The Battle for an Independent Currency


Everyone accepts that a currency union would constrain the economic power and sovereignty of an independent Scotland. The Scottish Government’s own Fiscal Commission says handing national monetary policy back to the UK would mean “the Scottish Government would have no input into the governance of that monetary framework.” Economic shocks would have to be absorbed using fiscal policy, there would likely be no-one to stand behind Scotland’s financial institutions during the next crisis, and Scotland would lack powers over inflation and interest rates.

Despite these trappings, such pseudo-independence would grant Alex Salmond his life-long goal, the dominion of Scotland. So the SNP, the Scottish Government and even Yes Scotland battle on with their demand for currency union. And given these forces’ dominance of the campaign for a Yes vote, they hardly pay other alternatives any attention – objections and assaults from the likes of Sillars and Canavan just glance off the Scottish Government’s armour. It is a forerun of one post-independent scenario, where Salmond and his knights knock aside the arguments against them to the left and right with a swing of their governmental broadswords.

But though currency union sceptics and radicals have been ignored, we now watch our older enemy, Britain, insisting that the gradualist tendency of a currency union will not be an acceptable truce. The coming fight risks damaging the only leg that the main bodies of the Yes campaign have agreed to stand on. But it also exposes them to an attack from radicals who seek economic sovereignty. Our strategy is to rally a demand for economic power.

The Trouble with Gradualism

Even leaving aside the obvious fact that Britain does not want Scotland to secede, the more direct reason for their assault is simple. As Tomkins argues, the trouble with gradualism is that independence can be seamless only if others sacrifice their own interests to the advantage of the new state. The British state is unwilling to cede a degree of its national sovereignty to a newly independent Scottish state. The House of Commons are reluctant to cede sovereignty to anyone, never mind ceding it to “a newly foreign power that had just decided to leave the jurisdiction.” Of course, gradual self-determination, if done properly, could amount to federalism of the kind desired by some in Labour. But it is not likely to be the approach of a Tory or One Nation Labour government.

The SNP will not admit Britain’s reluctance to cede sovereignty, so holds its ground and insists that the currency union is going to happen. It does this by insisting a) that it is economically the best and most viable option b) that because it is economically viable and advantageous, it will be chosen by the UK government. Again as Tomkins says, the SNP, by reading the Governor’s “we could make this work” speech as an endorsement of the idea that “it will happen”, blurs over the basic distinction between economics and politics. Economically it could work, but it would require the rUK ceding a degree of national sovereignty. The SNP’s implication is that if a Westminster government doesn’t agree to a currency union, they will be acting against their own economic interests.

The SNP’s economism – that the economic interests of a government will determine its political choices – is supremely out of line with the politics of Toryism and One Nation Labourism. It also rests on an ideology against which Left-wing forces are ranging. And the SNP wants economic control to be separate from the people’s political and sovereign power, and they are content to allow the forces of monetary policy, banks and currency to rule the Scottish economy. This is unacceptable for those who seek real economic power for people in Scotland

The Left’s demand for economic sovereignty

Much of the pro-independence left present the demand for economic sovereignty instead of the SNP’s gradualism. They mostly favour the Fiscal Commission’s ‘second best’ currency option, an independent currency, giving policy makers “maximum policy flexibility” representing a “significant increase in economic sovereignty”. Jim Sillars, Dennis Canavan, Patrick Harvie and Colin Fox have demanded an independent currency, pegged to the pound for the short-to medium term – but this has not been developed or thought through.

We have the basic line and a principle, but these are not powerful weapons, nor do they solve the problems with an independent currency. It would be very expensive, as everything would have to be redenominated: every contract, mortgage, salary, wage packet.These changes would likely lead to capital flight – causing another contraction in investment. It would also be uncertain: the new currency might fly, or might sink, starting a currency crisis.  Even if we were able to reduce the costs of exports and increase our balance of trade, economic stability would rest on increasing our supply of manufactures. Raising tax on the rich, creating productive work, and boosting social investment (an expensive option for a newly sovereign country) would not be enough to cover these costs, which would have to be borne by the people and the economy probably through another bout of austerity, causing an inevitable downturn for which Scottish people and capital are unprepared and unwilling.

These risks are huge and unattractive to a risk-averse electorate. We need a strategy, a negotiating position, and a plan. Our demand is electorally risky, economically radical, and potentially disruptive for a stagnant and undynamic economy, and we have yet to suggest any kind of timescale for transition.

