Audio: Winning the currency debate ‘crucial’ to Welsh independence
Winning the debate about currency would be crucial to the success of any campaign for Welsh independence, according to Swansea University economist Dr. John Ball.
Speaking at The National Library of Wales in an economics event organised by Yes Cymru, he highlighted the currency issue as one of the major problems which arose for the Yes camp in Scotland during the Independence referendum that took place in September 2014.
“I have spent almost a lifetime discussing, arguing, debating the merits or otherwise of an independent sovereign state and I think we’ve got to bury some of these negatives that are thrown at it day after day,” he said.
“And especially the kind of negatives that were thrown at those who drove the Scottish referendum.”
One option, he said, was that Wales had its own currency.
“The argument that we can have our own currency isn’t quite as fanciful as it sounds,” he said. “It would mean of course we would require a central bank.
“That again sounds fanciful but since the end of the Second World War and the breakup of the former Soviet Union no fewer than 25 new central banks have been established.
“Croatia reached the final of the World Cup. 27 years ago there was no Croatian central-bank. 27 years ago there was no Croatian currency. 27 years ago there was no Croatia.
“There is an argument for the retention of the pound in the short term for stability. A switch to a new currency is often inflationary but this idea of a new currency is not fanciful.
“The arguments that were put up in Scotland do not hold water. “
Another option would be a currency union with the UK, as it was for the Yes campaign in Scotland’s 2014 referendum.
The SNP’s plan would have seen Scotland use sterling and retain the Bank of England as its lender of last resort.
But the Conservatives, Labour and the Liberal Democrats lined up to rule out such an option.
Bank of England governor Mark Carney also spoke out against the plans prior to the vote and claimed that the currency union in the event of Scottish independence would be “incompatible with sovereignty”.
Carney stressed that a currency required a centralised bank and shared banking regulations, and also suggested that a new, Scottish Central Bank would require an initial fund equivalent to approximately one-quarter of Scotland’s GDP.
His intervention was seen as a major blow to the pro-independence campaign.
Ball believes that the currency union issue “wrong-footed” those campaigning for Scottish independence.
But he said that the arguments put forward by the unionists were misleading and irrelevant to discussions about the economic future of an independent Wales.
“The governor of the Bank of England argued during the Scottish referendum that there was no case for a currency union, but there is a currency union in existence,” he said.
“The north of Ireland, Scotland, the Isle of Man, the three Channel Islands, and the British overseas territories are all part of a currency union.
“The currency union already exists. And we would be part of that currency union if we so wished.”
He also noted there is no reason why, in an independent state, the pound (or for that matter the euro), could not continue to be used.
”Six countries outside the Eurozone use the euro,” he said. “Nine countries use the US dollar, without the consent of the representative central bank. Seven countries use the East Caribbean dollar.
“And if you think about it, 19 countries that use the euro do not have a domestic currency they could use. “
Although using the pound would mean the Bank of England would effectively set monetary policy, Ball believes it offers the advantage of banks having to be extremely disciplined.
“Because they wouldn’t have the protection of the central bank they would not undertake the lunacy that led to the 2008 depression,” he said.
”We could also use the pound with the consent of the Bank of England, who would remain the lender of last resort. That would be based on a fee.”