Independent Scotland should keep Sterling for transition period, says report

An independent Scotland should keep the pound during a transition period after any future vote to leave the Union, a new report commissioned by the SNP will say.

The Sustainable Growth Commission was set up to look at the future economic prospects of Scotland and First Minister Nicola Sturgeon has said it will “restart the debate'' about independence.

The 354-page report, to be published in full on Friday, will outline that the pound should remain as Scotland's currency for a period of time after any break from the Union.

There has been speculation the country would then move to a new Scottish version of Sterling.

Ahead of the 2014 independence referendum the SNP proposed a formal currency union with the rest of the UK.

On Tuesday, Governor of the Bank of England Mark Carney told the Treasury Select Committee a currency union was possible, but it would be for politicians to decide whether they want one.

The report will also set out proposals for a “Come to Scotland'' package as part of efforts to boost the country's population.

The document by former SNP MSP Andrew Wilson sets out how the country can use the “3 Ps'' - population, participation and productivity - in a bid to grow the economy.

The long-awaited report will argue an independent Scotland could be among the most successful small economies in the world, providing an economic boost that is the equivalent of £4,100 per person.

There are currently about 429,000 people living in Scotland who were born outside of the UK - with this group contributing £1.3 billion to the public purse.

The report includes 30 recommendations on how to grow the economy, including introducing a new visa system for Scotland which would be in contrast to the “UK Tory Government's hostile approach to migration''.

Demographic trends mean Scotland needs to attract people to boost its working-age population, with the report setting the goal of the country retaining an additional 5,000 overseas graduates each year - which could be worth £1.5 billion a year to the economy within a decade.

Speaking ahead of the publication of Scotland: A New Case For Optimism, Mr Wilson said: “We have a great opportunity for Scotland to strike a completely different tone on a vitally important area of economic policy - how we attract talent to our country.

“Growing our working population and, through it, our economy is perhaps the greatest national challenge we have - and is made even more urgent by Brexit and the threat it poses to our working-age population.''

Mr Wilson continued: “It is a fact that those born outside the UK who have made Scotland home for their businesses, their research or their families are significant net contributors to our economy and public finances - we need more of this.

“We also need more people from across the UK to consider the benefits of living and working here.

“Our package is designed to attract people to Scotland to study and to stay here, to build a career and a fulfilling future for themselves. We need investors, entrepreneurs and a skilled workforce to achieve our potential.''

The report is split into three sections, looking at Scotland's opportunities for economic growth, public finances and the key issue of what currency an independent Scotland could use.

Scottish Conservative finance spokesman Murdo Fraser said: “Of course we want to attract the best and brightest to come and live and work in Scotland. But you don't do that with high taxes and you don't do it by trying to tear up the UK.

“You do it by growing Scotland's economy - something the SNP government is failing to do, largely because it is spending so much of its time obsessing about independence.''

Scottish Labour leader Richard Leonard also hit out at the nationalists, saying: “The SNP government can attempt to reboot the case for independence as much as it likes. The people of Scotland do not trust it and want a government focused on jobs, schools and hospitals instead.''

Scottish Lib Dem leader Willie Rennie called on the Scottish Government to “focus on driving positive change and improvement in public services and the economy'' instead of pursuing “yet another divisive push for independence''.

But a Scottish Green spokesman said: “Many No voters in 2014 will no doubt be open to the case for independence, especially when this report is compared to the bleak, post-Brexit economic analysis papers, which we have seen, from the UK Government.''

He added: “While independence would give us a better chance of running a fairer economy, that shouldn't stop us taking action right now."

A separate Scottish currency could be set up after independence if six tests are met, the SNP-commissioned economic report has suggested.

The tests cover fiscal sustainability, central bank credibility, sufficiency of reserves and trading patterns as set out in the Sustainable Growth Commission report.

Author Andrew Wilson said: “It is important that independence must never be seen as a magic wand or quick and easy step to success.

“Indeed, there is no pot of gold, black or otherwise, at the foot of the independence rainbow. But there is a toolbox and using it will mean taking responsibility for choices that seek to create a stronger economy, sustainable public finances and a fairer society.

“Independence is a means to those ends, I believe a necessary but not sufficient step to success. The choices that are then made about the country's strategy and how effectively they are delivered are what will determine success - we are our choices.''

Scotland's First Minister and SNP leader Nicola Sturgeon said: “This report rightly doesn't shy away from the challenges we face but presents ways in which those challenges can be addressed - and sets out recommendations on currency - which as a country we should all debate and discuss.

“Scotland is now in a very different political and economic situation to 2014. There is no status quo and we know that being taken out of Europe and out of a market around eight times bigger than the UK market alone will hit our economy.

“That is why it is time to begin a fresh debate and to replace the despair of Brexit with optimism about Scotland's future.

“We look forward to debating the report's recommendations - both within the SNP and with business, trade unions and communities across Scotland.''

Scottish Secretary David Mundell said: “Scotland voted decisively in 2014 to remain part of the UK. That decision should be respected. The public do not want another divisive independence referendum.

“We want to work with the Scottish Government to maximise the opportunities our exit from the European Union will bring. We should all put our energies into making sure we get the right deal for Scotland and the rest of the UK as we leave the EU."

The Commission insisted that economic growth in Scotland can be lifted to “to take living standards to equal the best small countries in the world over a generation''.

The report said: “Our central argument is that Scotland should be seeking to emulate the performance of the best small countries in the world, rather than sticking to its current position as the best of the rest of the UK regions and nations outside of the south east of England.''

But it said the current UK model “which concentrates too much economic activity in London and the South-East region is holding Scotland and the other regions and nations of the UK below their potential''.

The Commission looked at the economies of 12 small independent states - Austria, Belgium, Denmark, Finland, Hong Kong, Ireland, the Netherlands, New Zealand, Norway, Singapore, Sweden, and Switzerland - as part of its work.

Median income in these nations is 14% higher in terms of GDP per head, the report said, the equivalent of £4,100 a person.

“This shows what is possible for an independent Scotland,'' the Commission stated

It sets out an approach of growing GDP in Scotland by focusing on the “the three 'Ps'' of economic performance” - productivity, population and participation.

If Scotland's population had risen in line with the UK, the country would have 5.8 million residents, while if this had matched the growth of other small European countries, there could be 6.1 million people living in Scotland.

It called for a national economic strategy to be drawn up on a cross-party basis.

Reducing the gender pay gap in Scotland to the level of New Zealand could increase GDP £6.1 billion, raising up to £2.5 billion a year more for the public purse.

Meanwhile doubling overseas exports - something the report said was a “reasonable target to set'' to bring Scotland in line with other nations - could increase GDP by 8% and generate £5 billion more in taxes each year.

To help attract people to live and work in Scotland, it suggested a package of financial incentives.

This “Come to Scotland'' deal should include tax breaks to help with the costs of relocating, and a new visa system.

There could also be tax breaks for businesses, possibly similar to the R&D tax credit scheme in Holland, although the Commission was wary of cutting corporation tax to lower than the UK level, saying this was not “an optimal strategic tool''.

It also suggested an independent Scotland should have a Ministry for Trade and Foreign Affairs, to oversee “a new and heavily integrated approach to trade, investment and economic diplomacy''.

There would also be a comprehensive review of UK spending programmes, with the Commission setting the target for an independent Scotland to save £1 billion compared to current levels.

Independence could also see a new Scottish Centreal Bank (SCB) and Scottish Fiscal Authority established - with the SCB to act as a lender of last resort.