Thread by @Ben_Wray1989

This front-cover led to a lot of excitement (inc from me) that the SNP leadership had listened to members and dumped the Growth Commission's currency plans.

But the details of the motion mean delegates at the spring conf have A LOT of work to do.

THREAD

commonspace.scot/articles/13933…

Here it is: it contains a litany of problems for Scottish currency advocates. If this becomes the official position, unamended, you can forget about a currency being introduced in first term of parly, & indy campaigners are going to have a hell of a task selling it on doorsteps.

1st and probably biggest problem is the motion keeps the GC's 6 tests. Like Gordon Brown’s 5 tests for the Euro and Starmer’s 6 tests for May’s Brexit deal, it has 1 purpose: to prevent the thing you are testing from ever coming to fruition, without publicly rejecting it outright

The tests are designed for a Scottish currency to fail, because they pose questions about the economy in the present, when a currency is an idea for changing the economy in the future. The idea of a Scottish currency has to answer for all the problems of a Sterlingised Scotland.

So for example two of the tests relate to the economic development pattern of the Scottish economy: whether it is de-linked from the rest of UK’s investment patterns and the rest of UK’s economic cycle. Unless it is de-linked, a Scottish currency fails the test.

But without first establishing a Scot currency, it is extremely difficult for iScotland to break from the UK’s development model, as iScotland will be locked into the City of London and bound to the Bank of England, as we will have outsourced monetary policy to the UK state.

This will be doubly so after Britain leaves the EU, because iScotland will have the same international trade regime as post-Brexit UK if it doesn't have its own currency. Keep pound Sterling, no EU membership.

Another test states iScotland would have to already have sufficient Foreign Currency Reserves (probs £30-40 bn). But with no guarantee of setting up a currency, no gov is ever going to set aside that sort of money from tax revenues, meaning Scot£ would automatically fail the test

One of the tests relates to the Growth Commission's targets for deficit reduction, fiscal targets which aren't actually in the SNP's motion. But the six tests are in. So that's confusing: is deficit reduction in the GC - which is regardless of growth rates - in or out?

The motion correctly states that "no single currency" approach is used by small indy countries, but Sterlingisation would be an unprecedented experiment: all dollarised/Euroised countries have GDP's <1% of their currency zone. Scotland's is far bigger, with a big finance sector.

Despite the fact this is a total experiment which would leave iScotland with big risks (no lender of last resort if there's a financial crisis), there is no tests placed on Sterlingisation in the SNP's motion. Why is that?

while the motion is correct to state that the £ “is available for Scotland to use”, so is any internationally recognised currency: that’s different from owning and controlling the currency with the powers of setting interest rates & everything else that goes with monetary policy.

And the motion makes reference to the Irish free state using the £ after indy, that's a really bad example: it's widely seen as having been a disastrous move, as @RichardJMurphy has pointed out.

Finally, there is the key Q of process and timing. The motion’s plan to put the idea of a Scottish currency up to annual assessments - “guided by the six tests” - may sound sensible, but it’s a recipe for constant uncertainty about the direction of the Scottish economy.

Sterlingised Scotland will be under enough pressure from money markets for the reasons explained above. The annual tests will be a big target on Scotland's head for money speculators. Any move to a currency would be a signal of lack of confidence in Sterlingisation.

Thus, here's the thing: the motion actually increases the confusion about iScotland's currency position. The GC report was clear that Sterlingisation was what it wanted to start with until "some future date", meaning a good chance there'd never be a Scot currency. This motion...

...says 'we want a currency, but we don't want to commit to setting it up, instead we want to start with Sterlingisation and then we want to submit a Scot currency to annual tests which it will fail'. That's totally confused and possibly the worst of all worlds.

SNP members will have to decide at the spring conference next month if they want to be in favour of setting up a Scottish currency properly - which means with full commitment and as soon as the country’s ready for independence day.

Some have argued that is premature, but if it’s premature to set-up a Scottish Central Bank & currency, why isn’t it premature to set up all the other institutions that an iScotland needs like a military, a foreign office with international embassies and an immigration system?

You're either ready to be a proper indy country or your not; you either set up a currency or you don’t. The alternative to doing it properly is to go into #indyref2 with a half-way house which doesn’t make it clear to voters whether a Scottish currency is coming or isn’t. ENDS