Scottish Independance - debate

[KingK_series]

King, if I may call you that, please for a moment step back and review your own hyperbole.

100% of people in the UK do not want to allow Salmond to keep the £

Well that's just silly. My old school friend Carl, who you don't know but he's English and lives in a place called Hapton in Lancashire, does not mind sharing the pound with the Scotch. I know this because we chatted last night on the phone and this was one of our topics. So you're 100% is wrong, that is to say your use of eh phrase "100% of people..." is wrong. Moreover I want Scotland to keep the opund at first if there is independence. So that's 2.

Secondly Salmond will not be keeping the pound, he does not have the pound so it is not his to keep. Scotland might keep the pound, like Ireland did.
Scotland and Salmond are not interchangeable, if you could stop behaving like they are that would be very helpful and stop you looking parochial and ill informed.

I thank you for your deep analysis of Scotch politics - but you seem to presume that everyone who is in favour of independence reaches this conclusion using only their emotions. Some people have taken an intellectual approach to this. Most of the contributors to this thread share a common agreement on the status of the pound (amongst other things) yet their politics vary widely.
Their conclusions differ, but their understanding of the position is consistent.

What does that tell you?

pete

So you do not accept Carney's analysis -


- is that right?


Here is his speech;-

http://www.bankofengland.co.uk/publicat ... ech706.pdf



here is his conclusion;-



Conclusion
The Scottish government has stated that in the event of independence it would seek to retain sterling as part
of a formal currency union. All aspects of any such arrangement would be a matter for the Scottish and UK
Parliaments. If such deliberations ever were to happen, they would need to consider carefully what the
economics of currency unions suggest are the necessary foundations for a durable union, particularly given
the clear risks if these foundations are not in place.
Those risks have been demonstrated clearly in the euro area over recent years, with sovereign debt crises,
financial fragmentation and large divergences in economic performance. The euro area is now beginning to
rectify its institutional shortcomings, but further, very significant steps must be taken to expand the sharing of
risks and pooling of fiscal resources. In short, a durable, successful currency union requires some ceding of
national sovereignty.[/i]
It is likely that similar institutional arrangements would be necessary to support a monetary union between an
independent Scotland and the rest of the UK.


I suspect you have reached your limits of endurance of
the dismal science, so you’ll be relieved to know that
economics can take us no further. Decisions that cede sovereignty and limit autonomy are rightly choices for
elected governments and involve considerations beyond mere economics. For those considerations, others
are better placed to comment




And here is an city analysis;-



WHETHER it is best for Ukraine to split, or the UK to join the emerging Single European State, or Catalonia to leave Spain, or Scotland to leave the UK are not fundamentally economic questions. Rather, they are bound up with constitutional issues, issues of identity, and the question of with whom one wants to share a future.

For Scotland to leave the UK would, in my view, be a catastrophe both for the values that Britain – that great fused project of the English and Scottish Crowns – has developed and projected around the world these past 300 years, and for Scotland itself – the great flourishing of which, in philosophy and finance and invention and economic theory in the eighteenth century, and then in military adventure and colonialism in the nineteenth century, occurred as part of Britain.

But although economic considerations are not decisive for the question of whether Scotland should become independent, they are relevant.

If Scotland leaves the UK, two things immediately follow. First, it will not participate in UK economic institutions. Second, it will not automatically be part of the EU.

Whenever a sub-division of a larger country or some member of a trade agreement proposes breaking away, it is always told “you are too small to survive in today’s world”. That is no more true of Scotland than it is of anywhere else. Scotland has many businesses – in electronics, agriculture, financial services, mining, and luxury foods, to name but five – that would compete strongly at international level if Scotland were independent. And even if it had none, it would find some.

However, just because a small country could operate happily enough by itself does not mean it would be economically well-advised to do so. Furthermore, one should not underestimate the transitional costs an economy choosing to go it alone might experience.

Scotland will not have a currency union with the rest of the UK. The Scottish National Party (SNP) claims that when Cameron and Miliband and Clegg and Osborne and Balls and Alexander say there will be no currency union they are bluffing. If the SNP really believes that, they are fools. Much of the British political establishment has spent nearly 20 years, in respect of the euro, arguing that a currency union cannot work without political union. There was no chance whatever of its reversing that position once Scotland came into the picture.

