The indy currency debate is done – we must focus on what matters most

In the summer of 2016 I was preparing for the announcement of the Sustainable Growth Commission initiative by the First Minister in September. We recruited an outstanding range of people to join the commission and to advise it. We were thinking through our programme of work and the framework for how to tackle the extensive brief that we had been given.

Many phone calls were made seeking advice, counsel and help. Most people we sought out were keen to assist. One of the first was to a very senior Irish diplomat to ask if they had any senior central bank and currency experts who could offer perspective.

His response was telling: “Andrew, we have never been able to understand the obsession in your debate about currency. We never worried about that, we had far too many other things to focus on.”

I was standing on the beach in St Andrews with children running around my feet as we spoke. Sometimes the clarity of an external perspective is so enlightening.

One week later I was sitting at the truly world-class event that is the Edinburgh International Book Festival listening to the former governor of the Bank of England Mervyn King. He was being interviewed in front of a packed auditorium by the BBC’s excellent business and economy editor Douglas Fraser and was asked about what Scotland should do about currency if it became independent.

He said words to the effect of: “I think it is not much of an issue. There is a very simple solution, but it is one that both the SNP and the UK Government will not like. Simply hold on to the pound. The SNP won’t like it because you are not taking monetary policy sovereignty quickly, but I don’t think that is material. The UK Government won’t like it because they can do nothing to stop it. Focus on other things that matter more.”

Currency was by far and away the most difficult part of our brief. This is because it is a highly technical issue in economics that very few are expert on or truly understand. Yet at the same time it is very personal as it is about our own family’s finances.

The reason the 2014 campaign held to arguing for a currency union should not be lost on anyone today. It was to avoid two things. The first was the risk of capital flight happening in real time before, during and after the campaign. If people, businesses, investors and others felt a new currency would be set up in the short term the risk was they would move money, jobs and investment in case there was a devaluation. You can imagine the political and economic cost that would be paid. Quebec suffered this in a major way in its referendum and the jobs and investment have not fully returned.

At the same time the equal risk was that people considering putting jobs and investment into the country would hold off.

The currency union argument signalled intent. While it was politically extremely difficult it did the job of protecting Scotland’s economy from risk. There was no capital flight to speak of and Scotland’s Foreign Direct Investment performance remained the best in the UK outside the South East. We should not forget the reality of that when we consider 2014 and the lessons for now.

The second issue to avoid was direct uncertainty for people over what would happen to their income, pension, mortgage and savings if held cross border. You can see that this is exactly where the heat has come in recent months as Unionists have sought to exploit the SNP conference debates on currency.

If it is anticipated that there is to be a very early move to set up a Scottish currency, then the immediate risk is either of devaluation or the opposite. If it was to fall, say, 10% against the pound then it would mean that mortgages owed in pounds got 10% more expensive. Goods bought from outside Scotland would become more expensive overnight.

If it was to rise by 10% then it would mean that pensions or wages paid in sterling dropped by 10%.

The inability to forecast what would happen with any certainty, and the risks to everyday matters of such import, would have led to a sense of potential uncertainty, risk and chaos. There would be winners and losers, but people would not be able to assess where they stood.

A further issue is the cost of borrowing for public services investment. If you ask the world’s savers to fund your public borrowing at a time when you are yet to get it on a sustainable footing and then add the risk of currency changes it will be very expensive. This will harm your ability to fund public services and pass on expensive debt to the next generation.

We can try and wish all of these issues away. They are complex, they are difficult, but they are reality.

Taken together this is a large part of the reason why only one in 20 voters say they want a new currency immediately. Going into a referendum campaign with such a formulation would be a losing ticket that would also provide real risks to the economy now. It makes no sense at all.

All of which is to help us all understand why the formulation approved by acclaim by the SNP conference last weekend is so positive and important for the economic case for independence.

The SNP policy is that Scotland, like almost every other country in the world, will have its own currency. But not until it is ready, fully prepared and it is in the positive balance of interests of households and businesses here. Conference approved the six tests that are to determine just that and to decide when it is in the practicable best interests of the economy and society to make the move. When it is practicable it will be done.

So that debate is now done. We can focus the economic argument where it needs to be on the positive vision for building a new country at the heart of Europe and the international community and

trading system.

We can now focus on seeking to emulate the best performing societies and economies on earth; being a welcoming magnet for talent, focusing on fairness and equality – and, let us not forget, not going down with the extremist titanic that is the prospectus for Britain now.

For the first time in my life a majority of Scots believe that independence will be better for the economy long term. They remain to be convinced about the transition and what that will mean for them.

We now have answers to every question. You don’t have to worry about prices, pensions, wages, mortgages and so on. Everything stays as now and will only change when we are prepared and ready, it is in our interests and the parliament votes for it.

Why would you argue against such a position even if you were an entrenched Unionist?

No-one should pretend that independence will be easy. Nothing in life worth achieving ever is. But we now have a clear and rigorous plan that underpins an honest and exciting case.

The time is approaching for Scotland to rejoin the community of independent nations. This will take hard work and effort by us all. It will be worth it. It will be very much worth it.