Article from Carolyn Leckie: The burning issue that is freedom of expression

Having the free space to challenge opinion and perceived convention is key to progress in politics, the movement for civil liberties, in business and generally in all aspects of life.  It is rare for articles on free speech to be given space in our media, so I was delighted to see Carolyn Leckie write on this topic in The National and both parties kindly allowed me to post the article to share with others.  The following text is as printed on the 8th of December:

I once had a fleeting run in with Quentin Tarantino. He had come to Glasgow to promote his film Death Proof and I was amongst a group of feminists protesting against what we considered to be glorification of misogyny.

Quentin wasn’t exactly pleased to see us. At one point he wagged his finger in my face, while angrily denouncing us.

He didn’t get the irony of defending his freedom of expression by denying ours.

Freedom of expression is an idea that almost everyone supports in principle. But as soon that principle is put to the test in the real world, the consensus falls apart and the arguments begin.

When three Renfrew SNP councillors last week demonstrated their contempt for the Smith Commission report by publicly burning a copy, reactions were polarised. They were also confused.

Thinking about whose freedom is being defended helps me make sense of it.

Some people might regard the actions of the three councillors as crass and tasteless. Others might see them it as harmless piece of political theatre designed to make a bold public statement, like tearing up a leaflet or walking out of a conference.

In my view, the only thing the councillors were guilty of is a lack of tactical nous. You don’t need to be around much in Scottish politics to recognise a scene ripe to be exploited by opportunistic, faux outrage.

What are the ‘outraged’ challenging exactly? You may not agree with protesting against Tarantino – but at least that demonstration was based on a coherent political analysis.  Our world systematically exploits, objectifies and kills women in their millions. Feminist protestors are challenging abuse of power and oppression of women.

Who were the maligned councillors oppressing? No one. They were making a point, however insensitively. When one Labour MP compared their actions with those of the Nazi regime, he spectacularly fails to understand power and tyranny. The Nazis were intent on systematically wiping out every trace of the ideas contained in the books he ordered to be burned. One charred copy of the Smith Commission report prevents no-one from reading it.

The real risk here is that the manufactured ‘offence’ of the nae-sayers has a chilling effect on the diverse, vibrant democratic discourse unleashed by the referendum.

Which is exactly what some politicians want. In a speech last week, Gordon Brown said – rather vaingloriously for a soon-to-retire backbench MP – that he was “pressing the reset button” because “it’s time to move on from two years of talk of constitutional change.”

And, conveniently, diverts attention from the really momentous news of the week – like truly radical land reform and conclusive fiscal proof that we’re far from ‘better together’.

But that doesn’t let us Yes voters off the hook. Supporting independence is not equivalent to supporting every policy that comes out of the SNP Government.

Take the Offensive Behaviour at Football legislation which has led to political expression being criminalised. One Celtic fan was arrested last week at Tynecastle for wearing a ‘Free Palestine’ T-shirt. Under pressure to justify the arrest, SNP MSP John Mason bizarrely agreed that wearing a ‘Yes’ badge could have you up before the Sheriff. Seriously? That’d be a pretty scary precedent.

Don’t get me wrong, I’ve had a few train journeys ruined by tanked-up football supporters. But it wasn’t the content of ‘The Sash’ or ‘The Boys of the Old Brigade’ that bugged me. It was the total lack of respect for other passengers, the volume and the aggression. The issue is men in tribes behaving badly.

There’s a few folk on Twitter who think the way to independence is to act like some monolithic ‘united’ bloc that should voluntarily suspend all critical faculties until Independence Day has been and gone.

This is not the way to a better country. I have disagreed fervently with SNP policies while sharing a friendly platform with SNP Ministers on the Yes trail. That is one of my abiding joyous memories of the campaign. Ideas – conflicting, contradictory, sometimes chaotic – were given a space. They were welcomed and nurtured. Lots of people disagreed with me. Brilliant.

Can we carry that on, please? It’s such a contrast to the petty point-scoring and political trivia that predated the referendum.

