Managing the transition [to independence] won’t be straightforward. Ireland’s experience shows that the need for fiscal discipline may be politically costly and adjustment may not be shared equally.
"[One option for] an independent Scotland would be...to “sharing” the UK pound for a while to help bring stability. Ireland took the same approach until 1928, when it launched its own currency, the punt, pegged one-for-one to the pound sterling, which made sense because Ireland was heavily integrated into the UK economy.
Over the years, UK monetary policy was also a constraint on the Irish government’s budget. Although in theory it was free to decide how to tax and spend, the need to maintain the sterling peg prevented various Irish governments from deviating too far from the UK’s approach to borrowing.
An independent Scotland is likely to face similar constraints. In 2018, the Sustainable Growth Commission (SGC), an economic body set up by the Scottish government to come up with credible financial plans for independence, stipulated that a pegged Scottish currency would require significant fiscal discipline. It noted that the “6% to 7% fiscal deficit is not sustainable”. In 2022-23, Scotland’s deficit is projected to exceed 10%.
There is no doubt that Scotland, like Ireland in the early 20th century, could succeed as an independent state. Indeed, key strengths such as oil and gas, renewables, financial services and higher education suggest it would start off in a wealthier position.
But managing the transition won’t be straightforward. Ireland’s experience shows that the need for fiscal discipline may be politically costly and adjustment may not be shared equally. Those who are promised the most through independence may be the ones that find themselves having to do the bulk of the heavy lifting."