SUPPORTERS of Scottish independence have been given a headache by Bank of England governor Mark Carney, following a speech in which he outlined the “clear risks” for the country if it leaves the UK but keeps hold of the pound.
A referendum on whether or not Scotland should break from the UK and become an independent and sovereign nation is set for 18 September this year.
The Scottish government plans to stick with sterling in the event of a Yes vote – yet Carney said yesterday that it would have to give up a considerable amount of freedoms if such a system was to work.
“A durable, successful currency union requires some ceding of national sovereignty,” Carney said, pointing to the Eurozone as an example of what can go wrong if integration is not sufficient. “It is likely that similar institutional arrangements would be necessary to support a monetary union between an independent Scotland and the rest of the UK.”
Campaigners to keep Scotland in the union pounced on Carney’s speech, delivered at an industry lunch in Edinburgh. “Make no mistake, the governor’s judgement on currency unions is devastating for [First Minister] Alex Salmond’s currency plans,” said Labour’s former chancellor Alistair Darling. Any agreement over a currency union would require some form of fiscal risk-sharing on top of mutually-acceptable banking arrangements, Carney said – an outcome that the Treasury believes is far from certain. “The UK government has consistently said that in the event of independence, a currency union is highly unlikely to be agreed. The Scottish government needs a plan B,” a Treasury spokesman said. Yet Scottish finance secretary John Swinney said the speech did not hamper the case for independence: “He was not making the case for or against Scotland’s independence, which is for the people of Scotland to decide.”
Julian Harris, Michael Bird