We all have a responsibility to create an environment where political ideas can thrive without an Arctic freeze descending on passionate flames. And to contribute to a democracy in which governments can make ‘U-turns’ and be praised rather than vilified. It’s difficult, though – especially when your opponents are entirely focused on ruthlessly exploiting the slightest mistake.

But I don’t think the right response is to batten down the hatches. If that happens, the hope, empowerment and energy unleashed by the referendum will be snuffed out. Sometimes flames don’t always spread in the direction you’d like them to. The price of a genuine movement is that you can’t control it.

But that’s preferable to the dank and dismal alternative of politics as they were. Good folk I know on the No side will recognise that.

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The Yes movement, moving on

The results are in, and despite the Yes campaign winning in my own council North Lanarkshire, 55% of the Scottish people voted against the proposed offer of independence.  With democracy being one of the core principles being promoted by the Yes campaign, we must now accept and reflect on this majority decision.

I’m so incredibly proud to have been part of a political campaign that put forward a positive vision for social justice, economic growth and moral responsibility on a global stage.  Scotland has travelled a long way in the last 2 years and there are more people aware of the political issues that we face than ever before.  Maintaining perspective is always important, and while the vote for Scottish independence has not been passed on this occasion – more people understand the purpose of this movement than ever before, setting strong foundations should there ever be another vote on independence for Scotland.  It is important for anyone who would like to see that happen to remain positive in their outlook, to continue to dispel myths about the independence movement and work constructively to make the best of the democratic system that we have.

I too have grown: learned that an inclusive discourse is more likely to engage with those who hold an opinion different to my own, or perhaps more accurately, I have learned how to put that process into action – even when the views expressed are wildly different from my own.  It has been extremely heartening through the process how many journeyed to Yes, even from the most staunch of opposition at the outset.  I’ve learned about my community and the love of my family and friends has been strengthened as we journeyed through this incredible democratic process.

Of course, that process has not been brought to a conclusion – regardless of the referendum outcome there will always be work to be done to shape a better future.  We cannot accept that 1 in 4 Scots live in poverty, there are issues on housing and health that have to be addressed here and of course we must work to address the blight of poverty around the world.  We must continue to do everything that we can to prevent the UK’s next-generation nuclear weapons programme going ahead – the 2015 elections are now crucial to get that message represented.  We have to recognise how reliant we are on the finite resources of Oil & Gas for both jobs and energy and do what we can to utilise that local resource to distribute wealth throughout our communities while ensuring our renewable energy potential is harnessed.  We have to recognise that our transport infrastructure has been stagnant relative to many other nations who we ultimately compete with for global business – we have to address that to stay competitive.  We do have a national debt of £1,323,000,000,000 – that is ~90% of the UK GDP and we are still running a deficit!  Those campaigning for the status quo over the last couple of years have somehow managed to do so without addressing these challenges but now this has to change.

There are clear challenges in terms of democratic representation and accountability that have been highlighted during the campaign, both in terms of political and media representation.  All parties seemed to acknowledge that the Scottish Government must be given more responsibility to raise their budget, rather than only spend an allocated budget – I’m sure Scotland will watch on with interest to see how this develops.

Finally, I want to say thanks to my wife Sarah-Jane for her understanding while I gave my energy to try and influence positive change and to my dad, my mum and my older brother for being a constant inspiration to me and others in the campaign (I’m extremely proud of the Darlings for Yes).  I wish that we could have celebrated together today but in time I believe it will be evident that we have enabled positive change – our efforts in shaping that will never be complete.

Much love,

Stuart M. Darling

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Why I’m voting Yes

‘Should Scotland be an independent country?’ – that is the question all citizens of Scotland have to answer on the 18th of September.  Yes is my answer and I’ll tell you why:

Democracy & Accountability

The UK political system is failing too many and serving too few.  The current UK has been sabotaged by successive Westminster governments pursuing flawed trickle-down economic policies.  All that can be seen from them today is a series of short term solutions and a focus that is too narrow for the diverse challenges that exist throughout the British Isles.  A recent study by Credit Suisse reported on features that make small, independent countries successful on their own. George Monbiot wrote an excellent article on this which is a must read for anyone with an interest in the vote, but I think it helps to look Scotland’s democracy within the UK.

