13 Feb 2014

What has changed for Scottish sterling currency union?

Professor John Curtice’s question at the Chancellor’s “gloves off” speech on the pound looked like it slightly wrong-footed George Osborne. If you’re telling us this bit of your negotiating stance in a post-yes vote scenario, why not tell us some others too … like whether Scotland would keep the BBC and how the rest of the UK would treat Scotland’s application for separate EU membership? George Osborne said he didn’t want to get into “pre-negotiation” but that’s exactly what he jumped into feet first today.

He won’t lose sleep about that though. Nor will Mr Osborne worry that he’s suddenly gone a lot further than he did as recently as last April. Back then he said of a sterling currency union; “frankly it’s unlikely.” Now he is completely ruling it out. What changed?

Ah, say the Treasury. We didn’t have the Governor of the Bank of England’s advice  – “Dr Mark Carney” to you, the Chancellor emphasised. Well, the Bank of England fed into the original April 2013 Treasury analysis, as you would expect. It concluded back then that “currency union could … place constraints on the efficiency of the fiscal policy lever. and the scope for fiscal stabilisation available to an independent Scottish state.” Not exactly a thunderclap.

Shuttle forward 10 months to today’s document and there’s a categorical “HM Treasury would advise the UK government against entering into a currency union.”

Three things have certainly changed. We now have all three main Westminster parties signed up to saying a categorcial “no” to currency union, a consensus which a sceptic might say a civil servant would be wise not to challenge. One other thing that’s changed is the date. We’re nearer the referendum and the temperature is hotting up. You don’t start a campaign for a union of nations by slipping on your knuckle-duster. The third thing? The polling.

The lead for the “No” camp looks like it is, as its senior figures always predicted it would, narrowing. And the Better Together camp know the leads not as formidable now as it needs to be. Drill into the numbers, factor in independence enthusiasts voting in greater numbers than apathetic status quo supporters – differential turnout – and peer into the minds of the waverers and you see a victory for the “Yes” camp is still possible and a healthy 45 per cent or so result for them is far from out of the question. That, the Better Together camp, desperately wants to avoid.

So the gloves have come off. The three main Westminster parties have gone for the kill. Their polling tells them the Achilles heel of the independence cause is the pound in the pocket. They want to convert a worry into a deep fear. The “Yes” camp is saying it’s typical “bullying” by the “Westminster” three-headed hydra. But their whole strategy has been to de-risk independence and this must add some risk.

The “No” campaign has been accused by some of lacking a strategy, of being too reactive. It’s got a strategy now and a pretty ruthless one. The Prime Minister stood in the Olympic velodrome only last week saying “please stay – we love you” (I paraphrase). Today the Chancellor stood in Edinburgh added the PS: ‘if you do go we’ll cut you off without a penny.’

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