Does SNP really think it has the money to hang on to the pound?
By Graham Grant
THEY were once strictly the domain of the veteran pub bore who would bide his time over a pint or dram until an appropriate opening arose.
Now earnest debates about secret oilfields, Unionist conspiracies and the finer detail of the foreign exchange markets have spread far beyond mere bar-room chatter.
Indeed some of those bores are even in government, or occupy senior positions within the increasingly factionalised and dysfunctional pro-independence movement.
The SNP conference in Edinburgh later this week is likely to be dominated by hypothetical discussion of the unit of currency after the break-up of the UK – ranging from the esoteric to the genuinely baffling.
Back in 2014, George Osborne put paid to Alex Salmond’s bid to cling on to the pound, so the latest wheeze is to keep using it without permission, meaning fiscal policy would continue to be dictated by London.
It’s an issue the party kept in cold storage for a long time after a Nationalist ‘growth commission’ last year recommended a home-grown currency, after a (potentially open-ended) period of busking it with Sterling.
But it’s a question that can be dodged no longer, and one that ensures separatists will be kept busy for the foreseeable future, cornering unsuspecting drinkers with impromptu seminars on ‘dollarisation’ in Panama.
All of the evidence suggests that support for independence is dwindling, at times dipping below 40 per cent – a psychologically important barrier: if it dropped much further, it would settle back to around one in three.
This was roughly the support base for separatism before the run-up to the referendum five years ago, and the SNP’s growing preoccupation with currency may reduce it further, for two different and contradictory reasons.
The first is it will bore people, into rejection and not into submission – and secondly, it will terrify them, presenting a nightmarish vision of the alternate universe the SNP has in store if it was ever given a chance to create it.
Salmond’s strategy was basically centrist: keep the pound, the Queen and the BBC, and most people will accept splitting up Britain: this was separatism with a comfort blanket.
Bridges were also built with business to underline the fact that independence could be whatever you wanted it to be, and wasn’t only the preserve of the Left (the ones now calling most vocally to ditch the pound immediately after independence).
Those bridges are now crumbling under the weight of tax raids and planned penalties for driving to work, and what is left is what the SNP and its allies always were: radicals coldly indifferent to those who shun their ideology.
They include Paula Coy, the SNP’s councillor for Elgin North, who pointed out on Twitter last week that Gandhi didn’t give up the fight to end British colonial rule of India because of pesky concerns about currency.
This is crass nonsense, of course, though some Nationalists voiced support for her after the Mail highlighted her bizarre intervention – and effected not to realise why the comment was even noteworthy.
The answer is that it demonstrates not only intellectual poverty on a grand scale, but also a mocking disregard for those who have some important questions about how an independent Scotland might work.
Anyone who has the temerity to have an income, and professional ambition, and a family, is working harder but keeping less of the cash they earn, and as a consequence many are struggling to remain solvent.
Battling debt, they forego holidays, settle for the local failing state school, and rack up credit card debt, resorting to pay-day loans to get through the month, if the boiler breaks down or the fridge packs in.
And then on the doorstep there is the canvasser for the SNP, who with medicine-man guile spins an idyllic vision of life after independence – a socialist nirvana that lies within our grasp, if only we had the courage.
But there’s a sting in the tail of the pitch that was going so well: the pound is no longer part of the plan – it may be used initially, but long-term its days are numbered.
Check the web after the hard sell is over, and you might stumble on the wisdom of former Nationalist MP George Kerevan, who advocates the conversion of deposits in Scottish bank into the new unit of currency post-independence.
This means that when that new currency depreciated against Sterling, the value of those deposits, including life savings, would plummet.
Ronald MacDonald, research professor of macroeconomics and international finance at Glasgow University’s Adam Smith Business School, has warned that Scotland would be forced to dump the pound for its own free-floating currency immediately after the end of the UK – meaning its value would be allowed to fluctuate in response to foreign-exchange markets.
This would depreciate to make Scotland’s exports cheaper to buy in foreign markets, generating foreign exchange reserves required to keep clearing a deficit.
Even this, Professor MacDonald estimates, would require at least £30billion of reserves from day one to protect the new currency from economic shocks and speculators, while for a currency pegged to Sterling, this figure could be as high as £300billion.
This makes Nicola Sturgeon’s proposal to hold onto the pound unofficially on an interim basis, until the country is ready for the new unit of currency, look even less tenable.
So what is the magical ingredient which will encourage voters to drop their instinctive reluctance to gamble everything they own on the misbegotten fantasy of die-hards such as Mr Kerevan and Mrs Coy, the keen student of Gandhi’s political campaign against the British Raj?
The answer is Brexit: since 2016, independence strategists have been furious that Leave won with what they saw as a threadbare argument; the Yes movement’s mistake in 2014, they reasoned, was to give full answers (mind you, quite a lot of those were false, or didn’t stand up to scrutiny).
Alex Kerr, an SNP candidate for the European Parliament, and Julie Hepburn, a member of the SNP’s national executive committee, wrote yesterday that the ‘whole Brexit fiasco from start to finish is a compelling example of why we need independence’.
It is, they argued, ‘exhibit A’ in terms of ‘explaining why we need to be in control of our own destiny, and to move decision-making from the cesspit of governance that is Westminster to our own parliament here in Scotland’.
They fail to recognise that most of us who aren’t obsessed by constitutional intrigue never want another referendum again, on anything.
And yet the premise is fatally flawed, because withdrawing from the EU isn’t the same as setting up a new state – something Salmond assured us would cost about £200million.
By contrast, the Common Weal pro-independence think-tank suggested last year that it could be up to £40billion.
It’s a slight disparity – but like the circular and introspective currency debate, it is just another example of insular Nationalists talking to themselves about taking enormous risks with the nation’s economic future.
*This column appeared in the Scottish Daily Mail on April 23, 2019.