59 of the 650 MPs that currently sit in Westminster are elected in Scotland – the 774 Lords that sit in the House of Lords are only elected by the establishment itself (after some hefty donations in some cases).  The fact of the matter is that no matter where you are in the UK, the process of First Past the Post has driven the political system to a two party system with the Conservative and Labour governments following similar agendas since I was born in 1980.  The outlook for the future looks much the same too with both parties committing to a continuation of the austerity measures set rolling by George Osborne during this term.

The 2007 election demonstrated how weak the UK system is for accountability – the Labour Government had taken the UK to war in Iraq during the previous term on the premise that they had Weapons of Mass Destruction.  Meanwhile at home we spend billions of pounds on Weapons of Mass Destruction on the claim that they act as a deterrent.  This hypocrisy was mirrored by the opposition and so the electorate were impotent in any efforts to hold this abuse of power to account and Labour were returned to office.

The Scottish Parliament has shown that it can make the proportional representation system work – ensuring that every vote contributes towards the make-up of parliament.  While Alistair Darling may say that he didn’t vote for the SNP but got them in government, at least his vote is represented in the parliament.  I’ll always vote, but my vote has never counted for any Westminster election other than making up the numbers (I’ve always lived in ‘safe Labour seats’ noting that the average constituency last changed hands between parties in the 1960s, with some super safe seats having remained firmly in one-party control since the time of Queen Victoria).

A Yes vote is the only way to ensure that every vote cast in Scotland will always count towards the political priorities set for Scotland.  There are already signs that this has awoken the people of England to the need for reform and this process will take a large step forward with a Yes vote.

The uncertainty of a No vote?

With a Yes vote now looking like a distinct possibility, the No campaign mobilised their political leaders – Cameron, Clegg and Miliband to cancel their weekly meeting in Westminster and instead head to Scotland with vague statements about new powers.  This caused some concern for MPs in Westminster who hadn’t seen any proposals either so when questioned in parliament William Hague clarified that “The statements by the party leaders made on this in the last few days are statements by party leaders in a campaign – not a statement of Government policy today, but a statement of commitment from the three main political parties, akin to statements by party leaders in a general election campaign of what they intend to do afterwards. It is on that basis that they have made those statements.”

It is clear that the ‘promises’ of new powers were not actually promises since they haven’t even drafted what these new powers may look like yet, but you only need to watch 2 interviews with Johann Lamont to be extremely concerned about what might follow: in the first on Newsnight Scotland she implies that the Scottish Parliament will only get tax raising powers (to avoid a ‘race to the bottom’ with tax reduction) and then another interview with Andrew Neil adds further confusion with apparent differences within the Labour party at Westminster and Holyrood.

Recent opportunities for reform in Westminster don’t inspire any hope either – the Liberal Democrats pledged to join the Conservatives in a coalition on the basis that they would bring forward reform on the House of Lords and the voting system for Westminster.  Instead we’ve seen the House of Lords continue to grow in numbers (with the ongoing blight of cash for honours) and voting reform was sent backwards after a defeat for the proposed AV system in the botched referendum on proportional representation.

With a No vote set to trigger a review of the Scottish budget allocation, the stated intention of a further £25billion of austerity cuts from Westminster and the real threat of reduced finances coming for public services in Scotland (as outlined in this excellent interview with Jeane Freeman) – it really is not clear what a No vote will mean for Scotland.

Risk & Challenges

Of course there are challenges that face Scotland regardless of the referendum outcome.  Many of these challenges come from issues that have manifested under the UK system such as Scotland’s demographic imbalance and social inequalities.  There is no indication that the UK is going to address these issues and I think the lack of control that comes with a No vote is actually the high risk option for Scotland.

Bringing the control of our political system to Scotland with a Yes vote will allow the challenges to be addressed head on.  This is an area that I have focussed on in previous blog posts – including housing, demographics, infrastructure investment and how we can best utilise the finite resource of Oil & Gas to strengthen our economy.

