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Scottish independence: Wales set to oppose pound pact

Carwyn Jones told his audience last night that a currency union was 'a recipe for instability'. Picture: Jane Barlow

Carwyn Jones told his audience last night that a currency union was 'a recipe for instability'. Picture: Jane Barlow

THE Welsh First Minister has warned that Wales could block efforts by an independent Scotland to join a pound-sharing pact with the remainder of the United Kingdom.

In a major speech in Edinburgh last night, the Labour leader in the Welsh Assembly, Carwyn Jones, said he was “not convinced” that such a currency union, as proposed by Alex Salmond after a Yes vote, would work in Wales’ interests, and said he would demand a say on such a plan if it ever came to light.

It was “highly unlikely” that such a pact could work, he said, warning it would add to uncertainty over the UK’s monetary policy, and thereby increase “risk” for both Wales and Northern Ireland. He added: “Given the experience of the Eurozone in recent years, and the uncertainty which surrounded the various bail-outs, I am not convinced that a shared currency would work from the Welsh perspective.

“I would be uncomfortable being part of a currency union where there are competing governments trying to run it. If there is a disagreement, who has the final say? This is a recipe for instability and these things matter, particularly in times of crisis.”

He added: “There was little scope for dithering when Alistair Darling, as chancellor, had a couple of hours to decide how to rescue the Royal Bank of Scotland.”

Mr Jones’ comments last night posed further question marks over the SNP government’s claim that the rest of the UK and Scotland would all agree to share the pound and the Bank of England after independence.

Mr Salmond has insisted that the rest of the UK would welcome Scotland into such a pact because it would be in both countries’ mutual interests.

A source close to the First Minister said last night: “Why would Carwyn Jones want to take Wales out of the advantages of a sterling area? It is hugely in their interests: Scotland brings a huge balance of payments boost to the UK, as underlined by the figures on oil and gas exports today.”

But opponents are demanding SNP ministers provide a Plan B on the currency ahead of next week’s White Paper, setting out what would happen if such a currency pact was unworkable.

In the speech at Edinburgh University, Mr Jones said he had agreed to speak on Scotland with “both pleasure and trepidation”, saying he knew he risked being accused of “interfering”.

He said he agreed there was nothing stopping Scotland continuing to use the pound after independence. “It could probably use the American dollar if it wanted to,” he said.

But he added: “What it couldn’t do is use the UK pound and then demand a say in the running of the Bank of England. Scotland would be at the mercy of monetary policy determined in London, so what use independence in those circumstances? If you use someone else’s currency, then you are bound by their rules.”

He went on: “And I have to say this: if one part of the currency union decides to leave, then that is a matter for them. But if an independent nation wants to join, then that is a matter for the people of Wales, Northern Ireland and England – and as the First Minister of Wales, I would want the right to have a say.”

Mr Jones also said that recent plans to give Wales more powers had shown that the UK could forge a “new consensus on a lasting settlement”.

Three weeks after calling for a reform of the way the UK nations and regions are funded, he insisted that he did not want this to happen “at the expense of the Scottish budget”.

He added: “What I am asking for is a fairer funding deal for all of us in the UK. I am confident that a solution to this can be found without driving a wedge between Wales and Scotland.”

He said it was time to end the “ad hoc constitutional tinkering” since devolution and find a “stable territorial constitution” for the UK. Reforms should include a guarantee the devolved legislatures of the UK should be “permanent”, a new UK-wide method for devolving powers, and new “presumption” in favour of devolution, so that “where there are no UK-wide interests, the devolved legislatures should be making the decisions”.

The SNP last night warned that Wales’ call for a reform of funding in the UK could lead to a cut in Scotland’s budget. SNP MSP Linda Fabiani said: “Carwyn Jones has never been shy about his desire to change the Barnett Formula in a way that would disadvantage Scotland.

“With a Welsh commission suggesting that Scotland’s funding could be cut by a staggering £4 billion in a single year, these are major cuts that are being proposed which would have a devastating impact on communities across Scotland.

“Scotland already more than pays its own way in the UK, but the dismal future being offered by the No campaign would see people in Scotland disadvantaged even further.”

She added: “With all of the UK parties lining up to cut Scotland’s budget if there’s a No vote, only the full powers of an independent Scotland will ensure that all of Scotland’s resources are used to benefit people living here.”

SEE ALSO:

Scottish independence: Currency plans need set out

Scottish independence: No currency union guarantee

 

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