Should Scotland keep the pound?

The political manoeuvring over the terms of a referendum on Scottish independence intensified today.

David Cameron has agreed to demands by Scotland’s First Minister for a face to face meeting on the issue but not before Alex Salmond talks first to the Scottish Secretary Michael Moore.

And the two sides also clashed over whether an independent Scotland could carry on using the pound.

Scottish independence would be a massive economic gamble, say its critics. But holding a referendum poses risks as well – for both sides of the debate over the future of the union.

The immediate issue – who decides the timing and the wording of the referendum question?

Read more from Faisal Islam on Economics on his blog: Yours, for Scotland. Ten economic questions on independence

Both sides are claiming that the Scottish parliament should be in the driving seat. Now the Scottish secretary has called for talks this week to settle the details.

Alex Salmond says he’s been trying to talk to the Westminster government about this for months. Tonight his wish has been granted, Downing Street saying that direct talks with David Cameron will be arranged in the coming days.

But whenever the vote happens, it is clear the SNP’s unionist opponents will focus their criticism on the impact on Scotland’s economy:

The SNP had harboured ambitions for an independent Scotland to join the Euro but that’s less attractive given the single currency crisis.

Now Mr Salmond stresses that an independent Scotland would at first retain the pound, even though George Osborne has refused to say whether Scotland could remain in a currency controlled from London.

But whether Scotland can use the pound may be less important than the economic implications of doing so. It means interest rates for Scotland would be set by the Bank of England. Tax and spending policy may need to be coordinated even after independence. The precise economic relationship between Scotland and England in this new sterling zone, is far from clear.