Grasping the potential

We’ve got an abundance of energy – not just from Oil & Gas, but from the wind, tides, hydro, biomass, geothermal and even solar.  There are few countries in the world that could compete with our abundance of energy potential.

Our stunning landscapes are an easily accessible from our world famous cities which sees Scotland regularly voted as one of the number 1 tourist location on the planet.

We have fertile land and healthy waters which sees great food arriving fresh on our tables.  When it comes to drink, it isn’t just fresh water that we’re spoilt for: whisky brings £4 billion to the Scottish economy each year and we’ve got an increasing global presence in the food & drink market, last year Brewdog were the UK’s fastest growing company in the sector.

The list could go on.

The fact that Scotland’s economy is in a healthier position than the UK’s has only been reported during this campaign, but amidst the constant noise of the political rhetoric there are still many who are unaware of this so it is worth repeating.  As things stand today, Scotland generates more wealth per person than the UK average.  That isn’t a forecast of the future, it is the starting point.

What that means is that we could keep all of our tax rates exactly as they are, and there would be more money available to the Scottish government to spend in Scotland than we currently get.

A simple but powerful example of how wrong the UK gets it is with nuclear weapons.  For all they get mentioned in the campaign, the significance of the timing on the referendum seems to have been under the radar.  In 2016 the UK government intends to commit at least £100billion to a next generation system of nuclear weapons, of that the Scottish taxpayer would pay around £10billion.  If Scotland votes Yes that whole project is stopped before it gets started – saving taxpayers in Scotland and the rest of the UK from a monumental waste on weapons that will never be used.

A positive message for the world

The paradox of this referendum is that Scotland voting Yes would be the UK’s most powerful message to the world of my lifetime.  The UK government has presented Scotland with the opportunity to gain our independence with a simple cross in a box.  To show that such fundamental political change can be enabled by a peaceful and democratic movement of the people, even against the forces of the mainstream media, will be a clear message providing hope to those seeking progress around the world.

I truly believe that a smaller government system will be more effective in addressing the challenges that are distinct to Scotland.  I believe that it is fundamentally better for all of us if decisions about Scotland’s future are taken by the people who understand the priorities in Scotland – it is time to give the people of Scotland control.

My head and heart are fully aligned, I’m voting Yes.

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Mortgages, the Economy & the Referendum

While the No campaign fails to give a tangible reason why Scotland is currently better together with Westminster their tactic instead is to speculate on what might happen if there’s a Yes vote, whilst ignoring any challenges that exist for the UK.  With their efforts focussing on people’s pockets, there has been a constant mention of mortgages but no real substance on the issue – I thought some substance may help.

Before thinking about Scottish independence, it seems prudent to first consider the current UK trajectory. During this summer we have had an indication that the low interests rates that we have seen in the UK over recent years are coming to an end.  In June, it was reported in Forbes that ‘the end of U.S. quantitative easing looms and the start of the end of zero percent interest rates is over the horizon for the U.S. and the U.K., but it is coming.’  I’m sure it is a coincidence in terms of timing but it looks like this prophecy is set to become reality in the months that follow the referendum with the Bank of England’s governor, Mark Carney, warning trade union members this week that they face higher interest rates next spring before they receive rises in real wages.  This clearly doesn’t just affect trade union members – an increase in interest rates is something that impacts everyone and so it is important to look at salary levels too and what is going to be the most effective way to drive them up.

This Guardian article highlights the issue that has again manifested under Westminster’s watch:

The problem for families isn’t only that their wages have been frozen year after year. Inflation has soared, too. As a result, wages in real terms – adjusted for inflation – have actually fallen. At one point inflation hit 5%, while wages were growing at around 1%. Even now, wages are growing by just 0.6%, while inflation is at 1.6%.

The squeeze on wages has left millions drowning in debt, only just able to get by. Low interest rates, government assistance and leniency by banks have kept households afloat.

But far from getting easier, things are set to get even tougher for these families. Carney has warned that interest rates will rise before wages increase in real terms, which the Bank does not expect to happen until later next year.

