An independent Scotland should keep the UK’s pound for an extended period before setting up its own currency, a report commissioned by the Scottish government said on Friday.
The Sustainable Growth Commission report, subtitled “the new case for optimism,” recommends that Scotland should temporarily keep the pound without a formal currency union.
The Commission was set up to look at the future economic prospects of Scotland.
“The Commission recommends that the currency of an independent Scotland should remain the pound sterling for a possibly extended transition period,” the report said, adding that the Scottish government should put in place arrangements for an independent Scottish currency.
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.”
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.
It set out an approach of growing GDP in Scotland by focusing on the “the three ‘Ps” of economic performance” – productivity, population and participation.
It said 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.
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, the report 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 The Netherlands, 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.”
Independence could also see a new Scottish Central 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.
Wilson 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.”
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 said: “Ultimately this is about the sort of country — society and economy — we want to become and believe that we can become.”
First Minister Nicola Sturgeon welcomed the report, saying: “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.”
The Fraser of Allander Institute think thank responded to the report by saying: “There is no doubt that today’s report will spark considerable debate.
“But irrespective of your views on independence, there is much to be taken – by all political parties – from the report’s discussion of ideas for growth.
“Many of these are possible with the existing suite of devolved powers.
“Of course, one of the challenges – as with any such report – is moving from a high-level vision and well-intentioned strategies, to specific practical policy measures.
“If the experiences of the countries reviewed in the report offer one clear conclusion, it is the importance of clarity of purpose in economic policy: internationalisation in the case of Ireland, low regulation and competitive taxation in Singapore, high value-high innovation-high public investment in Sweden.
“The report opens up some important questions about the ‘type’ of Scotland we wish to see in the future.
“Overall, the Sustainable Growth Commission report intends to move the public debate forward from 2014 in a rigorous way.
“Reports in yesterday’s media predicting households being better off by £4,100 – figures which should be taken with a large pinch of salt – unfortunately only undermine this aim …
“Today’s report is an important contribution to the debate on Scotland’s economic future.
“It offers one view of the potential options for an independent Scotland. It outlines some of the opportunities for Scotland – particularly over the long-term – but also highlights some tough choices in getting there.
“In this regard, whilst offering important insights for the Scottish Government, it also puts forward some significant challenges which Ministers will now have to respond to.
“But it also represents a challenge to other political parties. They too need to set out their vision for Scotland and how they seek to deliver economic prosperity in the years ahead.
“In this regard, we hope that the debate that follows today’s publication focuses upon the substance of the arguments on both sides and discusses the risks and opportunities from all potential constitutional models for Scotland in a transparent and respectful manner.”