The Economic Reality versus Snp Ambition; Analysis

Daily Mail (London), May 26, 2018 | Go to article overview

The Economic Reality versus Snp Ambition; Analysis


Byline: Michael Blackley

THE CLAIM: There is no need for a formal monetary union between Scotland and the rest of the UK: 'In today's world, no one owns a particular currency.' THE REALITY: A currency union, while unlikely ever to be agreed, was the preferred option for the SNP during the 2014 referendum campaign for a reason: it allows the pound to be retained while giving an independent Scotland a say on decisions about monetary policy, such as interest rates.

Sterlingisation, on the other hand, does not provide any power or influence on key decisions. Currently, the Bank of England is responsible for setting interest rates for the UK. That means it takes into account economic conditions in all parts of the UK before making decisions. If Scotland became independent, the Bank of England would no longer need to consider it when making decisions. If Scotland suffered a recession and the rest of the UK didn't, it might not make decisions in Scotland's interests. So it is about a lot more than 'ownership' of a currency.

THE CLAIM: Scotland should reject the austerity model pursued by the UK in recent years.

THE REALITY: Opponents claim independence would mean 'austerity on stilts'. The new report estimates an independent Scotland would start with a deficit about 5.5 per cent of GDP and would have to get that below 3 per cent within a decade. It is estimated doing that could mean a reduction of PS27billion in spending.

THE CLAIM: Brexit places a 'material risk' on Scotland's access to export and import markets and the free movement of people, capital, goods and services and 'must therefore be resisted vigorously'.

THE REALITY: A separate Scotland which continued to use the pound without being part of a currency union would effectively remain tied to the UK. If Brexit damaged the rest of the UK, it would likely damage Scotland. As economist Richard Murphy says: 'If London decides to trash the rUK economy to support the City, Scotland will go down with it. All the negative impacts of Brexit will be imported directly into the Scottish economy.' THE CLAIM: An independent Scotland would 'transition' to a separate Scottish currency.

THE REALITY: The document sets six key tests to be met before an independent Scotland would set up its own currency. …

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