Even if English politicians were willing to compromise, the SNP appears not to grasp this difficult truth: English voters do not want Scotland to leave and, if it were to do so, would be mortally offended. Alex Salmond merrily claims that Scotland would be England’s best pal in the world after independence. I can assure him that the feeling would not be mutual. In the unlikely event that Scotland were to vote for independence, English voters would be incandescent. Their view would be that the Scots had voted for independence precisely and mainly because they hated the English. Their attitude to any suggestions of political accommodation would be: “If, after all we’ve been through together, you hate us that much that you’re off, then be gone!” No English politician could stand against the rage that would follow.

Scotland might eventually find a friend in the European Union. But it would have to sign up for all the details of the Single European State to have any chance of getting in. There would be no Scottish rebate like the UK rebate. Instead, Scots voting for independence will be voting to pay money towards the residual UK rebate. (Scandalously, some Scots appear to have been told that Scotland would get a higher rebate than at present. No chance.) Scotland would have to join the Schengen Area and the euro. Perhaps there would be some special arrangement at the English border, but perhaps not. Some 2m UK citizens regularly crossing that border might be held up in future.

What of Scotland’s oil and gas? For a short time that might provide some buffer. But there would be no Norwegian-style sovereign wealth fund, as the SNP still implies. Instead, there would be a race to extract what they could before fracking in England (which would be accelerated by Scottish independence, to provide energy security) and elsewhere drove down oil and gas prices to a level that made the North Sea uneconomic.

None of this need be a disaster. Britain is a fantastic constitutional and cultural project. Scotland should stay in it. But if they leave, Scots should do so understanding the economic challenges. The independence debate doesn't appear to properly reflect these yet.

Andrew Lilico is chairman of Europe Economics.


- Do you disagree with this too - ?

[pete]

I agree with what Carney says but I think we interpret it differently so probably best we just leave it at that, we won't resolve our differences here.

I think currency union amounts, pretty much, to devo-max. Which will be fine and it will give the Scottish govt more ability to steer the Scottish economy where it wants to take it.

BUt it's OK because the ref will be a no vote so it's not worth worrying about

[H8OAG]

A few interesting and contrasting points of view.
I think its healthy to debate this subject as it is not debated enough
I have heard more constructive debate about the Scottish scenario in Europe than I have in the UK of late.

A few pointers

The people who dislike our First Minister?
They will get their wishes granted as SNP effectively ends....and Scotland returns to a Labour Government as declared by the majority who vote Labour
The SNP are playing a clever card by waking up the Labour majority to these facts....and they'll get their government back

I personally like Wee Eck
I have known him since 1986 when he got his first mobile phone......and he is no fool
(My Mother always told me that you can always look brilliant ...if you are surrounded by idiots!)....and by and large we get what we vote for!

I agree with the sentiment that the wider UK should have been allowed a vote
Judging by the sentiments of of the shaven/headed tattoo'd taxi driver who drove me to Wet Yorkshire Police HQ we would be granted independence!!
(Although I have seen the same venom directed at the English by ourselves and other UK countries ....especially in Northern Ireland.....and the irony about that one is not lost on me either

What does Europe think.....Should Scotland Be Independent?
My straw poll of EU visitors to our stand in Amsterdam...
Holland - Yes
Denmark - Yes
Norway - Yes....expect higher taxes but the state will provide everything
Sweden - Yes
Spain - Yes
Germany - No
Ireland - Yes
Latvia - Yes
France - Not Sure....they are not lovers of DC
Belgian - Yes


Austria - Don't care


Me?
My current thinking is that the union currently does not work
We don't need Armed Forces to be at Obama's beck and call.....and a Nuclear capability
Its all about the current GDP and the growing UK debt mountain
My business head says it's easier to deal with a smaller debt and build a recovery plan around that

[tut]

Have known Alex for twenty years, he helped me in a big way when I was medically retired in '93 and we almost bought The Old Mill in Strichen before we settled on Tut Towers so Alex bought it.

Have voted SNP ever since, and had a letter from him the other day after asking him what his plans were for the State Pension in the event of a Yes vote.

tut

[r10crw]

Just to be clear I dislike Alex because of what he has done to our area, his area. My family have lived in buchan for 300 years, his family have been here for not a great deal of it. Were from the same village, I went to school with his family members (who strangely enough emigrated), without going into it you can see my dislike is not based on nationaly ill informed media and bears no relation.

