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Thursday, 30 January 2014

Did Mark Carney Clarify Anything Nationalists Did Not Know Already?

Just for the record, I write this as a hard-line, uncompromising Scottish Nationalist of many years' standing. My whole life to be exact. I am not a Nationalist because I want to see a fairer Scotland. I am not a Nationalist because I want a socialist Scotland. I am not a Nationalist because I think Scotland should be run by those people who live in Scotland. I am a Nationalist because I want an independent Scotland. I am a Nationalist because I think it is the natural political position to take so long as Scotland is in an incorporating union with the rest of the UK. Why do I want independence? I want independence for its own sake, because it is normal, it is natural for any nation to govern itself. There, I've said it, not for the first time but for the umpteenth time. It is just that some things need to be repeated, often. I have no idea what kind of country an independent Scotland will be but however it turns out, it will be what we, the Scots, either by birth or adoption, who live here, will make of it. And that is how it should be.

The reason for the introduction stems from the reaction to Mark Carney, the Governor of the Bank of England's speech on the proposed currency union between an "independent" Scotland and the rUK. Perhaps we are getting somewhere at last, although, as the title suggests, some of us knew and admitted it some time ago. As usual the media has put its own spin on Carney's speech, but I am much more interested in the reaction of the SNP's leaders, Alex Salmond and John Swinney. The Daily Mail continued with its own particular brand of dishonesty with the headline, "...would an independent Scotland get to keep the pound - DON'T BANK ON IT" While The Scotsman ran with, "SNP accept currency union means loss of powers" and The Herald with, "Salmond put under pressure by Carney warning"

Why the Daily Mail is so popular in Scotland, a country it decries at every turn, is beyond me. I read it for that very reason. The editorial line is anti-Scottish, not just anti-Scottish independence, because it knows perfectly well that much of what it prints about Scotland is wrong; and that makes it dishonest. The paper knows perfectly well that an independent Scotland could use the pound sterling if it wanted to, whether or not the rUK objected, just as Ecuador uses the US dollar. It is called dollarisation and means that a country uses the currency of a bigger, more powerful country, rather than its own. There can be several reasons for such a choice being made but the outcome is that the smaller country has absolutely no control over exchange rate policy, interest rates or monetary policy in general. That can also impact on fiscal or tax policy in a number of different ways. That is not what the SNP is suggesting, therefore the details are unimportant for the purpose of this blog. What is important, is that the Daily Mail likes to give the impression that an independent Scotland could not use sterling under ANY circumstances, and that is wrong.

An independent Scotland could also peg its own currency to the pound sterling, as Denmark does with the euro and as Hong Kong did with the US dollar. The value of Scotland's currency would move up or down, relative to all other currencies, according to the movements of sterling and as long as markets could be sure that peg could be maintained, in good times and bad, the important currency for them would continue to be the pound sterling, and not the Scottish currency. While that action may encourage stability of a sort, it gives no control of the monetary policy that determines the value of sterling, therefore interest rates may be totally inappropriate for Scotland, forcing the Scottish government to put in place counter measures using the tax system or, break the peg. The one advantage of such a system is that it would give Scotland control over what it did with its own currency, although no control over the factors that determined its value.

I have already covered in detail in another blog, what a currency union would mean for an independent Scotland and have opposed the SNP policy in print ever since they announced its adoption. I have questioned their spokesmen face to face but the only answer that has ever been received is the standard party mantra, "Scotland will be able to control its taxes etc..." "We will have full fiscal freedom..." It won't and the SNP has been told that under the type of currency union they are proposing, it would not be possible for them to have control of taxes. Party supporters have simply dismissed the criticisms coming from the No side but they have equally dismissed the same criticisms coming from committed Nationalists like me or the Cuthberts, the SNP's favourite economists, or Jim Sillars or others like Patrick Harvie who claim not to be Nationalists but are in favour of independence. They even reject the same criticisms made by the SNP's own Fiscal Commission, which set out in detail the agreements that would have to be made to make the currency union work.

Mark Carney as the Governor of the Bank of England, is the man who would have to make the currency union work. His words cannot simply be dismissed and the reaction of Johnn Swinney, as reported in two different newspapers, was interesting to say the least. According to The Scotsman, John Swinney said, "Mr Carney provides a serious and sensible analysis of how a currency union can work, and every one of the points he cites in terms of the technical requirements has been examined by the Fiscal Commission." The Herald on the other hand, quotes John Swinney as saying, "A shared currency will mean an independent Scotland having control of tax policy, employment policy, social security policy, oil and gas revenues, immigration policy and a range of other levers to suit our own circumstances, helping to grow our economy, create jobs and secure a more prosperous and fairer society.." The two statements are not mutually exclusive, until you read what Carney actually said, which makes Swinney's second statement in The Herald a nonsense.

Carney could not have made it any plainer, "a successful currency union will require some ceding of national sovereignty by Scotland". Later a spokesman for the Scottish government is quoted as saying, "the Scottish Government will have to work within a strict economic framework to ensure Mr Salmond's plans for a sterling zone are workable". "Any independent government looks at pooling sovereignty on a range of fronts" Carney also drew attention to the problems in the euro zone suggesting, "the need for tight fiscal (tax) rules to enforce prudent behaviour." If fiscal or tax rules are to be applied, there will be no fiscal or tax freedom to implement the policies the SNP say they want. For example there will be no corporation tax at least 3% lower than the level applied in the rUK. How will the fiscal system be allowed to encourage investment in manufacturing, job creation small businesses and so on, if it does not accord with the agreement arranged for the currency union?

The whole purpose of seeking independence for the economic nationalists who currently lead the SNP, is to get rid of the economic stagnation that has created such misery in parts of Scotland for generations. We have been unable to do that because of the economic policies applied by Westminster since the end of WWII. We have been hamstrung by Westminster because it didn't suit London and the South East of England, to have the kind of expansionist policies we needed. When Scotland required investment and a looser monetary policy, on came the brakes with interest rates set to cope with the inflationary pressure from the South. We need to diverge from the economic structure that is determined by London and the South East but Carney has made it plain that if we have the SNP's currency union, it is not going to happen. Scotland will have to "cede some national sovereignty". Big Wowie, so what else is new?

Ends

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