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Scotland 'must have own currency' after Yes vote

THE SNP must develop plans to create a new currency if Scotland becomes independent, a leading economist has argued.

Jim Cuthbert said the Nationalists' economic strategy should be rethought and reversed before the referendum.

In a report for the left-wing Jimmy Reid Foundation he argued that SNP plans to keep the pound by entering a currency union with the UK would expose Scotland to the "high likelihood of a potentially catastrophic crisis in the not-too-distant future".

Mr Cuthbert said: "Far from implicitly accepting the strength of the UK economy, Nationalists should be adapting their thinking to the implications of the UK's economic problems.

"They should be stressing the UK economy's weakness and instability. They should be developing a strategy which points out the benefits of Scotland ultimately having its own currency."

He also warned the Edinburgh Agreement – the deal between Alex Salmond and David Cameron paving the way for the poll – could "cost Scotland dearly" by preventing a re-run of the vote if Scots rejected independence.

Mr Cuthbert, whose work has been cited frequently by the SNP, set out his views in a report yesterday titled The Mismanagement of Britain.

It argues the UK economy has been badly run over the past 40 years, leading to long-term competitive decline compared with the rest of the world.

Through over-reliance on the financial services sector, the report says the UK economy has become like a large bank and faces a second, catastrophic crash.

Mr Cuthbert concluded that the independence debate should not be seen in terms of a stable UK economy and a risky decision to sever ties with it.

He added: "In the light of this analysis, nationalist strategy on the 2014 referendum needs to be rethought, and current tactics reversed.

"The UK will always remain a primary trading partner for Scotland, so UK economic instability will always affect Scotland. But what nationalists should be pointing out is how independence could potentially insulate Scotland from the worst effects.

"It also strongly suggests that Scotland should not remain in a sub-optimal currency union which has sacrificed productive economy growth for conditions that suit financial speculation."

Mr Cuthbert claimed meaningful independence was not attainable by joining a currency union with the UK.

He said the Edinburgh Agreement – which commits both sides to respecting the outcome – was nonsensical and that it should never have been signed, and he urged the Scottish Government to renounce it.

Commenting on the report, Mr Cuthbert said: "The debate should address the implications of the poor management, and instability, of the UK economy."

Labour MSP Rhoda Grant said: "The foundation's conclusions raise very serious questions about how a separate Scotland's economy would function.

"The entire economic policy of separation under the SNP is to rely upon oil and gas. The Scottish economy is dramatically weaker, compared to the rest of the UK, when you exclude North Sea production."

Scottish Conservative finance spokesman Gavin Brown said: "The criticism of SNP plans for separation, both economic and non-economic, is getting louder by the week."

A spokeswoman for Finance Secretary John Swinney said: "Scotland will retain sterling after independence as part of a formal currency union with the rest of the UK, a position endorsed by the Fiscal Commission working group as the most sensible and practical currency option and described by Alastair Darling as logical and desirable.

"We agree with the Jimmy Reid Foundation that successive UK Governments have mismanaged the economy.

"It is only with independence that future Scottish parliaments will have the full range of social and economic levers ... that will enable us to boost growth, address inequality and develop Scotland's economy in Scotland's best interests."

Meanwhile, in a book published on Thursday, three constitutional experts claim an independent Scotland would, at first, face higher borrowing costs.

They argue the new state would need to establish a track record with lenders.

In Scotland's Choices, Professor Iain McLean from Oxford University, Jim Gallagher, former Secretary of the Calman Commission, and Guy Lodge, associate director of the IPPR think-tank, suggest an independent Scotland would get the vast bulk of North Sea oil based on current fiscal plans.

They add it would initially be able to maintain the present level of public services provided it was willing to spend all of its oil revenue.

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