Report calls for indy Scotland to keep pound

25 May 2018, 12:20 | Updated: 25 May 2018, 12:23

An independent Scotland should keep the pound during an extended transition period after leaving the UK, the Sustainable Growth Commission says.

The report - which was set up by the SNP to look at future economic prospects - is to be published later on Friday morning.

It will outline that sterling should remain as the country's currency for a period of time after any break from the union, while the First Minister has said the commission will "restart the debate" about Scottish independence.

A separate Scottish currency could be set up after independence if six tests are met, the SNP-commissioned economic report has suggested.

The tests cover fiscal sustainability, central bank credibility, sufficiency of reserves and trading patterns as set out in the Sustainable Growth Commission report.

Author Andrew Wilson said: "It is important that independence must never be seen as a magic wand or quick and easy step to success.

"Indeed, there is no pot of gold, black or otherwise, at the foot of the independence rainbow. But there is a toolbox and using it will mean taking responsibility for choices that seek to create a stronger economy, sustainable public finances and a fairer society.

"Independence is a means to those ends, I believe a necessary but not sufficient step to success. The choices that are then made about the country's strategy and how effectively they are delivered are what will determine success - we are our choices."

Scotland's First Minister and SNP leader Nicola Sturgeon said: "This report rightly doesn't shy away from the challenges we face but presents ways in which those challenges can be addressed - and sets out recommendations on currency - which as a country we should all debate and discuss.

"Scotland is now in a very different political and economic situation to 2014. There is no status quo and we know that being taken out of Europe and out of a market around eight times bigger than the UK market alone will hit our economy.

"That is why it is time to begin a fresh debate and to replace the despair of Brexit with optimism about Scotland's future.

"We look forward to debating the report's recommendations - both within the SNP and with business, trade unions and communities across Scotland."

Scottish Secretary David Mundell said: "Scotland voted decisively in 2014 to remain part of the UK. That decision should be respected. The public do not want another divisive independence referendum.

"We want to work with the Scottish Government to maximise the opportunities our exit from the European Union will bring. We should all put our energies into making sure we get the right deal for Scotland and the rest of the UK as we leave the EU."

The Commission insisted that economic growth in Scotland can be lifted to "to take living standards to equal the best small countries in the world over a generation".

The report said: "Our central argument is that Scotland should be seeking to emulate the performance of the best small countries in the world, rather than sticking to its current position as the best of the rest of the UK regions and nations outside of the south east of England."

But it said the current UK model "which concentrates too much economic activity in London and the South-East region is holding Scotland and the other regions and nations of the UK below their potential".

The Commission looked at the economies of 12 small independent states - Austria, Belgium, Denmark, Finland, Hong Kong, Ireland, the Netherlands, New Zealand, Norway, Singapore, Sweden, and Switzerland - as part of its work.

Median income in these nations is 14% higher in terms of GDP per head, the report said, the equivalent of £4,100 a person.

"This shows what is possible for an independent Scotland," the Commission stated.

It sets out an approach of growing GDP in Scotland by focusing on the "the three 'Ps" of economic performance" - productivity, population and participation.

If Scotland's population had risen in line with the UK, the country would have 5.8 million residents, while if this had matched the growth of other small European countries, there could be 6.1 million people living in Scotland.

It called for a national economic strategy to be drawn up on a cross-party basis.

Reducing the gender pay gap in Scotland to the level of New Zealand could increase GDP £6.1 billion, raising up to £2.5 billion a year more for the public purse.

Meanwhile doubling overseas exports - something the report said was a "reasonable target to set" to bring Scotland in line with other nations - could increase GDP by 8% and generate £5 billion more in taxes each year.

To help attract people to live and work in Scotland, it suggested a package of financial incentives.

This "Come to Scotland" deal should include tax breaks to help with the costs of relocating, and a new visa system.

There could also be tax breaks for businesses, possibly similar to the R&D tax credit scheme in Holland, although the Commission was wary of cutting corporation tax to lower than the UK level, saying this was not "an optimal strategic tool".

It also suggested an independent Scotland should have a Ministry for Trade and Foreign Affairs, to oversee "a new and heavily integrated approach to trade, investment and economic diplomacy".

There would also be a comprehensive review of UK spending programmes, with the Commission setting the target for an independent Scotland to save £1 billion compared to current levels.

Independence could also see a new Scottish Centreal Bank (SCB) and Scottish Fiscal Authority established - with the SCB to act as a lender of last resort.

Sustainable Growth Commission chairman, former SNP MSP Andrew Wilson, also argued many of the measures they were calling for could be implemented without independence.

He said: "It is also possible that many of our recommendations could be agreed and implemented in advance of independence either with existing or enhanced policy responsibilities for Scotland's Parliament and Government."

Mr Wilson added: "Carrying on as we are now would represent a dereliction of our duty to both our own potential and that of the generations to follow whatever the constitutional choices we make."

The report also stressed that "there are no silver bullets or cleverly designed or as yet undiscovered routes to success", highlighting instead the "need to think and act for the long term, frame a strategy and deliver to it".

The Commission stated: "Ultimately this is about the sort of country - society and economy - we want to become and believe that we can become."