Alex Salmond clashes with Adam Boulton
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Professor David Blake was commenting on Mr Salmond’s ambitious plan to replace sterling with a dedicated Scottish currency, which the leader of the fledgeling Alba Party hopes will prove a vote-winner in May 6’s Holyrood elections. Mr Salmond, who was SNP leader and Scotland’s First Minister before Nicola Sturgeon told The Times Scotland: “We are in a world with very low interest rates, where borrowing costs are at a historic low and where there is a great urgency in establishing your own currency at as quickly a rate as possible.”
The proposal is completely reckless
Professor David Blake
However, the Professor of Economics at City, University of London, who previously outlined his concerns in a blog published on the Briefing for Britain website earlier this month, told Express.co.uk: “Nicola Sturgeon called Salmond a ‘gambler’ and you can now see why.
“He wants to gamble with 60 percent of the Scottish economy.
“The proposal is completely reckless.”
He explained: “This would result in currency volatility on all its exports.
“The new currency is very likely to fall in value relative to sterling – remember sterling fell by 15 percent after the 2016 Brexit Referendum.
“This might help with exports since they would be cheaper, but imports would be more expensive and this would increase inflation.
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“The currencies of small countries also tend to be more volatile than those of larger countries.
“This is going to be bad for both international trade and foreign direct investment into Scotland.”
Liabilities denominated in sterling would immediately increase when measured in the new currency, Prof Blake warned.
He added: “It is also going to be especially bad for mortgages denominated in sterling.
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“Most Scottish residents (around 800,000 of them) will have sterling mortgages at the point that Scotland switches to its new currency.
“The value of these mortgages would increase if the new currency falls in value; and the mortgage interest payments will no longer be fixed, but will rise and fall as the new currency’s value fluctuates.”
Prof Blake offered a withering assessment of Mr Salmond’s fiscal expertise.
He said: “The new currency should be called the ‘dafty’. Initially, there will be one dafty to the pound.
“But political parties like the SNP are promising an end to NHS dentistry charges, free bikes for poorer children, free bus travel for under-22s, a laptop or tablet and internet connection for every school pupil, an extra £2.5bn for the NHS, a four-day working week, and an income tax freeze for five years.
“The total annual cost is £7.8bn, pushing up the budget deficit from 8.9 percent to 13.9 percent of GDP.
“The only way to pay for this will be to print more dafties (who in their right minds is going to lend Scotland the money to pay for all these goodies?).
“And this will lead to inflation with the dafty rapidly losing value against the £. Soon it will be two dafties to the £, then three dafties to the £, etc.”
Matthew Lynn, a financial writer, has likewise warned an independent Scotland would risk currency instability.
In a piece penned for Money Week, he said: “It might be the euro, but that would probably mean a long and harsh Greek or Italian-style recession while the public finances were put back in shape.
“Or it might be the new Scottish currency, but that would be sharply devalued as it struggled to establish its credibility in the market and might only end up being worth half or less than you thought it would be.
“Either way, the outlook is not good.”
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