Economic interests will prevail if Scotland chooses Independence
In some ways, the real news story today would have been if the Chancellor had come to Scotland to say something other than that, in his view, keeping the pound would be terribly difficult for Scotland.
He is, after all, a member of the UK Government - which is against independence – and it’s in his interest to imply that an independent Scotland wouldn’t be able to use the pound.
By contrast, the experts on the Fiscal Commission Working Group have no axe to grind. They simply took a detailed and exhaustive look at the various currency options that would be open to an independent Scotland and concluded that staying part of a sterling zone would be the best option for Scotland and for the rest of the UK. They also concluded that, notwithstanding the fiscal discipline that this option (and indeed any other currency option) would require, independence within a sterling zone would give Scotland substantial economic levers to grow our economy that we simply do not have at present.
The fact of the matter is that, if Scotland does vote for independence, the frenzied self-interest that we are hearing from the Chancellor today will quickly give way to more rational and hard headed economic interests. They might prefer Scotland not to choose independence (which is their right) but, if we do, here are just three economic reasons why the rest of the UK would also prefer a continuing sterling zone to any of the other options that would be available.
1. Trade. There is about £45bn of trade that flows – in each direction – between Scotland and England every year. Businesses – in England and Scotland – will want to continue to trade in sterling.
2. Balance of payments. Scotland would make an important contribution to a Sterling zone’s balance of payments. Our onshore economy exports £23.9 billion in goods and services to the rest of the world; whilst oil and gas production, the vast majority of which occurs in Scottish waters, boosts the UK balance of payments by a further £40 billion. Given the state of the UK economy, they won’t want to give that up.
3. Debt. If the UK government sticks to the line that an independent Scotland has no right to a share of UK assets (after all, it is our pound and our central bank as much as it the rest of the UK’s), then the inescapable quid pro quo is that we won’t be liable for any of its debts either. Somehow, I don’t think that’s an outcome they would be happy with.
Our position, supported by world-leading economists, is that within a monetary union Scotland would be able to use fiscal and other important economic levers to grow the economy and create jobs. The UK government says it disagrees. This means they have, in effect, ruled out any further transfer of tax powers within the current system as we are, of course, within a monetary union now, which the Chancellor says is incompatible with fiscal flexibility.