After months of speculation, Alex Salmond has finally stated that he would not accept a Plan B on the currency debate in an independent Scotland because it would be “settling for what’s second best”.
“Plan B implies settling for what’s second best. And neither myself, my colleagues in the SNP, or the wider Yes campaign will ever settle for second best for Scotland.”
Recent polls have placed the Yes campaign on weak ground since the first TV debate between Alex Salmond and Alastair Darling, but with this recent ‘no Plan B’ announcement from the First Minister, and a united opposition from Westminster on a formal currency union, it would appear that should Scotland vote Yes in September, then it would most certainly have to coin another currency plan, even if Mr Salmond does not believe alternatives are plausible.
But what could that look like?
One option would be for Scotland to keep the pound, but not have any say over its interest rates or provide a lender of the last resort, which would prop up Scottish banks should there be a repeat of the 2008 financial crisis. Panama is a model which could be used a guide on these grounds, as Sam Bowman in Conservative Home argues.
This strategy might be ideal for free marketeers, but Scottish politicians may find it difficult to operate via such methods.
Another option would be to create a brand new currency. However, this option is seen as an expensive alternative, due to the costs of setting up a new currency and the risks from doing so. James Millar touches on these difficulties in his column in the Sunday Post:
“First, because it’s a harder political sell. With most Scots still to be convinced of the benefits of independence according to the polls, asking them to go through the hassle of binning their pounds and pence for a Scottish groat is not going to go down well.
“Second, it would wreak economic havoc if there was an exchange rate between Scotland and the rest of the UK. The rest of the UK remains Scotland’s biggest export market, so it does not make sense to create extra expense through exchange rates that could make Scots goods more expensive everywhere.”
Perhaps one last prospective option is to join the Eurozone, a plan which the SNP once argued for, however the recent economic uncertainty about whether the Eurozone would even survive the 2008 financial recession have cast fresh doubts over such a move.
Joining the Euro would also be the antithesis of the Scottish independence campaign – at least according to this commentator. Due to Europe’s broad range of economic prosperity, further powers are being constantly sought to collectively manage the Eurozone more efficiently, which could, in some instances, mean that national powers are transferred over from the national state to the supranational model. Germany are pushing for a European Finance Minister who would have the power to veto national budgets of ‘rogue spending states’ who do not conform to the European model. And as such, this may well be seen as an unattractive option to the Nationalists in Holyrood.
One way or another, Mr Salmond must focus his agenda on the currency issue or else risk losing further support in the election next month. We now know that there is no Plan B, and with the election on the horizon, the Yes campaign are set for a struggle on this topic. What the Yes campaign need to do is deliver a clear message on currency which can attract broad support, however at the moment, such an outcome does not seem likely.