DURING our series of articles so far, the Scottish Banking & Finance Group has been outlining key issues for Scottish independence and the pre-conditions necessary to make it a success by building a thriving economy – our own currency immediately upon gaining independence; a written democratic constitution which enshrines the fundamental rights of all citizens as well as their obligations to one another and to the state; and reform of our banking and financial system.

This time we turn our attention to what can be done between now to lay the foundations for our independence. One of them is to put the plans in place for the establishment of a central bank (the Scottish Reserve Bank) which is “ready to go” on day one.

We have been consistent in arguing what needs to be done to build a productive economy which is as self-sufficient as possible in providing for the needs of all Scottish citizens, particularly in strategic production such as food and energy and the goods and services needed to fulfil the fundamental rights set out in the constitution.

However, it would be a grave mistake to think we can wait until after independence to start work on this. The Scottish Government needs to start right now, despite the constraints imposed by devolution within the UK.

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In our article in The National on August 23 (Why we must talk now about what we want from indy) we made some initial proposals, including the convening of a forum for heads of governance of the Local Government Pension Scheme (LGPS) and other large Scottish pension funds, the Scottish National Investment Bank, Scottish Enterprise and local authority leaders to discuss how financing for the transition to zero carbon can be provided pre-independence.

North Ayrshire Council is currently exploring potential for investment in the local economy by the Strathclyde Pension Fund as part of the council’s “Community Wealth Building” strategy. This approach could and should be expanded and replicated elsewhere.

The current UK fiscal framework gives the Scottish Government powers to borrow up to £3 billion for capital investment, with an annual limit of £450 million. Local authorities also have borrowing powers for capital investments.

The Government and local authorities should start to borrow now in order to invest in the foundations for our future economy. Provided the borrowing is in sterling, and does not involve borrowing from the UK Government, once we have established our own currency those debts can be redenominated in Scottish Pounds (S£).

Private investors, wherever they are based, will be repaid in S£ instead of £.

The ScotGov and local authorities could issue a special category of bond (“Green Bonds” and “Green Municipal Bonds” for example), offered solely to LGPS pension funds and other workplace and private pension funds.

If an attractive rate of interest is offered on a long dated bond (10 years-plus) this will give pension funds greater scope to fully disinvest from fossil fuels and other sectors and companies whose activities harm the environment, without breaching the current law of “fiduciary duty” (which we will eventually need to replace with a new statutory framework).

The LGPS pension funds are fully funded out of public money – central government grants to local authorities and local taxation are the source of all pension contributions into them by employers and employees. While the funds owe a “fiduciary duty” to the members of those pension schemes, they should also owe a duty to invest in Scotland’s national interest.

Long dated bonds issued before independence in sterling will carry the lowest level of risk of any class of financial asset because the ScotGov will always be able to repay the debt once Scotland has its own currency and central bank.

The debts in sterling will be redenominated in S£ after independence and then, once Scotland has become a “currency issuer”, it can never run out of money. While, like any other country on Earth, we can run out of resources – labour, skills, technology, land, and other physical resources – we cannot run out of money once we have our own currency.

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It is becoming clear that the UK Government is intent on strangling the Scottish economy ahead of an independence referendum. The decision not to invest in carbon capture and storage infrastructure in Scotland tells us where the UK Government’s priorities are. CCS does not work but that is not the point – the UK Government believes it does.

Borrowing in the way described above will provide the Scottish Government with a means to compensate for this deliberate choking of investment in Scotland. ScotGov borrowing now could help us start to do things which do work – such as improving the thermal efficiency of Scottish housing and starting to build a district heating network to replace our reliance on gas for domestic heating, while also investing in ways which support local and Scottish based businesses.

It could also provide the financial means to buy out private finance initiative (PFI) contracts at a discount – not at the full lifetime value to the PFI investors, as happened in the case of the buyout of the Skye Bridge from the consortium which built it and then charged tolls to users.

Doing this would end an exorbitant drain of public funds to PFI investors and reduce the cost of important public infrastructure such as hospitals, other health facilities, schools, prisons, etc. This would reduce ScotGov and local authority liabilities and free up finance for new Scottish priorities.