Successful partnerships or unions depend on give and take.
Political unions provide for this. Money raised from taxpayers can then be
transferred to wherever in the union needs it: in bad times and good, and over
time. Our Union, as the UK including Scotland, has worked like that pretty well
over the past 300 years.
One element of a political union is common money,
underpinned by a currency union. That’s why we all have the pound. The money we
use matters to us all. It must be universally accepted in payment; prices must
be stable. And crises like 2008 must not undermine it.
So Mr Salmond’s claim
that if Scotland votes ‘Yes’ there will be no change for Scotland’s money is a
delusion at best. A vote against political union is also effectively a vote
against currency union.
The Scottish Nationalists think that the three political
parties who rule out a currency union are bluffing. But why would the rest of the UK wish to support Scotland with their
taxpayers’ money?
Claims that it is in the UK’s interests to continue the
currency union forget the potentially open ended longer-term commitments:
whatever the short-term trade benefits.
And to insist that Scotland would be stronger than the UK is
not self-evident. The lessons are there in the European Union. The UK rejected
the euro because we knew this needed political union.
The euro’s difficulties won’t be overcome until that can be
achieved. It’s not there yet, and the lack of political union today prevents
wealth transfers where needed: resulting in mass unemployment in Spain,
Portugal and Greece.
Of course Scotland has other options. They all involve
change, and risk. Scottish nationalists may feel the risks are worth it. But
they need to know what they would be.
Scotland could
continue to use the pound but with no formal agreement with the rest of the UK.
Some small countries do this: Kosovo uses the euro, Panama the US dollar and
Jersey the pound.
The consequence for the Scots would be that they would have
no say over monetary policy. The rest of the UK would issue the pound, and look
first to its own interests, not Scotland’s.
Another consequence is that banknotes issued by Scottish
banks could be in jeopardy. Today these are equivalent to Bank of England
notes, but people might think otherwise if the bank was in a foreign country.
Mr Salmond could peg
the Scottish pound to sterling. But Scottish taxpayers would need to build a
multibillion pound reserve to defend this against speculators, to avoid what
happened when the UK itself was forced out of the parity with the developing
euro [ERM] as recently as 1992
Further reading here:
