Scottish independence: Treasury slaps down Alex Salmond’s bank claim

Salmond goes on the offensive during a stormy First Minister's Questions. Picture: Neil Hanna
Salmond goes on the offensive during a stormy First Minister's Questions. Picture: Neil Hanna
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AN INDEPENDENT Scotland would have no say over monetary policy if it retained the pound, Treasury officials in London said last night.

The statement came after First Minister Alex Salmond claimed it would be “entirely reasonable” for a separate Scotland to have the same influence that the UK Treasury does over the Bank of England’s monetary policy committee (MPC).

Mr Salmond told MSPs the Treasury currently appointed four of the nine members of the interest rate-setting committee and that, after independence, Scotland would “expect to be part of the appointments process”.

Scottish Labour leader Johann Lamont described Mr Salmond’s claims as “meaningless assertions” and said the Scottish Government had not asked bosses at the Bank of England about the issue.

Last night, the Treasury issued a statement, saying: “Scotland using the pound through a sterlingisation mechanism … would have no say over its own monetary policy as set by the Bank of England.”

The SNP has hardened its opposition to joining the euro in the event of Scotland becoming independent, with finance secretary John Swinney ruling out joining the single currency until at least the middle of the 2020s.

Mr Salmond came under pressure to explain his position during a heated First Minister’s Questions yesterday, after his deputy, Nicola Sturgeon, said in a televised debate that an independent Scottish government would have a voice on the MPC.

Although there was no Scottish representation on the MPC at the moment, she said it was “something that would change if Scotland was independent, and in addition we’d get the fiscal levers that we don’t have”.

She claimed a Scottish finance secretary “could appoint somebody as well and give Scottish representation that we do not have just now”.

Pressed by Ms Lamont to provide “details of that agreement” that would allow an independent Scotland influence over the Bank of England, Mr Salmond insisted it would be “entirely reasonable” for a separate Scotland to have the same influence the UK Treasury has over the MPC and that there was “nothing unusual about that” arrangement.

He told the Scottish Labour leader he had spoken to Sir Mervyn King, Governor of the Bank of England, in February, but he did not say what he had discussed with him.

He told MSPs that, in the event of Scotland becoming independent, it would “expect to be part of the appointments process” if it continued to use the pound.

But a spokesman for Mr Salmond was later unable to give examples of similar arrangements of other nations that share a currency having representatives on the body that sets interest rates.

And the statement from the Treasury appeared to rule out allowing the government of an independent Scotland any influence over the Bank’s policy on interest rates. A Treasury spokesman said: “In the event of Scotland seeking independence, the monetary and fiscal arrangements will have a direct effect on the rest of the UK, and so, of course, would have to be agreed.

“Scotland, within a full monetary union with sterling but fiscally independent, creates similar risks to those we see in the eurozone. If that crisis tells us anything, it is that strong control of fiscal policy and borrowing would have to be exercised centrally.

“Scotland using the pound through a sterlingisation mechanism, but fiscally independent, creates similar risks. However, in that scenario, it would have no say over its own monetary policy as set by the Bank of England.”

Scottish Liberal Democrat leader Willie Rennie said the SNP had been exposed over its policy of wanting to keep the pound.

He said: “Week after week, every time the SNP comes up with a different plan for the currency, Scotland ends up having less say over the pound, interest rates and public spending than we do now. Their sums just don’t add up. With independence, we’ll get less control, not more.

“The SNP has squirmed over this issue for many months, but now it is clear what the gory reality is.”

Ms Lamont used First Minister’s Questions to claim the SNP could not “answer basic questions about simple economics in an independent Scotland”. She said: “If the First Minister gets his way, we are fewer than four years away from leaving the UK, yet on the currency, on our interest rates, on how much we would be able to spend, how much we could borrow, how much tax we could raise, he has done nothing.”

She went on to say that for an independent Scotland to retain sterling, it was “crucial” that the Bank of England agreed to be Scotland’s lender of last resort.

Ms Lamont said: “Clearly, as he hasn’t spoken to the Bank of England about the monetary policy committee, can he confirm he has at least spoken to them about being our lender of last resort?

“It is about assertion and belief and hope. The problem is, of course, the First Minister thinks an independent Scotland would have influence on the monetary policy committee – we don’t have influence now but we will have somehow when Scotland is a foreign country. It does simply beggar belief.

“It’s just meaningless assertion after meaningless assertion.”

Mr Salmond said keeping the pound after independence would “be to Scotland’s advantage” and the “rest of the UK’s” because of the boost Scottish resources would give to the balance of payments.

He said: “We have no influence as a country on the monetary policy committee – the Bank of England is an independent central bank, it doesn’t take direction on policy.But we should move from a position of having no influence to having proper regard in a sterling area.

“It really requires a remarkably diminished view of Scotland and its position not to believe we would be entitled to the same representation as other people.

“The monetary policy committee of the Bank of England has nine members on it. Four members are appointed by the Treasury; we’d expect to be part of the appointments process.”

A spokesman for the First Minister dismissed the Treasury statement and said that, under independence, Scotland would “move from a position of having no influence to having some influence” over sterling. He added: “The UK government has had no say over monetary policy since the Bank of England was made independent in 1997.”