SNP conference: What's behind the currency debate?

By Philip Sim
BBC Scotland political reporter

image captionWhat kind of currency might an independent Scotland end up using?

A debate over currency is set to dominate the first day of the SNP's conference in Edinburgh, as the party's economic plans for independence come under scrutiny. What is being proposed, and what are the arguments within the party over it?

What's the plan?

Coming days after Nicola Sturgeon's call for "indyref2" to take place before 2021, debates over independence are set to take an even more prominent role than usual at the SNP's spring conference.

The economy was a major issue in the 2014 referendum campaign, and currency in particular came to the fore after then-Chancellor George Osborne said the rest of the UK would refuse to share the pound with a newly-independent Scotland.

Looking back on that, the SNP want to take the economic bull by the horns ahead of any second referendum. They began this process by tasking former MSP Andrew Wilson with drawing up a fiscal prospectus for independence, the "sustainable growth commission".

His comprehensive report, published in May 2018, covered a range of topics - but it was his currency proposals which sparked the greatest debate among SNP members.

image copyrightPA
image captionFormer MSP Andrew Wilson was tasked with coming up with an economic prospectus for independence

As in 2014, the party insists that Scotland could continue to use the pound - Nicola Sturgeon told MSPs in March that "the pound is Scotland's currency, just as it is the currency of anywhere else in the UK".

But their plan for the next referendum would be to eventually transition to a new currency, a Scottish pound, once a series of stringent economic tests have been met.

Nicola Sturgeon said it was partly the attitude of the unionist parties in 2014 which had persuaded her of the case for shifting to a new currency - but only via a "careful, managed and responsible transition".

The six tests in the growth commission are:

  • Fiscal sustainability - a "sufficiently strong and credible fiscal position in relation to budget deficit and overall debt"
  • A Scottish central bank with "international and market credibility"
  • Evidence that the currency would "meet the ongoing needs of Scottish residents and businesses"
  • Sufficient currency reserves
  • Proof that Scotland's economic cycle is "significantly out of phase" with that of the UK, so that an independent currency is "feasible and desirable"
  • The currency must "fit to trade and investment patterns" better than the pound

How long would it take to fulfil these six tests? Mr Wilson reckoned the first one, of a manageable budget deficit, would take up to a decade.

What's the issue?

image copyrightGetty Images
image captionSome campaigners worry about leaving the Bank of England in charge of monetary policy in an independent Scotland

Under the growth commission plan, Scotland would have to accept the monetary policy (things like interest rates) laid down by the Bank of England as long as it used the pound.

This is not popular with some independence activists, who want to get out from under what they see as the shadow of UK institutions much more quickly.

Some also criticise the plans for aiming to hold down public spending in the early years of a new state, part of Mr Wilson's plan to cut the deficit before shifting to a new currency.

Former SNP MP George Kerevan calls the growth commission "conservative" - which even with a small 'c' qualifies as a fairly damning assessment of an SNP project under the current leadership.

He says the tests set out in the document "could leave Scotland using the pound indefinitely" and "allow the City of London financial institutions to dictate and independent Scotland's decisions" - in short, the plan would "effectively negate the very point of seeking independence".

Some go even further - another campaigner and economist, Richard Murphy, said the growth commission plan was "dangerous", "makes no sense" and would see Scotland "shackled" by UK monetary policy.

Robin McAlpine from the pro-independence Common Weal think-tank said the "awful" plan was "incompetent right-wing idiocy" which would usher in austerity and "shatter the independence movement".

There is dissent from other pro-independence parties too - Scottish Green co-convener Patrick Harvie told Nicola Sturgeon earlier this week that the growth commission plan could "bind the hands of a future independent Scotland" into "more of the same austerity and economic conservatism".

How does the leadership respond to this criticism?

image copyrightThe National
image captionSNP leaders have pushed back on critics of the growth commission in newspaper columns and speeches

Mr Wilson told BBC Scotland that he "can understand the impatience" of activists like Mr Kerevan, but said shifting quickly to a new currency would be a risk both in terms of economics and, perhaps as importantly, politics.

Polling produced for Progress Scotland - a pro-independence group set up by former SNP deputy leader Angus Robertson - found only 6% of respondents backed "switching to a Scottish currency in the short term".

Almost half - 47% - said they would want to keep the pound in the long term, while 23% backed the preferred option of the party leadership, of initially keeping the pound before switching in the longer term. The remaining 14% said they would prefer to open another can of worms entirely and join the Euro.

Mr Wilson points to figures like these as proof that his proposal is the best one politically as well as economically - it stands the best chance of winning over a majority of the electorate, not just those already converted to the cause.

This has been echoed by Nicola Sturgeon, who published an essay in the National newspaper aiming to win over activists to what she calls an "ambitious and credible" plan.

She said it was not credible to suggest that new financial institutions could be set up immediately, and that proposing to "press ahead regardless of our state of preparedness or the state of the economy" would "undermine rather than enhance the case for a Yes vote".

The position of Ms Sturgeon and Mr Wilson is effectively a "soft" approach to independence - making it as palatable to undecided voters as possible, while being open and honest about the challenges involved.

One final counter-counter-point from opponents of the growth commission approach, though - if the party leadership is struggling to win over its own supporters to this plan, they ask, how successful are they likely to be with the nation as a whole?

What's going to happen at conference?

image copyrightPA

The currency question is set to come to the fore at the SNP's spring conference in Edinburgh. The debate is fixed for Saturday afternoon, and takes up six full pages of the conference agenda.

Deputy leader Keith Brown has put down a motion broadly outlining the growth commission currency plans, including the six tests that would have to be met before a Scottish currency would be introduced.

This has been co-signed by Finance Secretary Derek Mackay, who said keeping the pound in the short term was "sensible, popular and allows us to choose the optimal point of change".

To get this through conference, however, they will need to face down critics of the plan.

A group of party branches - backed by Mr Kerevan's "Campaign for an Independent Currency" and others including Inverclyde MP Ronnie Cowan - want to amend the motion to remove the six tests and committing any new SNP government to establishing a separate currency within the first term of the new independent parliament.

Another amendment proposes establishing an independent currency "immediately", while yet another says the move should be made "as soon as practicable".

And some, like Mr McAlpine, favour kicking the motion out altogether.

The leadership is pushing back hard, via speeches and newspaper columns, and will line up as many heavyweight speakers as it can for the debate itself in a bid to win backing for the growth commission.

Ms Sturgeon says she's looking forward to a "very positive debate" - but mostly she'll be hoping for a win. What members eventually vote for could have a huge bearing on the future of the independence debate.