Bank of England chief addresses independence debate

PUBLISHED : Thursday, 30 January, 2014, 3:57am
UPDATED : Thursday, 30 January, 2014, 3:57am

The governor of the Bank of England yesterday waded into the delicate question of whether Scotland would be able to use the pound should it become independent, saying a successful currency union would require giving up some sovereignty.

Independence advocates say they want to continue to use the pound as the country's currency if the Scottish people vote for separation this year.

Mark Carney warned that successful currency unions still require some level of common fiscal policy and bank supervision. The recent debt crisis in the countries sharing the euro shows the risks of what can happen if those measures aren't put into place, he said.

"In short, a durable, successful currency union requires some ceding of national sovereignty," Carney said at a meeting in Edinburgh of the Scottish Council for Development and Industry.

Carney stressed it was up to the parliaments of Britain and Scotland to decide whether Scotland continues to use the pound in the case of independence.

The Bank of England would implement whatever policy they chose.

"Decisions that cede sovereignty and limit autonomy are rightly choices for elected governments and involve considerations beyond mere economics," he said.

Carney's remarks are important because independence leader Alex Salmond, Scotland's first minister, has repeatedly stressed that the pound would remain the country's currency - a selling point to his movement. While Scotland is part of the UK, it has had its own parliament since 1999 and makes its own laws in many areas - but it is considering a full break.

Salmond's governing Scottish National Party supports independence, but the opposition Labour and Conservative parties oppose it. The UK would have to agree to a currency union for it to become reality.

Carney stressed, however, he was not taking a position on the vote and that he was simply offering information.

"This is a technocratic assessment of what makes an effective currency union between independent nations," he said.

The Scottish National Party quickly offered praise for Carney's "serious and sensible analysis of how a currency union can work in practice".

"Ultimately, as Mr Carney makes clear, a Sterling area is a matter for the two governments to agree," Scottish Finance Secretary John Swinney said.



Send to a friend

To forward this article using your default email client (e.g. Outlook), click here.

Enter multiple addresses separated by commas(,)

For unlimited access to: SCMP Tablet Edition SCMP Mobile Edition 10-year news archive