Scottish Government adviser calls on fresh currency plan to be considered
A Nobel prize-winning Scottish Government adviser has said the SNP's plan to keep the UK pound after independence was a mistake and urged Scotland to consider its own currency.
A Nobel prize-winning Scottish Government adviser has said the SNP's plan to keep the UK pound after independence was a mistake and urged Scotland to consider its own currency.
Joseph Stiglitz, the internationally-renowned economist who sits on Nicola Sturgeon's Council of Economic Advisers, said a free-floating Scottish pound could be used to stimulate the economy and lower its towering deficit.
Scotland spent nearly £15 billion more than it generated last year - a 9.5% deficit which outstrips crisis-hit Greece.
The Scottish Government is examining ways to keep Scotland in the European Union (EU) after Brexit but critics have pointed out the EU requires a deficit below 3% and a commitment to join the euro.
Mr Stiglitz said taking Scotland into the euro would be "a mistake" but insisted there is a greater willingness in the EU to accept countries which do not want to use the euro.
Alex Salmond, the former first minister who appointed Mr Stiglitz to his government advisory team, has said the shared currency plan was a key weakness in his 2014 independence campaign and allowed him to be "gazumped" by Westminster.
In the run-up to the referendum in 2014, the Fiscal Commission Working Group - part of the Council of Economic Advisers - made a ''clear recommendation'' for Scotland to retain the pound in a formal currency union with the rest of the UK, if there was a Yes vote.
Reflecting on this plan on BBC Radio Scotland's Good Morning Scotland programme, Mr Stiglitz said: "They wanted the smoothest transition possible.
"They wanted to say that we could move from the current economic arrangement to another one while keeping our currency and keeping other forms of institutions.
"I think, in hindsight, that may have been a mistake.
"It would be a mistake to join the euro, by the way, so what they would have needed to do, perhaps, was resurrect the Scottish pound and let it float.
"Small countries can have their own currency. The reason that Iceland, which had one of the deepest downturns in 2008, had one of the strongest recoveries was because it had its own currency."
He added: "If there was a Scottish pound floating, you could help stimulate the Scottish economy. The deficit would come down to make it acceptable to joining the EU.
"I think there's going to be, going forward, a greater willingness - I hope there is a greater willingness - within Europe for countries to be a member of the EU but not have the euro.
"Sweden doesn't have the euro, obviously the UK did not have the euro before, so they have shown some willingness - a concerned willingness - to accept countries into the EU without joining the euro."
He urged Scotland to avoid being "tethered" to the euro in its efforts to remain in the EU.
"If you were forced to join the euro as a price of joining the EU, then I would have very strong second thoughts," he said.
"It's too high a price. Your economy should not be ruled by Frankfurt, which is what would happen if you had to join the euro."
The Scottish Greens, the pro-independence party who the minority SNP government may have to rely on to get a second referendum through parliament, provoked a disagreement in the 2014 Yes Scotland campaign when they opposed the SNP's "Sterling zone" plan and backed a separate currency.
Co-convener Patrick Harvie said Mr Stiglitz's comments are a vindication of their argument in 2014 and urged nationalists to build a stronger plan for currency in an independent Scotland.
He said: "Professor Stiglitz is right to highlight the dangers of sharing the pound and the benefits of an independent currency, just as the Scottish Greens argued during the 2014 referendum.
"If we want the maximum economic control to run a fairer economy, then having our own currency must be a fundamental aim.
"After the No vote, Greens pledged to continue building the case for independence, but we're clear that it must be a stronger case than was offered last time, especially on the currency question."
An SNP spokesman said: "Any change in policy on currency would be required to go through the normal party processes - but we agree with Professor Stiglitz that we should not join the euro.
"However, our immediate priority is exploring all possible means to protect Scotland's place in Europe, in line with the way people here voted, which is vital for jobs, investment and long-term prosperity."
Scottish Conservative finance spokesman Murdo Fraser said Mr Stiglitz comments demonstrate that the SNP's "dodgy prospectus is falling to pieces".
He said: "There is a simple solution for the SNP on the currency. It's called the UK pound and most people in Scotland would like to keep it.
"The SNP needs to accept the result of the referendum two years ago and got on with the job of governing."
Scottish Labour leader Kezia Dugdale said: "What we have today works. Being part of the UK means we can use the pound and have access to the Bank of England in times of difficulty for our economy. That's a positive argument for remaining in the UK.
"Instead of agitating for a second independence referendum, the SNP should focus on the bread and butter issues of government, like getting people back into work and giving everybody a fair chance in life."
Scottish Liberal Democrat leader Willie Rennie said: "The SNPs favourite economist has now criticised Nicola Sturgeon's favourite policy. Imagine the chaos we would now be in if we had followed her advice then."