Alex Salmond – Statesman or Politician?

Signing the Edinburgh Agreement

Signing the Edinburgh Agreement

By Ronnie Morrison

Watching the much vaunted Salmond/Darling debate I speculated whether this reflected the opening encounter at Bannockburn or the closing stages of Flodden Field.  Is there really no Plan B for the currency and are we to approach the polling booth  still confused about EU membership?  Or were we witnessing a Bannockburn moment?

The secret of success is not only having a trap but also waiting for the precise moment to spring it.  What if the dogged pursuit of sharing Sterling was designed to lure the Unionists into a point-blank and irrevocable refusal to share? What if the uncertainty over Europe was engineered to generate an in/out  referendum in Scotland following that promised by Mr. Cameron and UKIP?

I am not privy to the inner stratagems of the Scottish Government or the YES Campaign, so I am obliged to make my own judgement of this moment.  I cannot risk it being missed, and I am now satisfied that there is no going back for the Unionist camp. It may be a cunning Salmond plan but it may also be no more than serendipity.  So I believe the time is now.

Scotland will appear to have been literally forced into adopting its own currency, the only realistic option in the circumstances. Using this refusal as a scare tactic will be a very expensive mistake if the vote is YES because the cost for the rUK will be far greater than to Scotland. With our own Central Bank able to control interest rates this will far outweigh any transaction costs.

The persistent rUK Balance of Trade deficit will double with the loss of oil revenues, whereas Scotland would be in surplus.  That together with a balanced domestic budget will offset any jitters about the seven-day wonder of the new currency.

Scotland incurred its share of the National Debt in its own currency and will be obliged to service and repay it in its own currency – now the Scots Pound. It could not be criticised if it did so in the manner which half of its share was incurred – by printing money.  It is more likely however that the Scots negotiators would honour their share of debt held by pension and insurance companies although surely not that held by the Sterling banks.

Mr. Salmond’s avowed predilection  for sharing Sterling may thus prove a master stroke – if indeed he appears to have been forced into abandoning Sterling because it would then be very difficult for anyone to criticize the rejection of its so-called ‘financial assets and liabilities’.

Similarly there are almost as many euro-sceptics in Scotland as the in the UK.  No one knows the state of Europe two years hence nor if the UK will remain a member. Either way, a referendum in Scotland would make good sense and demolish that other Unionist argument.

The detail of this ‘surprise factor’ sits quietly tucked away on a Think-tank website at Scottish Constitution -Alternative Financial Plan for Sovereign Scotland (PDF)

Now’s the time and Now’s the Hour….  No doubt we will hear much more of this in the coming weeks and if anything could swing the yes vote it will be that the Scots pound is likely to prove stronger than Sterling, and the people will decide the European question, not Strasbourg or Westminster.



Categories: Economics

Tags: , , ,

30 replies

  1. This would mean that the last two years, the Scotland’s future white paper etc. was all a big bluff. That the independence campaign has a twist in the tale similar to “The Sting” and the rug is going to be pulled from the no campaign at the last possible second. Fun idea but is thIs just a fantasy of the author? Certainly this kind of radical change Is the polar opposite to everything the Yes campaign has so far said and seems more like to bamboozle the public than win it over which is why it is a fantasy.

  2. Personally I go for Occam’s razor every time. The simplest explanation is probably the most likely.

    The Scottish Government commissioned leading internationally renowned economic experts like Joseph Stiglitz to advise them on their currency options. This Fiscal Commission concluded that a currency union was the best option for both sides after a Yes vote.

    Unfortunately this academic advice on economics turned out to be poor political advice, as politicians are primarily interested in power first and economics second.

  3. This thought has occurred to me. I do not think that this has been part of the Yes strategy but perhaps the disruptive change this would bring to the campaign would alter the dynamics which are not very encouraging for Yes at the moment.

