New Scottish currency would start out ‘worth 20 per cent less than the pound’
A NEW Scottish currency would initially be worth around 20 per cent less than the pound, lowering household incomes and pushing up prices, an economist has warned.
Tony Mackay, an adviser to the World Bank, said independence would cut exports to England by 15% because of the border created by the SNP’S plan to rejoin the EU.
He said there was no doubt “an independent Scotland could be economically viable”, but people deserved “an objective analysis” of the implications before voting on it.
Mr Mackay, who has been critical of the SNP Government in the past, made the comments in an analysis in the Sunday Times. Nicola Sturgeon has said she wants a second referendum by 2024, Covid permitting, then independence in 2026.
However, a Panelbase poll for the Sunday Times found only 22% of Scots want Indyref2 within 12 months, 33% want it in two to five years, and 45% don’t want it at all.
The SNP’S currency plan for independence is to keep using the pound until economic conditions allow a new Scottish currency.
Mr Mackay, who advised the government of Bosnia-herzegovina after its independence from Yugoslavia, said a new currency would initially have a value “18 to 22% lower than that of the pound sterling”, adding: “It is possible that the exchange rate would increase over time but it could also worsen.”
He said: “The bottom line is that average incomes in Scotland would be lower, although not by as much as 22%. Many people would be unaffected but those working in export industries and the public sector would be. Foreign holidays, including trips to England, would be more expensive.”
A recent report by Credit Suisse warned a Scottish currency could cause capital flight as people hurried to move their savings out of the country to keep them in sterling and avoid a devaluation.
Under SNP plans, an independent Scotland would rejoin the EU, making the border with England a tightly-regulated external EU one.
Ms Sturgeon last month admitted this would create “practical difficulties” for trade, but insisted these could be resolved in talks with London, although without specifying how.
She has said a full prospectus, including downsides, will be put before voters ahead of Indyref2.
Mr Mackay wrote: “A border with England would undoubtedly reduce trade, as industries such as fish processing and whisky have already found out with the new EU border.
“There could be restrictions or quotas on the export and import of specific products and services. There would also be added costs for virtually all trade because of the paper and legal work involved.”
SNP depute leader Keith Brown said: “Denmark’s national income per head is around 20% higher than the UK’S and Norway’s is around 40%. With Scotland’s abundant resources, the full powers of independence and as part of the European single market there is no reason we cannot emulate the success of similar-sized countries.”