An increase in interest rates could push some families into a spiral of indebtedness, charities have warned. An alarming report by the Resolution Foundation released in July found that interest rate rises over the coming years would lead to more than 1 million households facing a problem with debt repayments.”

With the UK debt continuing to spiral and with another £25 billion of austerity cuts to come from the Westminster government the prospect of significant salary increases in the public sector seems slim (unless you happen to sit in Westminster that is, in which case a 10% pay rise is coming).  Anyone who thinks that voting No is voting for ‘more of the same’ is frankly deluded – the world is always changing and the referendum is ultimately looking at the best way to move Scotland’s society and economy forward.

The prospectus from the No campaign is that the priorities set by Westminster are what is needed – I firmly believe that Scotland’s taxed wealth would be far better if we didn’t contribute our ~10% share to the spend of £100billion on a next generation nuclear weapons system (a programme which is set to start in 2016 if we vote No), or the ~10% share of the HS2 rail link £50billion cost.  With the austerity measures set to fall hardest on public services, it will be the poorer majority who feels the impact of these cuts the most, much as they have done with the VAT tax increase that the UK government put in place in 2011.

So what is needed to grow the economy?  The lack of vision from the No campaign on this should have alarm bells ringing for everyone, with the half-baked and panicked statements on devolution increasing the uncertainty of what might follow a No vote.  No matter how they tweak devolution though, I don’t see any tangible return coming to Scotland from the large scale projects of nuclear weapons or HS2 and instead would far rather that this £15billion of Scottish wealth was used to invest in our own infrastructure – I believe our transport infrastructure would benefit from some large scale projects and / or we could even build more affordable homes to get back to the mortgage theme.  I wrote more on this here, but either way such endeavours will create jobs in Scotland which will clearly be a good thing.

Creating affordable homes is something of an alien concept to the UK government who have previously tried to run their economy on house prices forever spiralling upwards.  However the crash that happened in 2008 because of this flawed economic approach seems to have taught them nothing and again, there’s fervour from the UK government as they see house prices increase.  Through this year we’ve been seeing ~10% increases on house prices which far outstrips the average salary increase of 2.5% and only serves to make homes less affordable, and sees more people struggle to afford their mortgage payments (as reported in a study this week).

In an independent Scotland mortgage rates will continue to be based on the interest rate set by the Bank of England, which in a Sterling Area will be exactly the same for Scotland as for the rest of the UK, just as it is now.  Banks make a good business from mortgages and we have a multitude of them competing for homeowners business – this is a global constant and an independent Scotland won’t be any different.  So with the interest rates consistent regardless of the vote the real challenge is improving the affordability of homes.

A Yes vote provides the opportunity for Scotland to set a different course, to treat decent housing as a basic right and not as a tradable commodity or as a political football.  I believe that most people rent or buy a home because they want to live in a space that they feel is their own and can have a sense of pride and security in it.  It should be a concern if house prices start to accelerate beyond increases in salary levels.  The No campaign claim that we are ‘Better Together’ but it is clear that they have abandoned too many in society.  A Yes vote provides the opportunity to provide housing across the nation that we can all be proud of – now is the time.

 

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Finance and the Referendum

An interesting study has been performed which shows that people provided with more information are more inclined to vote Yes.  I had not long finished reading that when I checked how the BBC are covering events and found that the referendum had prime slot with the headline ‘Scottish independence: Pound falls after referendum poll’.

The article starts with: ‘The value of the pound has fallen in the wake of an opinion poll which suggested the pro-UK campaign had lost its lead ahead of the Scottish independence referendum. [A YouGov poll showed Yes at 51% yesterday]

The article goes on: ‘Sterling fell by about 1.3% against the US dollar to a 10-month low of $1.61.

