Richard Murphy: An independent Scotland cannot be subject to the Bank of England's rule

It is, of course, indisputable that under whatever the UK constitution might be Rishi Sunak has the legal right to claim his position as Prime Minister. There is, however, a significant difference between a legal right to be in office and having the political legitimacy to command the House of Commons. The extraordinary collapse of Liz Truss’s government provides ample evidence of that. So the question is, can Sunak secure that legitimacy, and if he cannot what are the consequences for Scotland?

Superficially Sunak appears to be a better choice of prime minister than Truss. Certainly the financial markets seem to think so. Absurdly, the mainstream UK media appear to have appointed those markets as arbiters of this decision. That can only make sense in a society biased solely to the interests of the wealthy, who not only populate the City of London but who also own most of the resources that enclave manages. 

But is that somewhat exclusive approval going to be sufficient to deliver Sunak’s survival? I personally doubt it. That is precisely because their support is entirely mercenary. As easily as they might endorse Sunak, so might they withdraw their support if he does not deliver what they want. And this is where Sunak’s problems arise, as well as Scotland’s. 

What the City want from Sunak is financial prudence. As far as they are concerned this means three things. One is moderate borrowing, but with the higher interest rates we have seen emerging this summer being paid on that borrowing. The next is low taxes, especially on wealth. Last is ever more limited government spending, which they believe means ever greater opportunity for private sector spending, which in turn means opportunity for profit for them. 

READ MORE: FACT CHECK: Rishi Sunak claims Scottish crime on the rise during PMQs

The problem with these City objectives is that they conflict almost exactly with what society needs at this moment. That’s because Rishi Sunak was right in one way when he stood outside Downing Street this week. We do, as he said, definitely face an economic crisis in this country. There are four parts to this crisus.

The first is inflation, but it is a virtual mathematical certainty that this will fall next year. Inflation shot up in early 2022. There is almost no reason why prices will rise nearly as much, if at all, in 2023. So it is highly likely that inflation will fall and that particular crisis will pass.

However, and second, that does not mean prices will fall. It just means price increases will reduce. And that means that the cost of living crisis resulting from rising food and energy prices will not go away. For millions of households this means they will continue to be unable to make ends meet.

Third, the new higher levels of interest - which despite slight falls since Sunak arrived in Downing Street remain well above those of the last decade or more - mean that mortgages and rents are also becoming increasingly unaffordable for many.

READ MORE: Rishi Sunak challenged over private schooling of daughters and Cabinet

Finally, there is the knock-on effect of the last two problems, which is that households in crisis stop spending on the fun things in life, from a simple cup of coffee in a cafe, to a night out, to buying the clothes to wear in such occasions. This will be a disaster for businesses in the retail, hospitality and leisure sectors where closures and job losses are very likely.

Truss fell because she, firstly, did not understand this and, secondly, did not lay out the details of whatever plan she had to tackle these problems. By forcing interest rates up in reaction - which the Bank of England did - the Bank forced her out of office.

Sunak, in contrast, appears to agree with the Bank and will go along with its demands that he must trash the economy in a totally futile and unnecessary drive to cut inflation.  The Bank will, however, destroy Sunak’s political legitimacy in the process. No country will accept austerity that destroys the public services, household’s wellbeing, and leaves children hungry, most especially when that austerity is imposed by a Prime Minister without a personal mandate. He is as destined to political failure as Truss was in that case.

But there is a lesson in all this that Scotland must take note of. If the Bank of England will destroy prime ministers in Downing Street in this way, what would they do to a prime minister in Edinburgh after Scottish independence if Scotland still used the pound and so was subject to effective rule by the Bank of England at that time? It hardly bears thinking about.

I have said it before, and I will say it again. Scotland cannot afford rule by the Bank of England. It must in that case have its own currency on independence or incredibly soon thereafter. The simple fact is that Scotland will never rule itself without its own currency. Why is that so hard to understand?