I WAS glad to see Duncan Maclennan’s endorsement of the “honesty” of Andrew Wilson’s Growth Commission Report in yesterday’s issue (Economist who advised Dewar now backs Yes, November 30).
On the matter of the currency following independence, the report’s proposal that we stay with sterling for an extended period is practical, precedented and the most likely to be regarded as positive by waverers in the referendum, as well as being most easily defended against attack from Whitehall.
Its drawbacks are the presentational objection that it does not mark the move to independence in a dramatic way and, more importantly, that it leaves control of monetary policy to Whitehall. The former objection has spawned a sea of snake-oil sellers peddling to branches and in print their ideas on an instant pain-free move to an new currency and all the trappings of a central bank to manage it. Very little is convincing.
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The objection that an independent Scotland would not have control of monetary policy carries more weight, but a successful move to progress in a free-standing economy will require trade-offs and the attempt to keep a toe in the water in the run-up to the 2014 referendum by proposing a formal currency union was destroyed from the outset by rejection by Whitehall.
Against the other financial and economic powers that will come to Scotland, monetary policy probably ranks low. Certainly that is how it must appear to those who wish to rejoin the EU, which would have its say in monetary policy, and to the Irish who lived with London’s control of monetary policy for decades after independence and then passed that control to Frankfurt. It may be worth adding that, in this Covid year, it is very hard to understand how monetary policy works, for a flood of money poured into national economies round the world has not yet produced the reaction in markets, interest rates and inflation that would be expected.
The Growth Commission Report is a serious body of work that deserves fuller discussion than it is enjoying, in part because attention has been diverted to the single issue of the currency. There is much else in it which deserves debate, including its implied assumption that a newly independent, small, country on the fringes of Europe will have to play by the rules of the current international trading system rather than reinvent the wheel.
James Scott
Edinburgh
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