Thursday, 25 April 2013

Pounding the Scots

'Is there enough cash in here?'
It's not often I agree with George Osborne. In fact counting on the fingers of one hand would probably leave a couple over for a rude salute. Yet I have to say that I have some sympathy with the UK government's recent observations on what would happen to an independent Scotland when it came to currency.

The SNP was quick to point out that the Osborne observations were little more than campaigning for a 'no' vote in the upcoming referendum (which I still think should be open the all of the UK, not just Scotland), and they were probably right. And yet I am all in favour of Scottish independence, but I can still see Osborne's point.

There seem to be four options available:

  • Go into the Euro
  • Keep the pound in some kind of 'Sterling zone'
  • Use the pound without official sanction from the UK 
  • Set up a separate Scottish currency
Of course until recently the Euro appeared to be the desirable option to the SNP (if you set aside the possibility that Scotland might not have been accepted) - but it has become a poisoned chalice. No one wants that anymore. The 'Sterling zone' is the SNP's new idea, but I really can't see why the rest of the UK would want it. All the evidence is that currencies across multiple sovereign states produce serious problems. Scotland could go for the unofficial pound, just as Panama uses the US dollar, but I suspect this is considered beneath the SNP's vision of a proud, independent Scotland. As for a DIY currency, the SNP is rightfully wary, because Scotland is sufficiently small for this to be a risky approach indeed. Even so, it may be the only real option.

What I was fascinated by was Alex Salmond's rather petulant 'If you won't go with a Sterling zone, we won't accept our share of the deficit.' It made me wonder just how that would work. Given a national deficit isn't like a building society loan, split after a divorce, how would it work? Who would decide who gets what if both sides are saying 'I don't want this bit'? It's an interesting conundrum.

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