You might expect some context to analyse this to follow but remarkably not.  Some context would have been useful, especially since the BBC (and the rest of the UK mainstream media) have failed to give any notable coverage to the 1.8% drop in the pound (GBP) to the US dollar (USD) that occurred from the end of August to the start of September. In fact looking at the GBP to USD exchange over the last year shows that variation is business as usual:

pound-to-dollar

However there is a second point of analysis that is missing from the media’s coverage of this story and that is that there would be no impact on the GBP currency if the UK government stepped back from their Project Fear and announced that they will establish a formal currency union.  As I wrote about previously, one of the main reasons that a formal currency union is proposed is to ensure that the rest of the UK remains stable while losing ~10% of their economy and one of the areas that contributes significantly to the GBP balance of payments.  The No campaign obviously won’t pledge a currency union before the referendum but as the leading economist Anton Muscatelli outlined in this excellent Financial Times article, rejecting a currency union after a Yes vote ‘would be tantamount to economic vandalism’.

Who shares what?

However, instead of any context or analysis the BBC article moves on to say:

On Monday morning, shares in Scottish-based firms dominated the top fallers on the stock market.

Edinburgh-based Standard Life fell 3%, Royal Bank of Scotland slipped 2.4% and Lloyds Banking Group, which owns Bank of Scotland and Scottish Widows, dropped 2.7%. Their share prices recovered slightly later in the day but remained in negative territory.

After months of installing fear into the minds of Scottish citizens about the ‘cataclysmic’ impact of a Yes vote, this was obviously an attempt to make the Scots think that the possibility of a Yes vote is having a damaging effect on Scottish companies.

Now as anyone who has actually been campaigning in Scotland knows – people provided with more information are more inclined to vote Yes – and so the possibility of a Yes vote has been present since the referendum was announced so it is interesting to look at how the share prices have moved over the last year.

Standard Life have actually had a fantastic year – their share price is actually up 22.21% from last September.  The Standard Life share price had a 9% spike from the 3rd to the 4th of September following the sale of Canadian firm Manulife Financial Corporation, and reductions are fairly commonplace after such spikes on the stock market so the 2.42% fall today (not 3% as reported on the BBC) may well have happened even another poll hadn’t been published on the Sunday – to claim otherwise is pure speculation.

Standard Life 080914

The RBS share price isn’t quite so positive over the last year but still shows an overall growth of 2.06% over the last year.  The range in the share price over that time is from a low of 291.60 (April 2014) to a high of 387.50 (October 2013), which represents an 18% swing.  Again, with that context today’s 1.3% drop to 342.5 doesn’t seem so bad (again, the BBC overstated the drop but this time by more than 1%).  Similarly, Lloyds Banking Group’s drop was overstated by the BBC with their closing share price showing a 2.43% drop rather than the 2.7% reported – their story isn’t too dissimilar to that of RBS.

It would be insular and parochial to only look at UK companies though – so context from international firms is always useful for comparative purposes.  The largest bank in Denmark – Danske Bank – has seen a 39.78% increase in their share price over the last year.  It would seem that functioning as a financial institution in an independent country equivalent in size to Scotland has not prevented growth for them.

Ultimately though, share prices move around and that is what keeps so many traders in employment around the world.  It is shameful that the British media are trying to use the events of one fairly standard day on the stock market to try and influence Scotland’s constitution.

Being informed helps to overcome the efforts to scare the electorate – the referendum has sparked a process where the Scottish people are engaging in politics in a way that I’ve never seen.  Imagine the possibility of going into our first election after a Yes vote and the level of expectation that would go with this engagement – it is an extremely exciting prospect for the nation.

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Yes: a poster for Scotland

A message from the wonderful Dolce Merda:

‘A dear friend is very active in the motion to gain an Independent Scotland. With the referendum approaching I created this artwork for him and for the Scottish ‘yes’ camp. It highlights 45 of the best things that Scotland or Scots have given to the world.’

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1 ATM, 2 Bicycles, 3 Bovril, 4 Calendar, 5 Colour Photography, 6 Cotton Reel Thread, 7 David Byrne, 8 Deep Fried Mars Bars, 9 Drain Pipe, 10 Driving on the Left, 11 Electric Clock, 12 Finger printing, 13 First Cloned Sheep (Dolly), 14 Flush Toilet, 15 Football, 16 Golf, 17 Hollow Pipe, 18 Hypodermic Syringe, 19 Irn-Bru, 20 Lawn Mower, 21 Lucifer Friction Match, 22 Macadamised Roads, 23 Metal Detectors, 24 Microwave, 25 MRI Scanner, 26 Peter Pan & Captain Hook, 27 Piano Foot Pedal, 28 PIN Codes, 29 Pneumatic Tyre, 30 Postages Stamp, 31 Primal Scream, 32 Radar, 33 Radio, 34 Rain Coats, 35 Refrigerator, 36 Roller Printing, 37 Sherlock Holmes, 38 Shot Put, 39 Telephone, 40 Television, 41 The Proclaimers, 42 Toaster, 43 Triple Distilled Whisky, 44 Ultrasound & 45 Vacuum Flask.