The best answer for the Left is therefore a dishonest one: to keep supporting a currency union, or at least to tacitly accept the SNP’s negotiating position and posturing. We should not be under any illusion that this outcome is viable – because the rUK are unlikely to cede sovereignty – or desirable – because the conditions and constraints would undermine the case for independence. So while we accept electoral pragmatism, we can prepare for a quick transition in the period that follows a Yes vote, so that a left-wing party or coalition of parties will win the 2016 elections and quickly introduce an independent currency, without an electoral mandate.

A Left alliance for an independent currency

If negotiating with a Miliband government, this coalition could pick one of two options. Either an amicable Home Rule, quasi-federal settlement where monetary policy is reconstituted as a joint agreement – yet this option has been ruled out by Ed Balls, and the above arguments as well as a recent poll suggest it would be unviable. The other option is a quick and UK-government supported shift to a new currency, with some joint UK and Scottish control of capital for a period of time, to establish the new currency in the optimal way with the least political or economic disruption.

This latter plan may be costly, and given the costs of transition to a new currency for Scotland it may well inhibit other policy options for this Scottish government, as well as harming the interests of the coalition parties in the short run. But it may also raise opportunities for innovative direct economic involvement of the new Scottish state in the economy, because it would require the state to provide new forms of work in place of the flown capital as well as extending support to those who will lose in the short term. Oil revenues could underpin this transition and pay for the welfare and economic investment that would make this approach socially constructive and humane.

One positive result of this economic strategy is that the priority of this government will have to become the real people, and production of the economy itself. Work will have to be done well and efficiently, to ensure that even if the currency is unstable, the economy itself is stable and productive – the state will have to support this, and capital and companies will have to be made to work in the common interest rather than for profit, at least for the transitional phase. This seems a difficult and ambitious challenge especially given the downbeat condition of our economy. But there appears to be no other option. And so long as we are prepared for it, the state intervention, investment control, turmoil of capital and economic reconstruction that will follow can be used to the people’s advantage.


4 thoughts on “The Battle for an Independent Currency

  1. “The best answer for the Left is therefore a dishonest one: to keep supporting a currency union, or at least to tacitly accept the SNP’s negotiating position and posturing. We should not be under any illusion that this outcome is viable – because the rUK are unlikely to cede sovereignty – or desirable – because the conditions and constraints would undermine the case for independence. ”

    Build support for your politics on the basis of lies and deceit? Contemptible

    Leaving aside the utterly fantastic nature of your scheme you propose that, after having lied its way to power that the Left “quickly introduce an independent currency, without an electoral mandate.”

    So the path to radical change is to dependent on deceit AND a contempt for democracy? Yeah – that’s gonna work.



  2. Stephen,

    First, on ‘building support for our politics on the basis of lies and deceit’:

    To clarify, for the left to keep ‘supporting a currency union’ obviously means being involved with and promoting the arguments of an independence campaign whose main organisations, Yes Scotland and the SNP, support a currency union. Many on the left have decided that because of the opportunities a Yes vote brings, it is tactically worthwhile to back this campaign, in much the same way as elements of the left within Labour put forth a case on doorsteps with which they disagree. Yes Scotland’s message is generally what the SNP decides, at least on currency.

    This does not mean keeping silent about the advantages of an independent currency, but we might say on doorsteps that there will be a currency union. Call it lying if you want, but this is the equivalent to supporting the party line. If we were to avoid campaigning for Labour because it meant supporting, or tacitly accepting, bad positions, then we would find our influence diminish, harm the better goals of our party, and not campaign very much.

    As for the ‘utterly fantastic nature of our scheme’, we concede that much of this is thought experimenting on a certain series of events and victories for the left – but we feel this is a valuable exercise, and we think it is less fantastic than a British Road to Socialism. We aspire to make this period of Scottish politics into something that is currently hard to imagine: for a Yes vote to be just the start of a period of far-reaching political and social change, beyond the current imagination of our political class and of the public.

    As for ‘the left’ having ‘lied its way into power’ – no, the left will work for a Yes vote as part of a campaign based partially on some non-ideal principles, but will not win power this way. After a Yes vote, the pro-independence Left (whether in one party or more) will no doubt campaign for an independent currency in the 2016 election, so will not be winning any power based on ‘lies’.

    This left party or parties will not win government, but we want a ‘left-wing party or coalition of parties’ to win in 2016. We want Labour to win (on as left-wing a platform as possible), and we want a coalition of Labour and this Left party to govern after 2015, and to introduce an independent currency.