I like the man as an individual and believe him a good politician, spending time down south, a lot of it south of the manchester Hull divide, its dissappointing to witness the English media and the way they portray him as a fool.

I leave these sentiments behind when it comes to Scotland as a whole.

[pete]

I've found it very odd, chatting to English friends especially those who live in the South, about this topic. They have a very different view with a lot seeming to presume it's a done deal. And that's English friends who are either Scottish or have Scottish relatives...

I guess their media is presenting it differently.

[KingK_series]

I agree with what Carney says but I think we interpret it differently so probably best we just leave it at that, we won't resolve our differences here.

I think currency union amounts, pretty much, to devo-max. Which will be fine and it will give the Scottish govt more ability to steer the Scottish economy where it wants to take it.

BUt it's OK because the ref will be a no vote so it's not worth worrying about

Currency Union does not amount to Devo max - at all

Currency Union in Salmonds view means share the pound, share the Bank of England as a bank of last resort, share associated financial financial institutions, set in place a few " fiscal" rules with slap you down fines if Nation statee breaks rules - exactly like the pre 2008 Euro zone with said rules between Germany and Spain/Italy/Potrugal/and Greece.

Clearly that does not work - which is exactly what Carney is saying - so he goes on to say - which States do have a successful currency Union - answer two - Canada and the USA, but amongst many other features [read speech to hear this from Carney] the thing that both the USA and Canada share is a Federal Government - something that certainly the Germans, Dutch and possibly the French have always wanted in Europe ie A Federal States of Europe, and that all Euro zone countries are now waking up to as a necessity in economic terms to make the euro work - hence as Carney says - 'some ceding of sovereignty would be needed to make this work". Clearly that is not what Salmond wants - he is fighting for Scottish independence.


this is typical of comment on Carney's speech - and I have not seen any informed economics or political commentator disagree with this interpretation,


The governor of the Bank of England says he is not giving a view on whether Scottish independence would be good or bad for Scotland and its people

But Mark Carney will have an influence on the fractious debate over Scotland's future, because of the implications of his assessment of Alex Salmond's ambition that a separate Scotland would be in a sterling currency union with the rest of the UK.

The nub of his analysis is that successful currency unions pool considerable amounts of sovereignty over fiscal - or tax and spending - decisions.

And that currency unions that endure existential traumas (a big hello to our friends in the eurozone) tend to be those lacking the ability to share their public-sector financial resources, and which have limited controls over the propensity of union members to behave in an economically reckless way.

Or to put it another way, opting to be independent within a successful currency union would represent a very constrained form of independence. A Scottish government would have far less ability to tax and spend as it chose, than if it had its own currency - or so Mr Carney makes clear.

Which carries two implications.

First, independence within a currency union might not properly satisfy the yearning for self-determination of diehard activists, since their ability to manage their economy would be limited.

Second, the business of negotiating the terms of a currency union with the rest of the UK would be both make-or-break for Scottish prosperity and hugely complex.
Economic shock?

It won't therefore surprise you that the Treasury has seized on Mr Carney's speech to reinforce its view that negotiations on a currency union would be "highly unlikely to be agreed".

But, you may ask, why the need for Scotland's budgetary independence to be curtailed in the event of currency union?

Well, on Carney's view - which merely translates conventional economic theory - one reason would be to prevent a Scottish economic downturn becoming excessively painful for Scottish people.

Imagine there was an economic shock that were to hurt Scotland more than the rest of the UK. This could, for example, be a collapse in the oil price, if Scotland were to end up as owner of all that North Sea oil.

In fact in those circumstances, the energy price fall would probably benefit the economy of the rest of the UK (RUK) because costs for businesses and households would fall.

Which means that the economies of Scotland and that of RUK would diverge.
Tax revenues

Now the value of the pound would tend to reflect economic conditions in the larger economic area of England, Wales and Northern Ireland, not the more recessionary conditions in Scotland.

So the pound would not fall to offset the downturn in Scotland and give a boost to the export prospects of Scottish companies. And nor could the Bank of England, setting interest rates, reduce those interest rates to help the hurting Scots people, because they would be in the minority as a part of the whole sterling union.