PDF versions:  YESByDolceMerda-Scotland (for Scotland) & YESDarlingByDolceMerda (for Darlings & Scotland)

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Currency Options for an Independent Scotland

Since I previously wrote on why the option of retaining the pound was the correct approach for the Yes campaign, it is safe to say that there has been a lot of chatter on the topic.  While it is important to remember that the referendum is not just about currency (as Lesley Riddoch writes here), I do think it is worth reflecting on the situation and considering the context.

Sure Alistair Darling said that he thought that it would be logical and desirable to create a formal currency union after a Yes vote but I think it is more interesting to look at what those outside of politics are saying.  The Yes campaign has based its position on the outcome of a comprehensive review by the Fiscal Commission Working Group of all of the currency options that would be available to an independent Scotland.

The Fiscal Commission Working Group consists of four eminent economists, Professor Andrew Hughes-Hallett, Professor Sir Jim Mirrlees, Professor Frances Ruane and Professor Joseph Stiglitz, and is chaired by Crawford Beveridge.  The members include two Nobel Laureates for Economic Sciences and they are all world-renowned for their expertise in the areas of monetary policy, fiscal policy, and financial stability.

If you want the full 226 page report from the Fiscal Commission Working Group then you can read that here.  Surely no-one can read that and claim that the Scottish Government have not thoroughly thought through their options on currency. The summary report is perhaps more accessible and worth reading if this issue is important to you, but in summary they outline 5 potential options as illustrated in this table (which is on page 11 – the last page of the summary report):

Fiscal_commission_5_options

The recommended choice for both Scotland and the rest of the UK is to create a formal currency union.  The Bank of England announced on the 13th of August that they are making arrangements for Scottish independence and for ensuring stability as Scotland transitions to independence – in effect the Bank of England were confirming that they are ready to establish a formal currency union if required.  It was also made clear that they are preparing for multiple scenarios; should Scotland choose a different path then the Bank of England are poised to respond.

The Scottish Government have gone through a thorough process to assess the optimal currency for an independent Scotland, but Alex Salmond hasn’t always managed to get this point across to the electorate.  He was clear during his interview with the BBC – and in particular he demonstrated how the statement from the Bank of England demonstrated that the Scottish Government are in a strong position (the Q&A with Stewart Hosie is also worth watching if you can’t get enough of this chat).

National debt

So what is the alternative should the Westminster Government inform the Bank of England that they oppose a formal currency union.  Firstly, they would provide the Scottish Government with a very strong position on negotiating the debt that an independent Scotland would take on.  On the 13th of January 2014, the UK government announced that they would honour the debt held at the Bank of England, which currently runs at £1.3trillion. Within the UK our taxes are used to pay £1bn of interest on the debt every week!  So if the UK Government insists that they don’t want Scotland to have any association with the Bank of England then an independent Scotland could feasibly start with no national debt (as outlined by Alex Salmond here), though in reality I think during the negotiation process it would transpire to something more akin to 3% of the total rather than 9% if Scotland did join a formal currency union.

Plan B – a wealth of options

At this point I’d like to bring in Avinash Persaud, chairman of Intelligence Capital, and a former global head of currency research at J P Morgan.  He says that ‘25 years in currency markets tell me that the No campaign’s argument that Scotland cannot keep the pound is false.  It would certainly be a limited version of independence, but there is nothing stopping an independent Scotland from declaring sterling sole legal tender and borrowing it on the financial markets to hold in reserve.

