Independent Scotland should keep the pound, economists say
By Keith Aitken in Edinburgh | 11 February 2013
An independent Scotland should stick with sterling although this would mean agreeing some fiscal and spending policies with the rest of the UK, a commission set up by First Minister Alex Salmond concluded today.
The group of economists, chaired by former Scottish Enterprise chief executive Crawford Beveridge, also echoed previous warnings from other forecasters by recommending caution about future levels of oil revenues.
Set up last March to provide impartial technical advice to Scottish ministers on the economics of independence, the Fiscal Commission Working Group says that a workable framework for Scottish membership of a sterling union could be in place from the moment of independence. Such a framework would require extensive negotiation with Whitehall, which should begin as soon as possible.
The group endorses Salmond’s belief that Scotland’s interests would be best served by keeping the pound, and accepts that a due share of UK debt would have to be ‘gradually transferred’ to Scotland. It says that these arrangements would have to be subject to a ‘fiscal stability agreement’ between Edinburgh and London, governed by a new set of joint institutions and responsibilities.
These would include Scotland taking a shareholding in the Bank of England, proportionate to its population; a joint Macroeconomic Governance Committee to oversee financial regulation and share the risks of future financial crises; and a Scottish Monetary Institute and Fiscal Commission to supervise financial institutions, conduct economic research and promote budgetary responsibility.
Within this framework, the 200-page report argues, Scotland would still have scope to enjoy ‘full fiscal and economic policy flexibility’ and would have recourse to policy levers denied it under the current devolution settlement.
But, it says, ministers should not rely too heavily on future oil revenues. Present spending levels would consume all the current North Sea revenues and still leave a deficit. Any future surpluses, it adds, should be siphoned off into a special fund to protect Scotland against economic turbulence.
Beveridge said that the proposals represented ‘a workable blend of autonomy, cohesion and continuity… a well-engineered model designed for day one of independence’. He said: ‘Scotland has the clear potential to be a successful independent nation.’
Scottish Finance Secretary John Swinney called the report an important contribution to the debate on Scotland’s future and said ministers would consider its ideas ahead of a white paper in the autumn. But Labour’s Cathy Jamieson said the report merely highlighted the importance of partnership, and thus made a good case for retaining the Union.
• UK ministers today published legal advice that an independent Scotland would be treated as a new nation under international law, and have to negotiate treaties and international affiliations from scratch, whereas the rest of the UK would be regarded as a continuing nation. This runs counter to advice previously cited by Scottish ministers.