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Scottish independence: Post-yes economy scrutinised by MSPs Scottish independence: Adviser Beveridge backs currency union plan
(about 3 hours later)
The future of Scotland's economy after independence is facing scrutiny from MSPs. The head of the Scottish government's fiscal advice group has urged SNP ministers to stick with their planned monetary union under independence.
A panel of academics and economic experts have brought their predictions to Holyrood's economy, energy and tourism committee. Crawford Beveridge said Chancellor George Osborne was not "serious" when he ruled out Scotland's pound-sharing plan with the rest of the UK.
What currency an independent Scotland would use is expected to dominate the evidence. His comments came during evidence to MSPs on Scotland's future.
The UK government has ruled out a formal currency union with Scotland in the event of independence. Holyrood's economy committee also heard calls for an independent Scotland to start its own currency.
The referendum will be held on 18 September, with voters asked the yes/no question: "Should Scotland be an independent country?" In the event of a "yes" vote in the 18 September independence referendum, the Scottish government has proposed keeping the pound as part of a formal currency union with the rest of the UK.
Harvard-educated economist Professor David Simpson, who has worked for the UN, World Bank, European Commission and Standard Life, is expected to challenge the view that a currency union needs political union and economic stability depends on a central bank with lender of last-resort facilities. Mr Osborne, along with Liberal Democrat Chief Secretary to the Treasury Danny Alexander and Labour shadow chancellor Ed Balls, have said they could not recommend such a move.
'Dollarization' Scottish ministers have said their option made sense for both Scotland and the rest of the UK, but political opponents have called for a currency "Plan B".
Meanwhile, the view that "dollarization" of sterling - using the pound outside of a formal currency union - would benefit an independent Scotland has been challenged by Dr Angus Armstrong from the National Institute of Economic and Social Research, and Professor David Bell from the University of Stirling. Mr Beveridge, chairman of the Scottish government's fiscal commission, told MSPs: "I don't think any of us on the committee believe for a minute that the chancellor is serious.
They are expected to say unilateral use of the pound would lead to banks leaving Scotland and a lack of control over monetary policy. "We warned in our report last year that, leading up to this, there was gong to be a lot of political statements, but in our opinion, economics will trump the politics in this and good heads will prevail if there happens to be a 'yes' vote."
Edinburgh University politics professor Charlie Jeffery is likely to argue that a currency union with the UK is "perfectly feasible" and say an independent Scotland would be likely to gain uninterrupted membership of the EU. Mr Beveridge added: "We would not want to even talk about a Plan B at this stage of the game - I think we would say there are lots of options, but at this moment our strong advice would be, let's go down the path of recommending to the government that they stick with the monetary union.
Others have claimed EU membership would be difficult for Scotland to obtain following a Yes vote in the referendum. "We will spend some time on the fiscal commission working group over the next few months trying to help the rest of the UK understand the very strong advantages there are to that and the strong disadvantages there would be if they decided to go against that."
The committee will also hear from Glasgow University professors Jo Armstrong and John McLaren, who have urged the Scottish government to explain in more detail how independence would boost Scotland's economy, save oil revenues without spending cuts or tax increases, and how much it would need to borrow. However, Dr Angus Armstrong, of the National Institute of Economic and Social Research, told the parliament committee that the chancellor's position was "entirely rational".
Institute of Fiscal Studies director Paul Johnson will also give evidence to the committee, following the body's latest economic forecast, which offers "good news" for an independent Scotland provided it continues with the UK government's current programme of spending cuts. 'Associated risks'
He said: "The issue becomes, since that's been ruled out, what would be in an independent Scotland's best interests?
"Based on the aspiration, pointed out in the White Paper, to build a Scotland which reflects the values and aspirations of Scottish people, then I think you want to have something that allows you the policy levers to be able to do that.
"There is, in my view, only one option which allows you that full range and that would be your own currency."
Prof Jo Armstrong, an economist with the Centre for Public Policy for Regions at University of Glasgow, told MSPs there were pros and cons for all Scotland's currency options.
"If I'm truly independent and I want full access to levers of power, I would want to try and make my own currency work," she said.
"That has got lots and lots or risks associated with it but it allows me to have absolutely full control of the fiscal levers, which is what an independent country would want."
The referendum will ask voters the yes/no question: "Should Scotland be an independent country?"