National Interest

Peter Jones has been a regular contributor to The Scotsman for a long time and his backing for the Union is perfectly honourable stance by me, but in this article Peter accuses the Yes campaign of taking its eye off the ball on the question of a currency union between Scotland and the rest of the UK (rUK).

Yet for all his careful analysis, Peter makes no mention of the financial elephant in the room which is that if the Westminster parties are laying claim to the UK's central bank (Bank of England) lock, stock and barrel, then why should Scotland assume its current share of the UK's national debt?

Now this is really a matter for future negotiation in the event of a Yes vote, but the Westminster parties are ruling things in and out before any discussions have even got off the ground, which is a strange way for neighbours to behave.

The other point on which Peter Jones is wide of the mark is on the subject of sovereign will because he completely ignores the impact of a Yes vote would impact on the Scottish Labour Party, Scottish Conservatives and and Scottish Lib Dems - which are sororal or sister parties to those operating out of Westminster.

Now it seems to me that in the event of a democratic vote that Scotland should become an independent country on 18 September, then everyone has a duty to respect and honour that decision - in just the same way as would happen if Scotland decides to vote No.

And the difference that would make is that Labour, Tories and the Lib Dems would all have to stand up for Scotland wishes as opposed to just meekly going along with what their UK party leaders have to say.

In other words Scottish Labour would have to argue for the national interest rather than party advantage and any refusal to do so would amount to political suicide.       

Peter Jones: Independence or the pound - which?

An independent Scotland could face the sovereign wishes of an rUK that does not want a currency union. Picture: Contributed

By PETER JONES - The Scotsman

WHEN POLITICIANS accuse each other of desperation and panic, I tend not to listen, reckoning that it is the usual campaign hyperbole that tries to turn a minor slip of the tongue into a monumental credibility-destroying gaffe.

But I begin to think that it is an accusation that can be fairly levelled at Alex Salmond over the currency issue in this referendum.

There are certain tools that can be used to make the political equivalent of a clinical diagnosis of desperation. One is whether the arguments being used to shore up a position that has come under attack are robust or fatuous. And Mr Salmond is now making claims which, under any serious inspection, are complete nonsense.

In an article in a Sunday newspaper, he wrote that Labour leader Ed Miliband’s “hasty gambit to include a block on Scotland’s continued use of the pound in Labour’s next Westminster manifesto” would be “saying to Scots ‘I will defy the sovereign wish of the people in a referendum’”.

On umpteen grounds, this is gibberish. Actually, the only sovereign wish that will be expressed in the referendum will be the answer to the question: “Should Scotland be an independent country?” If it is Yes, the sovereign will of the people will be that Scotland becomes independent.

If Mr Miliband said he would prevent Scotland from becoming independent, then that would certainly defy Scotland’s sovereign will. But he isn’t saying that at all. He is saying that Scotland can be an independent country if that’s what people want, but they won’t get a sterling currency union.

I’ve read through the independence manifesto (Scotland’s Future, the 650-page version) a couple of times, and nowhere does it say in it that the rest of the UK is obliged to accept everything in it. In fact, it says several times that after a Yes vote, there will be negotiations with the rest of the UK.

To me, negotiations mean that everything is negotiable and nothing is certain. The Scottish Government might get everything it wants, but that’s about as likely as tomorrow being the end of the world.

And if we are talking about sovereign wills here, why is the Scottish sovereign wish the only one that matters? Aren’t the people of England, Wales and Northern Ireland allowed a sovereign wish as well? If they say they don’t want a currency union, why shouldn’t that sovereign wish be respected?

I suppose it could be argued that there is no obvious means of expressing that – short of inviting them to hold a referendum on the issue. But if political parties put that proposition in their manifestos and a majority of MPs standing on those manifestos get elected, that could be taken as the requisite expression of that will. In that event, whose sovereign wish matters the most?

That question can be answered by examining another of Mr Salmond’s assertions – the claim that the pound belongs as much to the people of Scotland as it does to everyone else in the Union.

The simple legalistic response is that the pound belongs to everyone in the Union, but if some choose to leave it, then they give up the right to use the pound. All serious legal opinion agrees that England, Wales and Northern Ireland would constitute the continuing UK under international law. So if they, via their elected representatives, say they will keep the pound and won’t let Scotland share it, how could Scotland dispute their right to 
do that?

In what court could these competing claims be advanced and weighed against each other? There isn’t one. And in any case, if there was such a court, a simple argument that the continuing UK could advance would be that it is not stopping Scotland from using the pound.

As Mr Salmond has said, Scotland could use the fact that sterling is an internationally tradable currency. Scotland wouldn’t even have to buy the initial stock of money – we already have it in our bank accounts and wallets. Since Mr Salmond has said using sterling unofficially is “quite attractive”, the rest of the UK could say “on you go, find out just how attractive it is”.

Actually, any disinterested party with knowledge of how modern financial systems work who has looked at this thinks it is extremely unattractive. The big problem is that Scotland would not have a central bank. Ruling out a currency union also means that Scotland doesn’t get to share the Bank of England.

Arguments that the Old Lady of Threadneedle Street is as much Scotland’s bank as everyone else’s are as watertight as a fishing net. The key point here is that any central bank has to be backed by the taxpayers of the country whose money it is supervising.

Why? Because in the event of a crisis that needs a few billion to fix, it isn’t just a matter of the bank printing those billions – the money has to be borrowed from someone who has to be paid interest. And as everyone knows to their cost, taxpayers foot that bill.

But if Scots are not paying taxes to the UK Treasury, they would not be standing surety as the Bank of England’s ultimate backstop. No Scottish taxpayers means no work for Scotland by the Bank of England.

Of course, you could come to an arrangement in which there was an agreement to pool taxes for these macro-financial purposes, which would also entail some sort of political agreement as well. Guess what – these things are called a fiscal and political union, exactly what we have now and what the European Unions is laboriously trying to construct to prevent further euro crises.

And that leads to the final and conclusive diagnosis that Mr Salmond is indeed desperate. All the evidence which has piled up on this question points to a simple conclusion – Scotland can have a currency union or independence, but not both. Mr Miliband could argue legitimately that by ruling out a currency union, he would be fulfilling, not thwarting, any Scottish sovereign wish for independence. How desperate is that?