Independent Scotland should keep Pound indefinitely, says SNP-backed Growth Commission

Posted On: 
25th May 2018

An independent Scotland should prepare to have its own currency but keep the Pound for an “extended transition period”, a landmark report has said.

Chair of the Sustainable Growth Commission Andrew Wilson and First Minister Nicola Sturgeon
Credit: 
PA Images

The SNP-backed Sustainable Growth Commission, said the country should “put in place arrangements” to establish its own currency eventually, but only after six strict tests are met.

Their 354-page report was led by economist and former SNP MSP Andrew Wilson, alongside politicians, business leaders and academics.

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First Minister Nicola Sturgeon launched the study in 2016 in a bid to refresh the arguments for independence after Scotland voted 55% to 45% against quitting the UK in 2014.

At the last referendum, the SNP backed a currency union with the rest of the UK, but that was ruled out by Westminster.

In its report, the Growth Commission rules that out as an option if Scotland becomes independent in the future, saying: "Scotland should continue to use the pound sterling following independence without seeking a formal currency union.

"A future choice to establish a Scottish currency could be considered, and earned, on terms that are made clear up front, once the economy and public finances are on track to the sustainable high-performance position our ambitions require. Unless those tests were met and a decision to change was made, our currency would remain the pound sterling."

The body also recommended the creation of a Scottish central bank, to act as lender of last resort, a Scottish Financial Authority and a Scottish Financial Services Compensation Scheme.

However it accepted that the Bank of England would continue to set interest rates indefinitely while a new currency would likely be pegged to Sterling in the “short to medium term”.

And it says an independent Scotland would make an "annual solidarity payment" of £5bn a year to Westminster to service a share of the UK’s debt.

The report supports the SNP’s long-held position that Scotland would not have to join the Euro were it to re-join the European Union, citing Denmark and Sweden as examples of member states with their own currency.

It also acknowledges that some banks would move their headquarters out of Scotland if it became independent - potentially putting thousands of jobs at risk.

The report says it would take about two years after a Yes vote to establish an independent economic policy and then five to 10 years to “put public finances on a sustainable footing”.

Over the course of a generation, if it matched the performance of other small nations, the growth rate of an independent Scotland would be worth an extra £4,100 for everyone in the country, according to the Commission.

Other measures recommended in the report include tax breaks for highly-skilled migrant as part of a ‘Come to Scotland’ package aimed at boosting Scotland’s population.

In another major departure from the SNP's approach to the last referendum, the report says that any revenue from North Sea oil should be put into an investment fund rather than used for day-to-day spending.

'CANDID AS WELL AS OPTIMISTIC'

Nicola Sturgeon said of the Commission's report: “This report rightly doesn’t shy away from the challenges we face but presents ways in which those challenges can be addressed – and sets out recommendations on currency - which as a country we should all debate and discuss.

“Scotland is now in a very different political and economic situation to 2014.

“There is no status quo and we know that being taken out of Europe and out of a market around eight times bigger than the UK market alone will hit our economy.

“That is why it is time to begin a fresh debate and to replace the despair of Brexit with optimism about Scotland’s future. 

Andrew Wilson said: “Our report focuses on the challenges as well as the vast opportunities. We must be candid as well as optimistic. If people are to be persuaded of the case for independence, they must be confident that the challenges are not minimised, but that there is a plan in place to address them.

“Scotland has potential far beyond its current performance. Our ambition should be to perform to the level of the best of the small advanced economies in the world and, in doing so, make the right choices about the sort of society and economy we wish to live in.”

Scottish Liberal Democrat leader, Willie Rennie, said: "The SNP's economic case for independence and their currency plans have been repackaged but not much has really changed since they were rejected in 2014.

"We should not be compounding the chaos of Brexit with the chaos of independence. Scotland should not jump from the frying pan into the fire.

“Our Parliament and Government should be focused on positive change, not another divisive referendum."