News Column

Salmond currency expert: UK may not share pound

August 20, 2014

Magnus Gardham; Magnus Gardham Political Editor

THE expert behind Alex Salmond's currency plan has admitted the UK might not agree to share the pound in a formal monetary union with an independent Scotland.

Crawford Beveridge, the chairman of the expert panel which drew up currency options for an independent Scotland, said the proposed currency union remained the best option.

But he told an audience in Glasgow that the argument over the currency had become political rather than economic and the UK might not behave "rationally" in negotiations following a Yes vote.

He said: "There are several viable options out there just in case the politics trumps the economics when we get to a Yes vote."

He admitted it was "entirely possible" the UK Government would reject a currency union after senior Tory, Lib Dem and Labour politicians made statements ruling out the proposal.

He said: "It's always possible but there are viable options.

"I'm not worried about the currency. Every country has one and we'll have one."

He said he regretted the intrusion of politics into the economic debate and had been "shocked" by Labour leader Ed Miliband's vow to rule out a currency union in his party's next election manifesto if Scots vote Yes next month.

Mr Beveridge, a former head of Scottish Enterprise, chaired Mr Salmond's hand-picked panel of experts, the Fiscal Commission Working Group, which set out a range of currency options for an independent Scotland last year.

In a lecture at Glasgow Caledonian University last night he reiterated his support for sharing the pound in a formal currency union, arguing it was in the best interests of an independent Scotland and the rest of the UK, and insisting the plan met the criteria laid down by Bank of England Governor Mark Carney earlier this year.However, his acknowledgement that the UK might reject the proposal will embarrass Mr Salmond, who has refused to consider the possibility.

The First Minister has resisted days of pressure to spell out his preferred "Plan B," though he has stressed an independent Scotland could keep the pound without a formal pact, a process known as "sterlingisation," in which case the new state would not take on its share of the UK's pound(s)1.4 trillion national debt. Mr Beveridge repeated the Fiscal Commission's original conclusion that sterlingisation - which would leave the country without a central bank - would be suitable only as a transitional currency arrangement.

He said a temporary arrangement could last anything from six months to 50 years while an independent Scottish Government prepared a permanent solution.

On Mr Salmond's threat to walk away from Scotland's share of the UK debts, he said the move would have to be "managed very carefully" as it could damage the country's credit rating, pushing up interest rates, if rating agencies regarded it as a default. He said: "I find it morally difficult. I'd much rather take on a share of the debt which we are all part of but it depends on how intransigent the negotiators were."

In last night's lecture, he repeated the Fiscal Commission's conclusion that an independent Scotland would not be in a position to join the euro and that creating a new currency, while viable, offered fewer benefits than sharing the pound which would have huge benefits for trade.

The issue of an independent Scotland's possible currency has dominated the referendum debate since Mr Salmond was challenged repeatedly to set out his Plan B during a live TV debate with No campaign leader Alistair Darling a fortnight ago.

Pro-UK politicians have argued a currency union would be too risky for the rest of the UK or place unacceptable constraints on an independent Scotland's policy-making.

At a Better Together briefing last week, Glasgow University economist Professor Ronald MacDonald argued a currency union would collapse in a year.

Labour's Shadow Foreign Secretary Douglas Alexander MP said last night: "This was supposed to be the start of Alex Salmond's fight back on Plan B.

"Instead his chief currency advisor has publicly accepted that a currency union is not in the gift of Alex Salmond."

l John Menzies says it hopes that Scotland does not vote for independence as Scottish companies will have more opportunities if Britain is not split up.

Paula Bell, the Edinburgh-based company's finance director, said: "We don't actually think Scotland should be independent. We'll be so glad to get back to normal when it's all over and hopefully the voters will vote for no independence."


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Source: Herald, The (Scotland)


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