Which means that economic activity in Scotland would probably decline more than would happen if it had its own currency.

And that in turn would lead tax revenues for the Scottish government to fall disproportionately more - at a time when Scottish unemployment would be on the rise and the Scottish government's expenditure would be rising on social security and benefit payments.

So the financial position of the Scottish government would be disproportionately impaired (its deficit would rise) - bringing the dangerous risk, perhaps, of the government defaulting on its debts.

In other words, within a currency union, there would be a strong need for governments to call on a common pool of resources to cushion the effect of such shocks.

This would involve, in our hypothetical case, taxpayers from the rest of the UK helping to finance Scottish unemployment benefits for a period.
'Moral Hazard'

But RUK taxpayers would only be prepared to do this, if confident that the Scottish government could not spend willy nilly in either good times or bad.

Or to put this in the tedious terms beloved by economists, any safety net agreed between the governments to bail out Scotland or RUK in a crisis would carry as a corollary strict rules on how much each government could tax and spend, to prevent "moral hazard" - or the danger that the Scots (in this case, but the same would apply to RUK) would not go spending bonkers, knowing that RUK taxpayers would bail them out.

And the same sort of fetters would have to be imposed for a second related reason, namely that a currency union implies banking union - and RUK taxpayers would only be prepared to stand behind the liabilities of Scottish banks, if those banks were subject to tight controls on their freedom to lend and invest.

The imperative of shackling banks is doubly important when Scottish banks would inevitably hold the debt of the Scottish government, so would be weakened in our hypothetical example by any impairment of the credit worthiness of the Scottish government.

And, if you doubt any of this, think for a second about how miserable life has been for the Spanish, Irish, Greeks, Portuguese and Cypriots in recent years, in a currency union where there is no common unemployment safety net and no shared pool of money to prop up ailing banks.

So whether he intended to do so or not, Governor Carney has just lobbed a very large stink bomb into the centre of Edinburgh.

Robert Peston, economics editor Article written by Robert Peston Robert Peston Economics editor

[KingK_series]

Just to be clear I dislike Alex because of what he has done to our area, his area. My family have lived in buchan for 300 years, his family have been here for not a great deal of it. Were from the same village, I went to school with his family members (who strangely enough emigrated), without going into it you can see my dislike is not based on nationaly ill informed media and bears no relation.

I like the man as an individual and believe him a good politician, spending time down south, a lot of it south of the manchester Hull divide, its dissappointing to witness the English media and the way they portray him as a fool.

I leave these sentiments behind when it comes to Scotland as a whole.

I don't think Salmond is a fool at all - I think he is the supreme political operator, and I think he knows very very well that Westminster will never enter a Currency Union with the SNP or anyone else.

And I think he knows exactly what Scottish reaction to the Carney analysis is going to be, or rather Westminster's refusal to enter into the arrangement that Carney says is necessary to make currency Union work, because the truth is that he is equally opposed to those same arrangements - he knows how to play politics...and play with Scottish feelings about being told what they [you] can and cannot have. - Which is exactly why so many south of the border wish they had some way of expressing their feelings about all this too - because it affects us too - as Robert Peston writes, and we don't want to be in a back door Euro.

How does Salmond campaign? what does he endlessly repeat??? - that London is bullying Scots, and that Scots will not take that - and how does that play out ? - plenty of evidence of that in this thread .... No I think Salmond knows exactly how to get the result he wants -

.............and at the same time......he is being unbelievably successful in burying the questions that he does not want to answer - pre vote day.


He's playing Scottish opinion like a fiddle........and he is a Maestro.

[robin]

Given a free choice the rUK government would choose not to enter into a currency union, as you say.

Post-independence there might not be such a simple free choice and the alternatives to a currency union might be worse, so they may end up with one despite not really wanting one. For example if Scotland's 10% of UK GDP were removed from rUK GDP, would rUK's debt as a percentage of GDP be manageable? Politically would call-me-Dave survive if he let the "jocks" wander off into the sunset unhampered by debt - can you imagine the Daily Mail headlines? In those circumstances the powers that be might suddenly decide there's more in it for them to compromise than to stick to their ideals.

