AN in-depth plan is being drawn up for an independent Scotland to have its own currency after a recognition the case for continuing to use sterling was a flaw in the Yes argument in 2014.
Detailed work on a new monetary policy is being carried out by specialist experts within a commission established by Nicola Sturgeon to look at economic issues ahead of the prospect of a second referendum.
Professor Andrew Hughes Hallett, a former consultant to the World Bank and International Monetary Fund, is in charge of the policy work which will be presented later this year to the SNP leader.
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“The work on the currency is being looked at by Andrew’s group in much more detail than it ever has been before,” a member of the SNP’s growth commission told The National.
“It includes not just looking at the issue narrowly in terms of a currency but at the whole architecture required to make sure that whatever the circumstances are an independent Scotland is properly placed to be in much stronger control.”
He added: “The idea is to get way beyond where the debate was before – do we still use the pound or adopt our own currency – and come up with detailed analysis and proposals.
“So not only do we have a strong case for whatever option is put forward but it is backed by the proper infrastructure so the case is entirely secure and that the Scottish Government can put it forward.”
The source said he was in favour of a separate Scottish pound and that it should be supported by a currency board which could make decisions over how it was introduced and maintained.
Its value could either be determined by floating the currency freely on the world markets, or it could be tied to sterling, the euro or a "basket" of international currencies in order to reduce the uncertainties of a fluctuating exchange rate.
The Danish Krona is tied to the euro, and was previously pegged to the Deutschmark.
“My reading of the situation is that there will certainly be a change from what the position was last time and I think some form of arrangement where you move reasonably quickly and go to use a Scottish currency is likely and will at the very least be seriously considered,” the source said.
Last year economists backed proposals in a discussion paper for the Common Weal think-tank advocating the creation of a Scottish pound pegged to sterling at a 1:1 rate.
But they cautioned against tying the new currency to sterling because of the damaging impact Brexit may have on it. Sterling has seen its value plummet since the vote to leave the EU in June.
Dr Jim Walker, founder and chief economist of Asianomics Group, which services the fund management industry, told The National at the time: “I agree entirely with the view that a new currency would indeed be the best option for an independent Scotland but I think that the case for it being pegged 1:1 against sterling for a protracted period is now very much more questionable.
“With Brexit, the pound sterling is likely to become one of the world’s weaker currencies.”
SNP MP Tommy Sheppard has already backed the case for an independent Scotland establishing its own currency and central bank.
Sheppard told the Scottish Independence Convention earlier this month: “One of the lessons we learnt from 2014 is that it is very difficult to go into a campaign when one of your central policy points relies on consent from your opponents and therefore the next time it will be clear that what we will say we can offer and we can do that in Scotland using the political power we seek from the electorate.”
A separate Scottish pound is already backed by the pro-independence Scottish Greens, which adopted the policy in 2014.
In 2013 the National Institute for Economic and Social Research (NIESR) worked with the Economic and Social Research Council to assess choices on currency, concluding that a separate currency would be a “prudent option” for an independent Scotland.
An SNP Spokesperson said: “The SNP has established a Growth Commission which, as well as making recommendations for measures to boost Scotland’s economy, will consider the most appropriate monetary policy arrangements to underpin a programme for sustainable growth in an independent Scotland. The work of the Growth Commission is ongoing.”