I ran a Twitter poll on Saturday and the results are in. Bear in mind that it wasn’t possible to have more than four options so I ran with the four most likely (option 4 being achieved post two years in the ERM with our own currency and an ‘adequate’ deficit).
To be honest, I am not surprised with the results.
The poll was as per the below:
| Given the Pound is due to slip below parity with the Euro, should an Independent Scotland… | ||
| Run own currency and peg it to the Pound | 13% | 74 votes |
| Run own currency and peg it to the Euro | 56% | 320 votes |
| Run own currency and peg it to the Dollar | 6% | 34 votes |
| Join the Euro | 25% | 143 votes |
*sample size 571
I did not put the option to simply float our own currency. The reason for this, although my preferred option in the long term, is because I do not believe that an independent Scotland would be in a position on the day of independence to have this option viable to the point that risk is at a manageable level. There would be too much to do to have this option stable without making the currency rates fluctuate due to economic uncertainty. Pegging the rate of the currency against another currency, at least in the short term would be the most sensible option – others may disagree.
- 6% of the votes (totalling 34 out of 571) would like to see our own currency pegged to the Dollar.
- 13% of the votes (totalling 74 out of 571) would like to see our own currency pegged to the Pound.
- 25% of the votes (totalling 143 out of 571) would like to see us join the Euro.
- 56% of the votes (totalling 320 out of 571) would like to see our own currency pegged to the Euro.
Initially before any decision could be made, the Scottish Government must set up a Central Bank. Some, including me, may argue that the Scottish Government should be looking at this right now. My opinion here is that for the people of Scotland to see independence as a viable future option for Scotland we must start acting like an independent country. A Scottish Investment Bank may be a practical option at the moment, with a future intention of utilising this investment bank as Scotland’s future Central Bank. The purpose of the Central Bank would be to set interest rates, print and remove currency as required and oversea the financial position of the country. This is a current weakness in the independence journey and an area that I argue should be tackled immediately.
The main over-riding reason that my poll went down the route of pegging the currency against another is primarily for stability of trade and movement of goods and people. It’s no surprise to see the main choice, at over 55% being to peg a Scottish currency to the Euro. This, I suspect aligns with the Scottish desire to remain a European nation and the recent dramatic change in the value of the British Pound.
Pegging a Scottish currency to the Pound pre-Brexit may have been the most sensible option given the volume of trade Scotland does with the rUK (so pegging to the Pound would have been seen as more beneficial), however, post-Brexit I am more inclined to agree with the stance of the majority of voters in this poll.
Scotland does trade more with the rUK than with the EU, but given the steady decline of the Pound and the uncertainty of the UK’s future trade makes managing any potential financial risk much harder. Scotland is also pro-European and likely to re-join the EU as an independent country. On this basis, it seems likely that pegging a Scottish currency to the Euro would allow an independent Scotland to better manage its growth on the back of the single market and not in spite of it. Politically it would also tell Europe that Scotland aligns more with Europe than the rUK and that it rejects Brexit.
Pegging the currency to another does have its advantages and disadvantages but the main issue is mitigating risk and providing stability. This must ride above all other political issues.
The problem facing an independent Scotland would be that the Scottish currency would effectively be at the whim of the country(s) that the Scottish currency is pegged too. The choice would therefore be, which currency seems most stable?
Free floating Scotland’s currency is risky. Maybe not too risky in a number of years’ time, but initially it would be as the currency would fluctuate too much due to economic issues within a ‘transitional’ independent Scotland.
There are other options available of course but I am not going to waste my time talking about them as I don’t believe they are viable, nor do I believe there is the political will in Scotland to embrace them.
Making any decision would require some political review. The Scottish Government, should it look to set up its own currency and peg it to another during its Indyref2 campaign must be able to capture the political aspect involved.
It must be acknowledged by all sides that generally people tend to vote based on the ‘devil they know’, and in many ways that would translate to pegging to the Pound versus pegging to the Euro.
I do not believe that free floating the currency without reviewing the ‘political’ aspect to it i.e. pegging it to the Euro or Pound would win over enough people.
Pegging to the Pound comes with the risk of it being dismissed as ‘not viable’ by the UK media. We have all seen the impact this can have when a currency union was spoken about in 2014, however, it may provide stability for voters politically and could encourage some ‘soft’ unionists to back independence – but would it be enough?
Pegging to the Euro comes with the risk of alienating the 38% leave voters and any subsequent shift in people who now back Brexit. One main advantage being that it would remove some of the fire power and control that UK media has over the voice of the Europeans regards Scotland currency. It would also provide stability to the EU citizens in Scotland who would know that one Scottish Pound equals one Euro.
I have purposely left out discussion on simply joining the Euro because it isn’t possible at the moment, however, I included it into the mix of votes because it could become a viable option post-independence and it shows that there is possibly quite a number of people who don’t want any form of new currency in Scotland – rather just straight out of the Pound and into the Euro. The 25% who want to join the Euro ‘could’ be merged with the 56% who want a Scottish currency pegged to the Euro from a political point of view, if so the poll translates to over 80% want some form of currency affiliation with Europe versus only 13% affiliated to the rUK.
So which of the two is more beneficial and likely to sway enough people in Scotland to back it?
On the sum of all the above, my hearts desire is for an independent Scotland with its own free floating currency, however, my brain tells me that we should not go down this route unless we peg it to the Euro initially.
I do not believe pegging the currency to the Pound is a vote winner due to the media manipulation available to the UK state, nor do I see it as viable in the eyes of unionists in Scotland – nothing short of staying in this union will change most of them.
We cannot escape the fact that many people voted to be part of the UK and part of the EU in Scotland, therefore from a political and economic basis, I would urge the Scottish Government to do the following, starting immediately:
- Set up a publically owned Scottish Investment Bank targeting European and Scottish investors.
- Empower this bank to be in a position to become Scotland’s Central Bank post-independence and make that known.
- Decide on a Scottish currency and look for public input into design etc.
- Empower the public to formally decide on what to do regards currency through a public representation body within the bank.
No matter what the future holds, many choices need to be made and spoken about. If Scotland chooses to stay in the UK or leave it, Scotland needs to be able to start taking control of its destiny and start making economic and political choices of its own – no better place to start than a Scottish Investment Bank that allows its customers to open current accounts.
Whether independent or within the UK, a new investment bank that allowed me to open a current account would have my custom immediately upon opening.
A bank for Scotland and run by Scotland could help open that independence door a little further, pegging the currency of an independent Scotland to the Euro may also help cement Scotlands future place in the EU and provide stability for EU nationals looking to stay or move to Scotland.
you can follow MacAlba on Follow @BlogAlba or at his site MacAlbasite