ONCE upon a time it all seemed so straightforward. After years of seeing economic decisions tailored to the needs of the south-east of England, an independent Scotland would free itself from sterling and prove its modern, internationalist credentials by joining other European nations in adopting the euro as its currency.
The 2008 banking collapse and the euro crisis put paid to that.
The alternative of a new go-it-alone Scottish currency looks rather daunting in still-tricky economic times. And the SNP instead proposes an independent Scotland should stick with the pound.
In the circumstances it could be the least bad option – though Alex Salmond and his colleagues have been left trying to explain away their previous condemnation of sterling as a “millstone” round Scotland’s neck and their complaint that Scotland’s needs were ignored when interest rates were set.
But a formal currency union would require agreement from the rest of the UK and the message from the anti-independence parties, being delivered again today by George Osborne, is they would not go along with Mr Salmond’s plan.
Since David Cameron thought it best to make his latest foray into the referendum debate – “We want you to stay” – from the safety of the Olympic stadium in London last week, it is strange the Chancellor thought it a good move to come to Edinburgh to deliver his less friendly message in person.
The Prime Minister has more or less acknowledged that as an Eton-educated “Tory toff” he is not best placed to win over Scots – even when he is being upbeat about Scotland. Mr Osborne’s visit surely carries an even bigger risk of alienating voters.
The Liberal Democrats’ Chief Secretary to the Treasury, Danny Alexander, and Labour’s shadow chancellor, Ed Balls, are echoing Mr Osborne’s refusal to agree to a currency zone.
But it’s difficult to see how any pronouncement now on a currency union can be taken as binding on a future UK government of whatever colour. And the SNP insists the London-based parties would soon change their tune after a Yes vote anyway.
Bank of England governor Mark Carney, on his visit to Edinburgh last month, warned a currency union would inevitably mean surrendering some sovereignty – but more important from the SNP’s point of view, he did not pour cold water on the idea of a shared pound. He said the Bank would implement whatever the Scottish and Westminster governments agreed.
However, the implications of a shared currency lie at the heart of outspoken MP George Galloway’s arguments against Scotland becoming independent. He says if he thought independence would lead to a socialist Scotland he would be all for it, but he claims a currency union would in reality mean Scotland’s economic policies being dictated by a Tory-dominated Bank of England – without the opportunity to vote them out.
The united front by Labour, the Tories and the Lib Dems against a currency union could cause problems for the SNP and force it to come up with the alternative “Plan B” which the opposition parties have been calling for.
But the blanket dismissal of a shared currency could equally backfire and be seen as the work of an unholy alliance determined to out-manoeuvre the Nationalists. The currency looks one of the most important issues at stake – but also one of the most difficult to settle.