The SNP’s nationalist outriders, the Scottish Green party, are reported to be within touching distance of agreeing the terms of a formal cooperation agreement that will see them enter government for the first time. What will this mean for Scotland and its governing party?

On the face of it, not a great deal. Some Green MSPs (the party has seven, including co-leaders Lorna Slater and Patrick Harvie) will get ministerial posts but will have minimal impact on SNP policy, which will likely remain tightly controlled by Sturgeon and her inner sanctum. The SNP will hope that the optics of hooking up with the Greens will boost their environmental credentials in the build-up to the Cop26 conference in Glasgow. This matters for a party that favours style over substance and narrative over progress, but in the real world it will change nothing.

On the constitution, the fundamentals won’t have changed. Boris Johnson can credibly continue to say ‘now is not the time’ for another referendum while opinion polls show a majority of Scots neither want independence nor another vote anytime soon. The Greens in government won’t change that.

There could be other consequences to bringing the Greens into the fold though. It will see advocates of modern monetary theory (MMT) in government for the first time, which could have implications for Sturgeon when it comes to building a credible economic case for secession; her ability to maintain authority over the nationalist movement; and perhaps even on internal SNP party discipline.

Scottish Green co-leader Lorna Slater is a big fan of MMT, the theory that countries in control of their own currency don’t have to worry about budget constraints, they just have to control inflation using tax and spend powers while maximising economic activity. In March, for instance, Slater tweeted: ‘Economies do have limits, but if you have your own currency, money isn’t one.’

In certain respects MMT provides a useful (although not original) way to think about how state finances work, in that it establishes a framework which demonstrates how governments have a lot of budget flexibility. But many economists have also pointed out problems with it and voiced fears it would be destabilising if adopted. For now at least it remains on the fringes.

The Greens want to see an independent Scotland launch its own currency before fully embracing MMT. They see it as the magic formula needed to remove Scotland from the UK without causing economic catastrophe. Why worry about a deficit or the costs of setting up a new state when taxes aren’t needed to pay for government spending, and when the state as a currency issuer can pay for everything you need?

The problem here is that the Greens have failed to take account of a key aspect of MMT, which is the degree of monetary sovereignty a country has. Large countries with their own free-floating currencies have a high degree of monetary sovereignty and have a free hand to adopt MMT, says the theory. Those constrained by currency pegs or foreign currency debt less so.

By any account an independent Scotland would start off with a very large sterling currency debt commitment to the remaining UK after accepting an effective fair share of the national debt liability. That means the new state would not have the degree of monetary sovereignty the US or the UK has. Even in MMT world there would be budget constraints.

The Greens could argue that Scotland can always reject a debt commitment from the remaining UK – Slater has discussed this idea enthusiastically. This is a controversial position to take when the UK government has just borrowed record amounts to pay for a vaccine programme and economic bailout that has saved countless lives in Scotland and kept the economy afloat. The Scottish Greens might be morally comfortable with the idea of a newly independent Scotland leaving that debt for the rest of the UK to deal with, but you would hope the people of Scotland would take a more honourable position.

The Green’s MMT argument is therefore based on a fantasy: that an independent Scotland can start off debt free.

The delusion that MMT is the key to separation isn’t just confined to the Greens though. It is also being promoted by sections of the SNP who want Sturgeon to drop her commitment to ‘sterlingisation’ – unofficially using sterling post independence. The Greens pushing that agenda in government could strengthen their hand. The crankiness of it all could also further weaken the SNP’s credibility when trying to make the economic case for separation, which already has more holes in it than a Scottish government freedom of information response.

The Greens in government might give the SNP a short-term optics boost, but longer term there could be other not so pleasant implications for Sturgeon.

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