and loose loose referendum, one point that baffles me slightly is the transaction costs to business discussion, I deal with Italian products imported into UK and exchange rate effects are (nearly) always passed onto the end consumer, up or down, not the business’s themselves, so the increased costs will be borne by constituents of the looser in the currency game, on whichever side of the proposed border they may live. Dare I say the losers are more likely to be north rather than south of the border.

  5. These comments above are crisp and correct. I half expected AS to pull a surprise, announce Plan B on Tuesday night and give AD a problem. But he didn’t and they are stuck with a policy all can see is hopeless. It won’t go away. They are like a hugely overweighted diver, going down. What amazes me is the overriding impression of ineptitude. Did they really think they would get away with it? .

  6. There’s something else very interesting in the article:
    The article claims that:
    “as the Scotland Institute report ‘Debt and Destiny‘ confirms, it is equally clear that the pound Sterling is an ‘asset’ in the broad sense of the word, that it has a value, and that this value is to be recognised in a division of assets.”

    In reality, there is no such discussion in the Debt and Destiny report, which merely refers to the position on the issue taken by Scottish Government and the UK, and specifically states on page 43 that:

    “This report does not consider whether or not currency as a means of exchange is an asset for the purposes of state property and succession.”

    I’ve written to Lawyers for Yes and the Herald pointing out the error

  7. It is difficult to see how, as a fiat currency, the pound Sterling is in any way an ‘asset’ in the sense of having an intrinsic value to be divided. Replacing every instance of “the pound” in the Yes literature with “a currency that derives its value from the regulation and laws of the UK” reveals the fundamental problem of reliance on a foreign government that sterlingization would bring. The addition of “and Scotland” to that definition would surely be difficult to sell to the electorate in the remainder of the UK as it would partly concede control of a central bank to a foreign country which would comprise a relatively small proportion of foreign trade (much less than, for example, the Eurozone)
    It is, to me, almost inconceivable that the rUK would sign up to a currency union unless an independent Scotland’s representation on the board of the BoE comprised only a small minority of decision-makers, leaving the end result very similar to that of sterlingization.

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