  4. Ah the dreams,a Sottish currency has been advocated by several people and the depth of the water has been tested,and many know that it makes no difference if we all call it the £Stirling or Sterling,many have been led to believe that the rUK holds all the cards perhaps they do,but we are not playing cards with their loaded deck.Now of course we wanted “Devo-Max” on the ballot sure we did or did we?We can go into the discussions with plan A,and when they say no we say OK,we will use Sterling while negotiations are ongoing meanwhile we shall set up our own central bank and issue a Scottish £ linked to Sterling while it suits us.The future white paper is a manifesto of what the SNP want to do,but if we are blocked from using the £Sterling we have to change only one thing and that is the central bank.It is all within our capabilities,or are too stupid to run our own country? we know we are not to poor,too rich,maybe,we know we are not too wee,bigger than a lot of countries that are independent and how many countries would just love to be in the position Scotland is in? plenty I would think.Of course if there is any sense left in Westminster they will say before the referendum that they will share the £Sterling with us,maybe even want to share! I am sure Mr.Salmond has not been wrong-footed,I’m sure there is a game changer just waiting to be played.

  5. What? The ‘Alternative Financial Plan’ referred to promotes a flat tax regime, as advocated by the Libertarian Adam Smith Institute (From Wikipedia – “It was the primary intellectual force behind privatisation in the Thatcher era”). Are you serious? This kind of inequality-generating system that rewards the already wealthy is what we’re trying to get away from. Read this and learn more :
    http://www.theguardian.com/commentisfree/2012/may/22/flat-taxes-taxpayers-alliance
    The Tories and all neo-liberals would love to get such a system in place.

    It also advocates a Positive Money type banking system, that is criticised for potentially strangling investment. Read this from Ann Pettifor :
    http://www.primeeconomics.org/?p=2629
    Admittedly, there are many conflicting views on this subject – that’s economics for you!

    The stuff about having our own currency is fine, but this document is a Trojan Horse.

  6. Please, let’s have the Merk Scots back. The Scottish Pound does not have a happy history!

  7. Had similar thoughts.

    Eck was never gonna win the first debate on the expectations thing alone

    And even if he had won it wouldn’t have been by enough according to the media.

    And even if it was universally accepted that he had knocked Darling into the Clyde in that debate, then he would have had to win the 2nd debate by an even wider margin or face ‘YES vote stalls, momentum swings to NO’ style headlines…you’d rather by the campaign with momentum 3 weeks rather than 6 weeks out.

    There is an easy fix as you say just say ‘Scottish pound would be my preferred option’,

    Problem is as Darling rather snidely pointed out in the debate… ‘The markets are listening Alex !’,

    So whilst he can say that as Alex Salmond, he can’t say that as Alex Salmond, First Minister of Scotland.

    What he can realistically do is agree to go along with Darlings hypothetical, but ask him to state his Plan A, after all this is something that the incoming Scottish Govt will have to address and that Scottish Govt might be Labour.

    I don’t think it was be any grand design, but I do agree that BT have over extended themselves on the Currency thing and that if Eck delivers on the night he can destroy them on that and as an added bonus simultaneously destroy their credibility of their scare stories about pensions, the NHS.

    And if he was really clever he would also take the chance in the 2nd debate to announce he will be following Margo’s advice and spend the last few weeks campaigning face to face and won’t be doing any further TV, that will be done by cross party and no party representative of YES

    Once you take out the ‘Evil Alex Salmond’ card and ‘Currency Fear Bomb’ , then BT really have nothing left.

    To leave them lacking both 3 weeks out will destroy them and leave them with nothing else but the now almost mythical……’Positive Case for the Union’

  8. Many seem to have forgotten that the First Minister is playing a game of chess that started when he was at university, and will not finish for another two years. Why would he waste his best on Darling when the debate that matters is with Cameron. Only a fool would forewarn his opponent. And only a fool would not anticipate the questions he was asked last Tuesday. I feel that the debate went exactly as the First Minister planed. The consequences of his opponents actions are surprisingly easy to predict. Darling destroyed his own case, he just hasn’t realised yet. The reaction of Westminster was everything one could hope for, both in the run up to the referendum, and for post ref negotiations.
    Wee Ek’s no daft.
    Watch this space…

  9. I don’t know about it being a “master stroke”, but it is easier to believe than the proposition that Salmond has simply blundered into this situation without having foreseen and planned for every eventuality – including the unionist threat to abolish the currency union. Salmond is a past-master at dancing his opponents into a corner while keeping his options open.

  10. I think he’s playing poker and he’s bloody good at it. Bring it on.

  11. Can’t wait until he goes all in.

  12. Interesting article, the problem ( as I see it ) is that most of the people on this site are already YES and the undecided are mostly stuck with the MSM who are still peddling the same tired message, we still need to be taking the real message to them, the grassroots of YES are doing just that.