    And as for whether this is democratic, I suppose the phrase ‘without an electoral mandate’ is a lamentable (or Lamontable) slip of the fingers. But Labour has said a currency union would be ‘undemocratic’, and so an independent currency will be the best way to restore democracy. So Scottish Labour will remain opposed to a currency union (or else will be arguing against the position of UK Labour and Balls), but rather than signing up to an independent currency they may fight the post-independence elections without seeking a mandate for any currency option.

    We want Labour to be the biggest party after the 2016 elections. But even if we beat the SNP, we think Labour will not win a majority in Parliament, so lets suppose we end up with a Left-Labour coalition (our preference). This coalition will have to act on the currency issue. If Scottish Labour are true to their words, and are to avoid clashing with Miliband’s Westminster government, they will oppose a currency union and back a different option – the best and most viable of which is an independent currency. The Left part of this coalition will have a mandate for this, but the larger Labour will not. Thus, their implementation of an independent currency, which is in the interest of Scotland, will lack an electoral mandate.

    You say the path to radical change is dependent on deceit and contempt for democracy. We think it is dependent on compromise to win a Yes vote, then pragmatism for Labour to win in 2016, followed by the audacity to pursue an independent currency in the interests of the people who elected Labour as its representatives. It would be better if Labour favoured an independent currency after a Yes vote – which is really their tacit position now, given their silence after Balls’ statement. But we reckon they will not accept this position before 2016, because the public is told that the pound is better, because Labour would be pilloried and attacked by vested interests, and because they lack the nerve.

    So long as our politics and public sphere are dominated by an ideology that favours a ruling class, a media that reacts against change, and a tendency for parties to present a moderate programme, then politics by electoral mandate will remain conservative, populist, and non-radical. If we are going to be called liars whenever we reject it, then we suppose we had better get used to it.


  3. “politics by electoral mandate will remain conservative, populist, and non-radical. If we are going to be called liars whenever we reject it, then we suppose we had better get used to it.”

    We’ll leave aside your contempt for the idea of mere ‘electoral mandate’ in your bid for radical change( it’s practically self satirising anyway.)

    No. – you are going to be accused of trying to build support for your politics on the basis of lies when you say

    “The best answer for the Left is therefore a dishonest one”

    and when you say

    “This does not mean keeping silent about the advantages of an independent currency, but we might say on doorsteps that there will be a currency union. Call it lying if you want, but this is the equivalent to supporting the party line.”

    No. Supporting the party line – is saying “There will be a Council Tax freeze” even the though the prospect makes you die a little inside – but you say it on the basis that If the party wins, council tax will be frozen. Which is really quite different from. going round doors suggesting something that you spend quite a lot of time explaining might well not happen and if it did it

    “We should not be under any illusion that this outcome is viable”

    Your contention that tha a Left Government could seek to take a decision as fundamental as changing the currency without an electroral mandate is indeed lamentable we are in full agreement on that one.

    “You say the path to radical change is dependent on deceit and contempt for democracy. ”

    No. I did not say that, I would never say that. You argued that when you advocated “dishonesty” and talk of governments putting through huge change “without an electoral mandate”. Let me be very clear the path to radical change is incompatible with deceit and contempt for democracy.

    If I was conducting a “thought experiment” it would probably start from the basis that people should say what they mean and mean what they say rather than being based on practice dishonesty on a whole population for tactical purposes.

    ohh and it might start from a consideration from a basis in reality. The situation you describe in the first paragraph isn’t a currency union its sterlingisation


  4. Prokofiev,

    So, I take it you agree with me that the first prize is independence?

    Frankly your arguement would be better made after we had some certainty about obtaining that major shift in our politics. Whilst there are some green shoots and all of that right now, nothing is guaranteed.

    Are you afeared that the SNP will be all powerful after we pass an independence ballot? I do not believe that will be the case.

    I see a fundamental need to realign Scottish politics. I am currently a member of the SNP – because I think our independence would be better for all of us, and it is by far the most important issue we have had the ability to determine for ourselves. But I might vote Green if we succeed in getting a ‘Yes’ vote. I see no contradiction in that.

    I should imagine that socialism might move back to the left, how radical would that be?

    It is perfectly legitimate to be part of the wider campaign for independence without signing up for every cross of a t or dotting of an i. It is just that, at this moment in time, it matters more to be independent and to allow the people of this country to flourish. It may be that we will end up with a hundred years of social democracy rather than anything more radical, but that, of itself, would be hundreds of times better than what we have right now.


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