Wednesday, 29 January 2014

Banking on the Pound

Yesterday's speech by Bank of England Governor Mark Carney received predictable responses on Twitter - passionately assurances, from both Yes and No campaigners, that their own cases were vindicated by it as he clearly agreed with them in full. Having watched this go on through the subsequent hours, I hope that I may be excused for sticking my oar in and asserting that, on the contrary, he agrees with me in full: I have long argued that this is a complex, nuanced issue with both positive and negative points.

I'm not a newcomer to this area of discussion; I've run three different kinds of business and I've written on business and financial issues for around a decade. And like it or not, this is a business issue, not an ideological one - those who get further than just lapping up the soundbites or shrugging their shoulders because maths is hard will be thinking carefully about how the decision could impact them financially before they decide which way to vote. They will be thinking not just about their domestic lives but also about the businesses they run and the businesses they work for. Even if they've already made up their minds about voting, many will want to work out how they can prepare financially for what is to come, how much work they will need to do to make adjustments, and what they need to take into account when preparing individual business forecasts.

In any situation of this type there are a lot of unknowns, but as Carney noted, something we can do is to look at other countries that have gone through the same process, and consider what happened to them. Doing so should reduce some of the panic that has attended the independence debate. The question is not - and, to serious minded people, never has been - about whether or not Scotland can survive on its own. What matters is whether or not it should, and whether or not it would be able to provide its citizens with a standard of living not simply adequate but satisfactory.

In asking these questions, we really need to examine two points that have been sidelined or distorted during the bulk of the debate. Firstly, there's the issue of currency use. We need to say goodbye to the nonsense that has been spouted about Scotland perhaps not being able to use the pound. Of course it will be able to use the pound. There's a very simple reason for this: the pound is a freely tradeable currency. Should it cease to be such, the UK (or what then remains of it) can kiss goodbye to its high credit rating. Naturally that isn't going to happen - so what really matters is not the cash we use (after all, we could always choose the bitcoin), but who is our lender of last resort.

This brings me to the second point - it would be unwise for any country already dealing with complexities of establishing itself as an independent force in the modern world to try and set up its own weighty central bank at the same time. But independence does not have to be established overnight. Again, if we look at other recent divorces between nations, we can see how this works in practice. If a currency is shared for a short period of time - five years is probably  good base estimate, but it should be flexible in order to take account of changing circumstances - this gives a new country stability when it most needs it. It will face limitations for the duration, being obliged to follow a similar economic direction to its larger partner, but this can be temporary. Introducing its own currency after that point is much easier and means it then has the freedom to determine its own direction.

So why is nobody discussing this option? In act, a few of the smaller political parties are, but it has been elided from the mainstream debate for two reasons. Firstly, the majority of those opposed to independence find it problematic because it makes the option of independence seem more viable. secondly, the majority of those in favour find it problematic because it requires the acknowledgement that independence would be complicated and some major elements would remain unpredictable for years after the fact. (The desire to make everything seem predictable and safe is a problem on both sides of the argument - it's politically expedient, of course, but hardly honest - there is no political arrangement without uncertainty - and the public are beginning to see through it). This is another illustration of the problems stemming from the media narrative of the referendum as a battle between polarised opponents, focused on sniping at each other rather than on elucidating the issues the public is anxious to understand. We badly need to open up public discussion of a wider range of possibilities where Scotland' political and economic future is concerned.

At present, many Scots find themselves dependent on putting their trust in one financial assessment or another based on how credible its exponents seem, without ever unravelling the details. Carney is to be praised for he clear language he used in his address, and this should be taken not as an opportunity for political posturing but as an opportunity to explore the pros and cons together, constructively, and invite more people in to the economic debate. If nothing else it is an opportunity for education that - whichever way the referendum goes - will benefit Scotland in the long term.

Friday, 24 January 2014

Best Exotic Politico Hotel

This week, First Minister's Questions in the Scottish Parliament opened with a bizarre exchange in which Johann Lamont challenged Alex Salmond over the cost of a 2012 trip to Chicago. There's a reason why this kind of politics is generally discouraged, with people being advised to play the ball, not the man. It's not just about being polite. It's that the ball can't kick back.

Lamont's criticism centered on Salmond's $2,000 a night stay at the Peninsula Hotel in Chicago. It just so happens that, like my many writers, I make part of my living from producing promotional copy, and I've written about the Peninsula Hotel. The reason it's so popular with celebrities, something Lamont ridiculed (she must wish Justin Bieber's latest bad-boy-honest publicity stunt had happened a day earlier), is that it has excellent security. Accommodating politicians in a place like this may cost more upfront but it cuts down on the cost of providing personal security, so it's not quite the waste of money it might look like. Sadly, senior politicians and celebrities do need security these days, and the cost of losing our first minister, even just in financial terms, would be considerable - not to mention that, with increased security, he's cheaper to insure.

What really makes this unfortunate for Lamont, however, is nothing to do with Salmond - it's all about the Labour Party. Let's stick with Chicago. In 1999, Tony Blair stayed in the Conrad Suite in the city's Hilton hotel, another place known for the excellent security, which is partly why it has been used by the likes of Frank Sinatra, John Travolta and Cher. The Chicago Hilton charges upwards of $7,000 a night for this suite.

Far be it from me to attack Blair for this, even if I can't see why he'd need 24 hour butler service. The point is, accommodating famous politicians is expensive. If Lamont herself becomes First Minister one day, she may find herself in the awkward position of having to find a cheaper hotel and security deal for herself. Thursday's conversation may come back to haunt her. She would be wise to do her backtracking now rather than letting this fester.