  13. The unionists have overplayed their hand with the CU and are in a corner. They can’t attack their own currency so they are left harping on about a plan B. They need it more than Scotland and will be left in the position of having to make a humiliating climb-down afterwards in the event of a yes vote.
    To continue saying that a CU was unlikely or highly unlikely was enough to maybe create a little uncertainty amongst the ill informed, but to cross the Rubicon and completely remove it from the table has been a masterstroke in stupidity. It smacks of desperation because it is desperation.
    Most people don’t care about what currency arrangements are put in place after a yes vote. Everybody knows they will still have money in their pockets. The other half of most doesn’t even want a CU to begin with.
    Westminster has only guaranteed Britain’s debt until after the referendum. A little tough talking from Salmond continually pointing out that Scotland will not take a share of the debt in the event of Scotland being denied its share of the assets should be enough to cause jitters in the markets with investors the closer we near the referendum- and they will want reassurance. I foresee Westminster being forced yet again having to make a statement on CU before the referendum in order to reassure investors. No panic for the yes side. Just allow the unionists to do what they do best, which is to continue to behave badly!

  14. I agree with the need for our own currency. Where the SNP section of the campaign is weak is exactly on fiscal arrangements (using rUK pound, no central bank, no financial regulator – all are needed to get EU membership).

    But I think the article contradicts itself at points.

    “The persistent rUK Balance of Trade deficit will double with the loss of oil revenues, whereas Scotland would be in surplus.”

    Import/export is difficult to measure without national boundaries, but the indications are that Scotland currently has a small trade surplus with the rest of the world, and a deficit with the rUK. As separate states, that becomes crystalised as a trade deficit.

    http://www.scottish.parliament.uk/ResearchBriefingsAndFactsheets/S4/SB_14-07.pdf

    In round numbers we’re currently exporting goods and services worth about £68 billion and importing about £80 billion, so running a deficit of around 11 billion. The Scottish economy is around £148 billion, so an annual deficit (if nothing changes) of -7%. The most recent figure (2010) I can easily find for the current UK is a trade deficit of -3%.

    “That together with a balanced domestic budget will offset any jitters about the seven-day wonder of the new currency.”

    We would need to borrow to finance the deficit, at least until we’d closed the trade gap (I don’t think anyone outside of RIC is in favour of general tax rises – and they’re unlikely to stand for election), so no balanced budget.

    The Adam Smith Institute and acolytes like the idea of using the rUK pound as a “hard” currency as it would exactly force the Scottish Government into running a balanced budget, as it would have very limited access to currency (only that obtained from citizens via their own trades or remittances). A much shrunken state.

    “It is more likely however that the Scots negotiators would honour their share of debt held by pension and insurance companies although surely not that held by the Sterling banks.”

    For good or bad we’re in a network of mutual, international, legal obligations. If the Scottish Government starts selective defaulting on debt (however that might be worked out – presumably not the reissuing of gilts with Scottish Government on the face) then we would trigger legal action and credit downgrading.

    But overall, I don’t think this is a political masterstroke. I think it is the product of the White Paper writers, mostly civil servants, who were minimising change.

    It would be better to put up a Yes campagin figurehead agains the No, rather than the FM (who isn’t a Yes campaign director). The Yes director could simply state there are a range of options, and point to the fact that every small (and smaller) country in Europe has launched aand managed its own currency – or as in the case of Belgium/Lumxembourg agreed a currency framework (two matched currencies, two central banks).

    • The whole top half of your argument does not include any spending plans an Independent Scotland has, so i presume that your basing your argument on there being a deficit if we adopt the same spending plans as the current UK government.

      Clearly that is not going to be the case. We know that Scotland has raised more tax in the last three decades than we have received back through Barnett, so in that scenario we can assume that Welfare and Pensions and Education should be ok as they are paid out of current taxation.

      Nor in your trade deficit argument do you consider the strength of sterling at present which has a big impact on imports and exports.

      Nor do you take into account any tax revenues that would now accrue to and independent Scotland that currently only appear in Westminster figures, the most obvious of which is the £billions raised in VAT.

