A TOP pro-independence economist has said the Scottish Government’s currency plans are “so wrong” he would vote No in a future referendum.
Professor Richard Murphy blasted plans announced on Monday to retain sterling for an unspecified and potentially lengthy period following independence and claimed they would lose the vote for Yes.
By failing to set out a “timed plan” to set up a Scottish pound, instead saying that it would be done once a series of tests were met, the First Minister has asked Scots to take too big “a risk”, he added.
Announcing the updated economic case for independence, Nicola Sturgeon refused to say when Scotland would move away from sterling and adopt a new currency after independence.
She said she hoped it would be less than five years but that putting a timeline on the plans would “undermine” the series of tests she hoped would make sure the new currency was stable and that international markets had confidence in it.
Cambridgeshire-based Murphy said: “The worst possible outcome I can imagine, is independence then goes catastrophically wrong, then [acting Finance Secretary] John Swinney, or somebody else, is on a plane to the IMF asking for a bail-out six months after Scotland is independent from England.”
Because he lives in England, Murphy – a supporter of independence for more than a decade – would not have a vote in a future referendum. But he said if he did, he would vote No based on the offer put to Scots voters under the current plans.
He added: “I’d have to vote No because it would be too risky.
“I wouldn’t want to take that risk, I wouldn’t want the people of Scotland to take that risk.
“It’s that bad … This is so wrong and, I think, so likely to alienate people that it will lose the referendum. It’s good enough to kill it.”
What are the alternatives?
He backed a timetable put forward by the Scottish Currency Group which would see a new currency set up in three years – based on the assumption negotiations on Scotland’s exit from the Union would take a similar length of time - and in use within months of Independence Day.
Problems which would arise with Scotland using the pound without a formal agreement with England, Murphy said would include being tied to interest rates and quantitative easing policies set by the Bank of England and that Scotland’s financial regulation would still be set in Threadneedle Street.
The Government set out key criteria that would need to be achieved before a new Scottish currency was introduced and fully adopted.
These included certainty that markets were confident the Scottish economy was in good health and institutions were already in place, the functions of which would be expanded to include having responsibility for monetary policy.
In a blog about the announcement, Murphy said the tests seemed to be "structured to make it as hard as possible to ever get to a Scottish currency".
Speaking to The National, he added: “If there was a timed plan to transition to a Scottish currency, over the first year after independence, I’d be voting Yes, of course I would, because I would know the risks that were being taken then.
“The problem here is I don’t know the risks and that risk is so potentially big – of Scotland using the pound for an unknown period of time – that I couldn’t afford to take that risk and I could afford to expose my family and the community to that risk.
“But if I knew there was a period of time where we were going to go through that transition and it was laid out, it was going to be a year, then I would take that risk.
“It’s about balancing risks, there isn’t anything about independence that is risk-free, but you’ve got to be able to appraise that risk.
“At the moment, the balance of risks here is just wrong, it’s all in favour of uncertainty.”
At the press conference for the launch of the paper setting out the Scottish Government’s vision for the economics of an independent Scotland, Sturgeon rejected the framing of the constitutional debate as being about “certainty versus uncertainty”.
She said: “There is an inherent uncertainty in the future for everybody, for every individual, family business and country.”
A statement released by the Scottish Currency Group following the announcement read: “During the potentially long period of using sterling, interest rates and other important aspects of monetary policy would be controlled by the Bank of England without necessary regard to Scottish interests.
“Any borrowing by the Scottish Government during this period would need to be in sterling, risking the creation of a high level of debt in a foreign currency.
“The Government paper mistates UK foreign reserves as the current figure is US $78 billion net.
“Even if the UK agreed to Scotland getting a share, that would be US$6bn. The so-called central bank during the sterlingised period would have totally insufficient funds to either be a lender of last resort or to guarantee bank deposits at £85,000 per account.”
