Earlier this month, a senior SNP minister said that an independent Scotland would look to set up its own currency “as quickly as we could”. The party’s Business and trade minister, Ivan McKee, said that the pound sterling would be used while the country transitioned to a stage where it is ready to use a new Scottish currency. He told the BBC: “Our policy is to initially use sterling and then move as quickly as we could towards an independent Scottish currency. “So there would be a Scottish central bank and the powers of that bank would obviously evolve as we moved forward towards an independent Scottish currency.”
The currency issue is one of many economic conundrums facing the SNP and First Minister Nicola Sturgeon.
How independence would impact the economy in Scotland remains one of the biggest sticking points, and comments by a former economic adviser to the Scottish government won’t ease these fears.
In his book ‘A Better Nation’, published in May, Professor John Kay made a series of warnings about how Scotland could suffer economically.
This included his prediction that Scotland would face a currency “fiasco” if the country tried to ditch the pound too early.
He said: “There is a real possibility that a premature and ill-timed introduction of a Scottish currency would be an embarrassing fiasco, ignored by most of the world and unappreciated by Scottish residents.”
The SNP voted at conference to introduce a separate Scottish currency as soon as possible, meaning Ms Sturgeon may have to balance her supporters’ enthusiasm for secession with the economic reality of such a big call.
Aside from the currency question, Professor Kay made some harrowing warnings about Scotland’s finances.
He said Scotland could start life as an independent country saddled with £180billion of debt.
The former adviser also claimed Scotland would have to borrow between £10billion and £20billion annually to keep the economy going.
Professor Kay wrote: “It may be reasonable to assume that Scotland would begin independent life carrying, explicitly or implicitly, a pro-rata share of UK debt, which might be in the region of £180 billion.
“Scotland would also need to borrow to cover its budget deficit after independence, a figure which might initially be between £10billion and £20 billion annually.”
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“The UK Government created £400billion to actually pay for the whole Covid crisis.
“Not a single penny of the spending for Covid was actually paid for by the taxpayer – it was all done because the Bank of England can create money at will for the UK Government. So Scotland has to have a similar power.
“The reality is even in Scotland there could be millions who are not able to do so. And in that case, how do we provide them with the support they need?
“This is a crisis at least as significant in economic terms as Covid, people are going to be forced to choose between heat and food, and unless Scotland would have its own currency, I don’t think it would be able to handle that scale of crisis.
“I would hope a future compassionate Scottish Government would want to tackle such problems – and it can’t do it without its own currency.”