This in effect would be an informal currency union or ‘sterlingisation’. He goes on to write that ‘the list of countries that have adopted a currency issued by another state, outside formal agreement, includes about 30 small countries from Andorra to Panama and the Vatican that have officially chosen to do so. History and the present day teach us that currency substitution is possible. It should also be easier for Scotland than others, because it already uses sterling and its economy is tightly integrated into the rest of the UK economy.’ It is worth noting that the Adam Smith Institute recently reported that Panama has the seventh most stable financial system in the world.

However, I think the most likely scenario will be for Scotland to continue to use the Scottish Pound as has been well articulated by Jim Sillars.  On this option Avinash Persaud writes that ‘while many rightly note that an independent Scotland using sterling could not print currency and devalue, the benefits of being able to do so are themselves not free. Beyond those that have adopted another state’s currency, there are a further 20 relatively successful countries – like Hong Kong, Denmark and Saudi Arabia – that have chosen a rigid exchange rate fix with another currency without seeking permission. They are also unable to provide unlimited liquidity to their banks without devaluing – something most have avoided for decades.

They have made the decision, however, that the long-term costs of governments giving in to pressure to inflate (or financial markets second-guessing whether they will) outweigh the short-term benefits of flexibility. Instead, they have chosen an exchange rate fix as a signal of fiscal and regulatory responsibility. They tend to be small countries, where the benefits of exchange rate devaluations are scant anyway, because there are few competitive local alternatives to most imports, and their main exports, like oil and gas, are priced in US dollars.

In other words, many nations currently use this method of pegging their currency and they use it to their benefit.  When the UK government commissioned the McCrone Report in the 1970s, it was assumed that Scotland would go for a Scottish pound and interestingly they concluded that it would be far stronger than the pound sterling, in fact at the time their concern was that it would be too strong relative to sterling (which was collapsing at the time as I detailed here). Here’s what was written:

Scotland’s central economic problem is to secure a faster rate of economic growth so that she can raise income levels and absorb the excess labour which presently appears as high unemployment and emigration. As has been explained, this is a situation which would normally point to devaluation as a possible remedy. North Sea oil, however, by giving the country a chronic balance of payments surplus, would rule out any possibility of devaluation. Indeed, it is hard to see how an upward valuation of the currency could be avoided. Obviously this pressure should be resisted as far as possible; but unless there was a remarkable change in the strength of sterling, it must be expected that the Scots pound would rise in relation to it fairly soon after independence, especially if the latter continues its downward slide. A revaluation would give rise to none of the difficulties which were argued earlier to apply to a Scottish devaluation. Since the effect would be to reduce prices and raise incomes there would not be the same resistance to making it effective in Scotland. An exchange rate of £1 Scots to 120p sterling within two years of independence therefore seems quite probable.

Unfortunately, the demographic challenges highlighted in the report still remain and this is a failing of the current political system of the UK.  I’m sure a government directly accountable to the people of Scotland would find a way to use such a significant balance of payments surplus to accelerate our economic growth – there are several ways in which this could be achieved.

Euro

It is worth remembering that 23 countries within Europe have changed their currency in the last 15 years and the key point from that is that currency isn’t the key factor in how well an economy and society performs.  The economies of Germany, Austria, Luxembourg and several others have actually shown higher levels of economic growth than the UK economy since joining the Euro.  It is also worth noting that despite Alistair Darling’s opportunistic attempt to undermine the Irish economy, Ireland is one of the other Euro economy’s which is in a better state than the UK’s.  However, it is actually technically impossible for Scotland to join the Euro upon independence so this isn’t an option in the short term.

Summary

Ultimately, when it comes to currency though I think Irvine Welsh summarised things effectively on the night of the first Salmond-Darling debate:

welsh_currency

It is worth bearing in mind that political priorities of a nation adapt to the landscape around them. If an independent Scotland needs to adapt down the line then that is something that the people can vote for, the adaptability of smaller nations is the reason that so many are leading the way in the modern world.  Scotland can only take control and drive the economy forward if it has the powers of independence – that is surely the most efficient ways to increase the overall wealth of the nation.

For some extra reading, I’d recommend:

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