ANALYSIS

ONE of the symbolic moments of the independence referendum was when Alistair Darling landed a blow on Alex Salmond during their first head-to-head debate. “An eight-year-old can tell you what Scotland’s capital and flag is ... but you can’t tell us what Scotland’s currency will be.”

The Better Together chair drew blood because the Yes campaign’s plan for “currency union” with the rUK had been ruled out and was lying cold in the morgue.

If the SNP Growth Commission’s report is adopted as the next independence blueprint, the question posed by Ruth Davidson to Nicola Sturgeon in the equivalent debate will be: “Who will set the interest rates of an independent Scotland?”

According to the Commission, an independent Scotland should use sterling without a formal currency union for an “extended transition period”. Sturgeon’s response to Davidson would have to be that the Bank of England, a foreign country’s central bank, will control monetary policy.

The 354-page report stands in contrast to some of the optimistic assumptions in Salmond’s White Paper, but the content will be, at the very least, a difficult sell on the doorsteps.

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The Commission’s currency policy, effectively sterlingisation, means that Scotland would have no lender of last resort if a bank went bust. Some on the anti-capitalist left and free-market right might say “who cares”, but such a scenario would be a huge problem for anyone with savings or a mortgage.

If interest rates soared under sterlingisation, Sturgeon's options would be to put out a stiffly-worded press release, or leave a voicemail on Mark Carney's phone. The currency plan would be like trying to play the Masters at Augusta with one club. It is possible to putt with a sand wedge, but I wouldn’t recommend it.

Given his challenging brief, Commission chair Andrew Wilson should be congratulated for producing a sober and honest blueprint. His team has recognised the folly of making wild claims about oil and recognises that Scotland’s deficit is too high. The Commission also concluded that it could take an independent Scotland 25 years to close the GDP gap with other small advanced countries.

However, unpalatable economic truths are rarely the foundation for successful political campaigns, and it is hard to see Sturgeon putting this prospectus to voters in the short-term. Voters want gain, not pain.

Imagine Sturgeon’s referendum pitch: “If we become independent, the priority will be deficit reduction and public spending restraint. If your mortgage goes up, there is nothing we can do. We will be as successful as Norway in 2053.”

Scotland’s relationship with the EU, which the Commission sidestepped, is another banana skin. Some senior SNP figures, in a bid to placate pro-independence Brexiteers, want Scotland to join the European Economic Area, rather than the EU.

Such a policy would conjure up an odd version of independence. Scotland would be outside the EU, but bound by its rules, and chained to a monetary policy determined by an overseas central bank outside the European bloc. Sturgeon would be a lobbyist, not the leader of a Government.

If sterlingisation is unlikely to seduce Middle Scotland, it will almost certainly cost the SNP support on the left, which does not see independence as a better vehicle to cut the deficit. There weren’t many winners in the Growth Commission report, but Jeremy Corbyn and Richard Leonard will be smiling.