      Nor do you take into account when you say ‘I can easily find for the current UK is a trade deficit of -3%.’, the effect on that trade deficit without Scottish oil and other exports. How about giving us the trade figures expected from the rUK after Scottish independence.

      Without giving us a fuller picture that includes all of the economy it’s just selective fact picking I’m afraid.

    • Would anyone care to enlighten me, but talk of being able to quantify the Scottish ‘balance of trade’ is ludicrous when we consider that when a pound is spent in a Scots supermarket it is more than likely to be racked up against an English based HQ and ridiculously so for whisky, not to mention the demon oil both of which are uniquely Scottish products but will still be accredited to a HQ address in London.

      It’s already well known that the vast bulk of Scottish products are exported from English ports and accredited at that point as English / UK exports

      One of the plus points for independence will be absolute certainty of import costs and export gains, then you will see the true balance of trade of our very rich country.

  15. “using rUK pound, no central bank, no financial regulator – all are needed to get EU membership).”

    Not quite true,
    Applicant countries are only required to commit to aquiring them , different thing to applicants being required to have them prior to being allowed entry.

  16. Yep – forced into adopting an alternative currency, but using the opportunity to shout that it is only because of what appears to be a new HOSTILE neighbour.

  17. Plenty of talk here about ‘central banks’ and financial regulators’ and our possible need for them.

    In reality it’s not a big deal. A central bank requires the hiring of a few economists to form such an organisation and an office for them to sit in. In it’s simplest terms thats all a central bank is. They discuss our economy and make recommendations to the Scottish Govt of the time or indeed, depending on what powers we decide they should have , may be able to raise or lower interest rates and the like.

    The same can be said of a financial regulation body, a group of people hired and given an office to work from.

    When central banks and regulatory bodies are mentioned, many people jump to a negative conclusion that these are huge institutions that have taken centuries to to mature and hire the most skilful economic minds of our generations. They also apparently cost a lot of money to set up. Think of the Bank of England, that huge imposing building in London and you’ll get the idea.

    The reality is however, the Bank of England holds major responsibility for the crash of 2008 – many of them are ex-bankers who have come from the investment banks. These are the guys responsible for our economic situation, so don’t get suckered into the myth that surrounds these institutions.

    It is easy to set up a central bank, and indeed a financial regulatory body, they are not great obstacles in the way of independence. Don’t think hinderance, think positively. Look on them as a tool to help protect the interests of the ordinary citizen and the nation as a whole against the greed of corporations or banks that solely look for profit and their own personal enrichment. Think Iceland jailing bent bankers rather than Brown or Darling or Osbourne and the cosy relationship they still hold with London city elites.

  18. Very clever telling THEM what we’re up to!!!!
    Let the NAW crowd do their own thinking.

  19. Of course there`s a Plan B, (and C and D on currency). Plan A apparently is the BEST option, AT THIS POINT IN TIME, for an INDEPENDENT SCOTLAND. Salmond is a statesman and a politician. He is also a clever strategist who is coming round the corner soon to bite the NO camp where it hurts. Why should we stay in UNION with a group of people who are hell bent on destroying the fledgling prospects of an INDEPENDENT SCOTLAND? If that`s a definition of `friendship` and `love` then I`ll say no thanks to the UNION on 18th September 2014.

  20. A currency union might make cross-border trade easier although the fact that British firms currently deal with more than one currency in Europe does not seem an overwhelming problem. It also means that taxpayers in rUK would effectively be the lender of last resort for the Scottish economy and would foot the bill for any economic failure or banking collapse. Some more honesty on this and less hubris about the nasty Brits not letting Salmond get his way would not go amiss.

    • You need to borrow a dictionary and look up the word “mutuality”. Monetary union would also mean taxpayers in Scotland underwriting the economy of rUK. Why do you assume it would be the Scottish economy that would fail and need bailed out? While you have that dictionary, you might also like to look up the word “prejudice”.

      • Peter – rUK 54 million people. Scotland 6 million. Scotland’s input would be a small part of the rUK economy. rUK would be far more important to Scotland.

        • In fact, Scotland’s input to the UK economy is crucial. It is Scottish oil and tax revenues which underpins the UK economy. Which is why British nationalists’ talk of putting up barriers to trade and conducting some sort of low-level economic warfare against Scotland is such inane drivel.

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