Scottish independence: Keeping pound incompatible with fiscal autonomy, Labour MP warns

Published on 11/07/2012 02:41

SCOTLAND would not be able to keep the pound and set its own fiscal policies after independence, a Labour MP has claimed during a debate at Westminster.

• Labour MP Graeme Morrice says Scotland would not be able to keep pound and remain fiscally autonomous

• Morris accuses nationalists of being “cavalier” about approach to monetary policy

The idea that the currency remains and Scotland becoming fiscally independent is “cavalier”, Graeme Morrice said.

The eurozone crisis has shown it was disastrous to think you could have monetary union without an over-arching fiscal policy, he told MPs.

There were calls for a separate currency, including a Scottish dollar, but the SNP was now no longer in favour of joining the euro but preferred to keep the pound and set its own taxes, he said.

Speaking during a debate in Westminster Hall, Mr Morrice said: “Until recently, most nationalists were strongly in favour of joining the euro and were lukewarm about the pound.

“Even they have realised that this is not such a sensible idea now and have become converts to retaining Sterling without having bothered to have had any discussions with the UK Government first - an astonishing, cavalier approach to such a vitally important question.

“In between their enthusiasm for the euro and recent conversion to keeping the pound, the SNP has also debated options for introducing a separate Scots currency. It’s also widely accepted that a separate Scottish currency would be a serious disadvantage to business.”

He added: “While the commitment to a separate Scotland retaining Sterling may sound more credible... it would be a monetary union without fiscal union which has already proved disastrous in the eurozone.

“It would of course be fraught with well documented problems, especially on fiscal responsibility and the lender of the last resort.

“A formal monetary union with the UK would mean that the Bank of England would continue to form monetary policy for both the remaining UK and the separate Scotland, removing a key aspect of economic independence from the tools available to a Scotland operating outside the UK.

“Whichever way you look at it, the SNP’s current policy of retaining the pound Sterling as a separate Scottish currency is a proposal engulfed by uncertainty.”

Mr Morrice said an independent Scotland would also have to take charge of reducing its own debts, while its main revenue source, tax from the oil industry, could prove volatile.

Independence would also mean the new government would have to set up new embassies, its own armed forces, and welfare system, which would all prove costly, he said.