Scottish independence: BoE offers currency talks

THE Governor of the Bank of England said yesterday that he would welcome the opportunity to enter “basic discussions” with the Scottish Government on its plan to create a sterling currency union if Scotland votes for independence.
Mark Carney said he would welcome the opportunity to discuss the plan. Picture: PAMark Carney said he would welcome the opportunity to discuss the plan. Picture: PA
Mark Carney said he would welcome the opportunity to discuss the plan. Picture: PA

Mark Carney said he would be prepared to hold talks with First Minister Alex Salmond on his proposal to hand power to the UK central bank after a Yes vote, giving it authority to set interest rates and provide a potential bail-out for Scotland.

The offer was welcomed by Mr Salmond’s aides as a “positive development” as they attempt to convince voters that the SNP’s keynote proposal on a shared currency area is feasible.

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But the policy, which lies at the heart of the Scottish Government’s white paper on independence, received a fresh blow last night as Sir John Major, the former prime minister, used a speech in London to warn that the Bank of England “cannot – will not” carry out such a role. Scotland would not be independent if it handed such a key economic power to a foreign bank, Sir John said, adding that a bank which “is answerable to the UK government and Parliament” could not be expected also to answer to a foreign administration in Edinburgh.

His remarks came as Mr Salmond faced fresh pressure over another key claim in the white paper – that Scotland would be welcomed into the EU after independence. Doubts were raised after the Spanish prime minister asserted that a newly independent Scotland would begin life “out of the European Union”.

On the subject of currency, UK ministers have dismissed Mr Salmond’s claim that he would be allowed to keep the pound as “highly unlikely”, saying it would be a bad deal for both countries.

The white paper on Tuesday backed the pound-sharing deal by noting that Eurozone countries shared a currency but “are clearly independent and control their own resources”. It argued Scotland would be able to do so as well, with the Bank of England managing policy for both Scotland and the rest of the UK.

Mr Salmond held “technical” discussions on the proposal with the former Bank Governor, Mervyn King, last year.

In London yesterday, Mr Carney was asked if he had held talks with the SNP government on the proposal. He said: “I have not had any discussions with members of the Scottish Government. My predecessor did have some basic discussions with Mr Salmond. I certainly welcome the opportunity to have those discussions.”

A spokesperson for the First Minister said last night: “Scottish Government officials have already had technical discussions with their counterparts at the Bank of England to assist the Fiscal Commission with their work, including the publication of their report on a macroeconomic framework for an independent Scotland, which includes proposals for a shared sterling area.

“The First Minister met the previous governor of the Bank before and after those technical discussions – and he looks forward to meeting the new governor in due course.”

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But the idea of a monetary union was once again challenged last night. Sir John’s remarks came after Welsh First Minister Carwyn Jones also said he could block the proposal.

Speaking to the Institute of Directors in London, Sir John, prime minister between 1990 and 1997, said: “The whole point of independence is to enable Scotland to take her own decisions – yet she cannot do so if, upon a central economic matter, she has no control over monetary policy and no lender of last resort.

“That cannot be the Bank of England: the Bank is answerable to the UK government and Parliament – not any future Scottish Government.”

He added: “A currency union – which the SNP assume is negotiable – would require the UK to underwrite Scottish debts: that cannot – will not – happen if Scotland leaves the Union. There can be no halfway house: no quasi-independence underpinned by UK institutions.”

Sir John also raised the question of Scotland’s EU membership, and the question of whether Spain would back it, given Madrid’s fears over the secessionist movement in Catalonia.

He said: “Spain uses uncertainty over EU membership to deter Catalonia from even holding a referendum on independence. It is hardly likely she would happily wave in Scotland.”

Spanish prime minister Mariano Rajoy said on Wednesday an independent Scotland would be outside the EU after independence and would have to apply as a new state. He told a press conference that if part of a member state becomes independent “it would be left out of the EU and it would be good for citizens and Scots to know that.”

The issue was raised at First Minister’s Questions yesterday by Scottish Labour leader Johann Lamont after Mr Salmond produced a letter from the Euro-pean Commission’s Secretariat-General which declared that Scotland could “renegotiate” its EU membership from “within the EU”. Mr Salmond insisted this proved Scotland could negotiate while still part of the UK and become a new EU nation as soon as it became independent.

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“Scotland is a European nat-ion,” he said. “Resource-rich Scotland would be welcome. Anybody with an ounce of sense knows that. Can Better Together not just get off the scaremongering and embrace the idea that this nation is a European nation?”

However, it later emerged the letter was not official correspondence. Instead it was a letter that appeared on a pro-Nationalist website last month, where it was spotted by Mr Salmond’s team.

Scottish Government officials said they could not confirm who made the original request to the EC, but last night reports identified the author as an SNP activist.

Quoting from the letter, Mr Salmond also failed to read out a section that included a sentence stating a renegotiation of the UK and Scotland’s EU relationship “would imply a change of the Treaties which could only be done by unanimity of member states.”

Ms Lamont said: “It seems Alex Salmond is basing Scotland’s future on his ability to Google. What other parts of the white paper rely on random websites? He has claimed to have legal advice on EU membership before which turned out not to exist. Now he is doing it again.

“If this man had a shred of honesty, or the remotest desire to have an honest debate about independence, he would come to the Scottish Parliament and apologise to the people of Scotland for the way he has behaved.”

Lib Dem leader Willie Rennie said: “The First Minister now must find out what the rest of Europe makes of his independence assertions.”


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