I took Pete's comment about currency union leading to more of a devo max system to mean that yes, if we end up with a currency union the Scottish government will not be quite as independent as they wanted to be as some aspects of economic policy will be subject to "foreign rule", but the compromise is they have currency stability, so it's sort of where we would have ended up with a devo max vote.

One thing is for sure and it has been pointed out here already, politicians spout ideals but end up with compromises (or you risk invoking Godwin ).

Cheers,
Robin

[tut]

I am just a country farm boy.......



tut

[KingK_series]

Given a free choice the rUK government would choose not to enter into a currency union, as you say.

Post-independence there might not be such a simple free choice and the alternatives to a currency union might be worse, so they may end up with one despite not really wanting one. For example if Scotland's 10% of UK GDP were removed from rUK GDP, would rUK's debt as a percentage of GDP be manageable? Politically would call-me-Dave survive if he let the "jocks" wander off into the sunset unhampered by debt - can you imagine the Daily Mail headlines? In those circumstances the powers that be might suddenly decide there's more in it for them to compromise than to stick to their ideals.

I took Pete's comment about currency union leading to more of a devo max system to mean that yes, if we end up with a currency union the Scottish government will not be quite as independent as they wanted to be as some aspects of economic policy will be subject to "foreign rule", but the compromise is they have currency stability, so it's sort of where we would have ended up with a devo max vote.

One thing is for sure and it has been pointed out here already, politicians spout ideals but end up with compromises (or you risk invoking Godwin ).

Cheers,
Robin

Robin


Yes the RUK debt would be manageable, N. Sea oil revenue is about equal to current UK funding to the Scottish Govt, and many people think there would be a net gain.


Currency union won't happen, and Salmond knows that -

if Scotland votes yes, - there is enormous political investment here in the UK's refusal to enter the Eurozone and it has become quite clear that the Euro is a disaster - have you been to Madrid or Athens recently - it is a CATASTROPHE!!!! I have many Spanish friends who are truly desperate and in Athens you only need to walk 300m across the main square from their parliament into the main shopping area to find shop after shop after shop boarded up and vandalised. Currency Union is not going to happen.

As the above said even if the politicians are lying through their teeth right now - and the'd have to be, because they have made unequivocal statements that The UK will never share the pound or the Bank of England with an Independent Scotland under any circumstances [they made this clear in a joint statement after Carney's speech] - and just look at the political trouble Clegg is in after reneging on his University fee pledge which is a minor thing by comparison to a nation's financial security [Currency union] = honestly I do not know any one down here who thinks that could possibly happen


- and the article is right - English people are 54% against the Scots keeping the pound if you vote for Scottish independence and only 22% for =- and that is I dare say without most people reaslising that were a Euro type currency arrangement put in place it would be a serious risk to the UK economy and the risk that we'd have to bale Scotland out - have you been to Germany recently? - to hear the sheer resentment held by Germans towards the Greeks.

It ain't going to happen and Westminster has made that plain

- thinking that somehow it will all work out is swallowing Salmonds line, hook line and sinker.

[KingK_series]

Here's what Mcpherson said on the matter ;

[KingK_series]

Here's what Mcpherson said on the matter ;

https://www.gov.uk/government/uploads/s ... _union.pdf


- it answers your question Robin

[pete]

Here's what Mcpherson said on the matter ;

https://www.gov.uk/government/uploads/s ... _union.pdf


- it answers your question Robin

Yes, I read that. I didn't agree with it.

Didn't Ireland have a currency union for 50 years or so? Do you think they wanted a closer union or were they moving in the other direction?

Exciting though, isn't it? Let's leave just to see what will happen, might be a laugh.

What do you think they mean by currency union?

[David]

It's a myth that the Irish shared the pound - they basically copied the pound system and pegged it to the UK pound. The value was kept the same by the Irish government and bank in much the same way the UK pound was pegged to the Deutsche Mark prior to Black Wednesday. In those days, the Governments decided the exchange rates - a policy that eventually failed due to the high costs involved. It did worked for Ireland in the period when currency was heavily controlled - remember those days was when you could only take £50 out of the country, and it was written in your passport. When visiting some countries it was even illegal to take their currency home with you - spend it or give it back. Very different times.

In today's IT world, it is nonsense to compare the past experience of Ireland.