The currency debate will matter when voters go to the ballot box because an independence referendum cannot just be about the heart, it must also be about the head. Leaving a union – be it the UK or the EU – might seem obvious to someone who is already convinced, but most voters will need reassurance that, if they jump, they will have somewhere safe to land. Alex Salmond made great play of his plan for an independent Scotland, boasting of the hundreds of pages it took up. But it has now fallen apart under the slightest scrutiny. Salmond seems to think it’s politically risky to argue for full independence, and is instead trying to build a halfway house based on a currency union. The fact that his fellow Yes campaigners have resorted to claiming George Osborne’s intervention is “bullying” shows quite how badly this has hurt the Yes campaign. They tried to build a concrete idea of independence, but now it looks as solid as a mirage. Mark Wallace is executive editor of ConservativeHome.
An independent Scotland may be better off outside a currency union with the rest of the UK, so the Scots shouldn’t worry much. Scottish banks could continue using the pound as a reserve on which they issue their own promissory notes, as happens already. Banks would have to hold higher reserves and could arrange private clearing-houses to provide liquidity to others in need. The only real difference would be that the Bank of England would not be there to bail out insolvent banks, which may mean that RBS would relocate to England. But the Latin American states which use the US dollar have highly stable banking systems precisely because their banks cannot expect help if they run into trouble. Neither should Scots fear life outside the EU – Iceland, Norway and Switzerland do well enough. The debate should hinge on a much bigger question: would Scotland be a statist throwback to the last century, or an open nation looking forward to this one? Sam Bowman is research director at the Adam Smith Institute.