Scottish independence: Carney says Scots currency plan may lead to power loss

Mark Carney: "A durable currency union requires some ceding of national sovereignty"

The Bank of England governor has said an independent Scotland would need to give up some power to make a currency union with the rest of the UK work.

Mark Carney said such a move, proposed by the Scottish government, "requires some ceding of national sovereignty".

He also said the risks of not having a strong agreement had been demonstrated by problems in the Eurozone.

Mr Carney's comments, in Edinburgh, came ahead of the Scottish independence referendum, on 18 September.

The Editors - Analysis

Nick Robinson, Brian Taylor and Robert Peston
  • Nick Robinson, BBC political editor - "There are two words and one warning that really matter in today's speech by the Governor of the Bank of England - Mark Carney spoke of the "clear risks" involved if an independent Scotland tries to carry on using the pound......." Read more
  • Brian Taylor, BBC Scotland political editor - "For the unionists, the scheme is in tatters. For the nationalists, Mark Carney's remarks are "common sense". Truly, it seems that, unlike David Hume, the governor of the Bank of England is, for today at least, a man without enemies......" Read more
  • Robert Peston, BBC business editor - "Whether he intended to do so or not, Governor Carney has just lobbed a very large stink bomb into the centre of Edinburgh......" Read more

Scotland's Finance Secretary John Swinney welcomed Mr Carney's speech, saying it had recognised the benefits of a currency union.

Alistair Darling, leader of the Better Together campaign to keep the Union, argued the governor's remarks were "devastating" for the Scottish government's currency plans.

In the event of a "Yes" vote, the Scottish government said keeping the pound and retaining the services of the Bank of England, under a formal currency union agreement, was the best option for Scotland and the rest of the UK.

The UK government had said such an agreement would be "unlikely", and the deal would result in Scotland effectively having to hand over control of interest rates and borrowing levels to a foreign country.

In his speech, Mr Carney stressed arrangements for a currency union in the event of independence would be a matter for the Scottish and UK parliaments.

He added: "If such deliberations ever were to happen, they would need to consider carefully what the economics of currency unions suggest are the necessary foundations for a durable union, particularly given the clear risks if these foundations are not in place.

"Those risks have been demonstrated clearly in the euro area over recent years, with sovereign debt crises, financial fragmentation and large divergences in economic performance."

Mr Carney, who was speaking at an event hosted by the Scottish Council for Development and Industry, went on: "The euro area is now beginning to rectify its institutional shortcomings, but further, very significant steps must be taken to expand the sharing of risks and pooling of fiscal resources.

Mark Carney and Alex Salmond Mark Carney met Alex Salmond at the first minister's official residence, ahead of the speech
Mark Carney Mr Carney agreed to provide "technical" analysis of the issues ahead of the referendum

"In short, a durable, successful currency union requires some ceding of national sovereignty.

Analysis

Mark Carney does a good impersonation.

In Edinburgh today the Bank of England governor insisted he was not a politician and then proceeded to sound very like one: dodging tricky question after tricky question.

"Others will judge...it's for others to decide...that's clearly not what I said," he intoned, as a pack of politics and economics reporters pushed him on Scottish independence.

Nonetheless, the central message from this central banker was clear.

He does not want to preside over a Eurozone-style currency mess, whatever Scotland decides on September 18th.

As such he set out in dry, technocratic detail his views on the ingredients for a successful monetary union.

Expressed in simple terms, he said broad agreement on tax and spending between the nations sharing the currency would be needed.

No problem, says the Scottish government. We can do such a deal.

Big problem says the Treasury. We're not so sure.

So what of the governor's view? Would such a deal happen?

Oddly enough Mr Carney, the astutely political non-politician, declined to say.

"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."

Earlier, Mr Carney, who has agreed to provide "technical" analysis of the issues ahead of the referendum, met privately with Scottish First Minister Alex Salmond.

Scottish Finance Secretary John Swinney welcomed Mr Carney's speech, including what he said was a confirmation that that Bank of England would implement whatever monetary arrangements were put in place, if independence happened.

Mr Swinney said the points made by Mr Carney had been investigated in detail by the Scottish government's Fiscal Commission.

He said: "The benefits of a currency union are clear for both sides in terms of issues like promoting investment, eliminating transaction costs, reducing borrowing costs and facilitating the movement of labour and capital, and we welcome the governor's recognition of these benefits.

"An independent Scotland will control 100% of our own revenues, compared to the 7% of our tax base we are currently responsible for under devolution.

"A shared currency will mean an independent Scotland having control of tax policy, employment policy, social security policy, oil and gas revenues, immigration policy and a range of other levers to suit our own circumstances, helping to grow our economy, create jobs and secure a more prosperous and fairer society."

But Mr Darling, the former UK chancellor, said: "There is one clear message from today's thoughtful speech by Mark Carney the Governor of the Bank of England - that the failings of the Eurozone show that to have a successful monetary union you require fiscal and political union.

Alistair Darling on a currency union: "It can only work if you have increased economic and political union"

"This is a detailed speech but make no mistake, the governor's judgement on currency unions is devastating for Alex Salmond's currency plans.

"Why? Because the whole point of independence is to break the fiscal and political union that makes monetary union possible."

Mr Darling added: "The governor has spelled out in stark terms the problems of a currency union - above all it needs people living in the rest of the UK to agree to something they have never been asked about."

Scottish First Minister Alex Salmond said his breakfast meeting with Mr Carney had gone "extremely well"

A spokesman for Prime Minister David Cameron said that it was of no "great surprise" that on technical issues the governor of the Bank of England would want to set out his views.

He explained: "The issue around currency is an important part of the debate that is currently going on in Scotland. It hardly seems a great surprise at all, on the technical issues, that the governor of the Bank of England might want to set out his views.

"I'm sure the people of Scotland will want to be as well-informed as possible."

The independence referendum will see voters in Scotland asked the yes/no question: "Should Scotland be an independent country?"

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Scotland Decides: SCOTLAND VOTES NO

  1. No 2,001,926
  2. Yes 1,617,989
After 32 of 32 counts Results in detail

Referendum Live

  1.  
    Text 80295 09:10: Referendum - Your Views

    Robin, Glasgow: I voted No and I do have faith in the new powers being provided. What I never had faith in was Salmond's Vow that he and the Yes voters would accept the result of the referendum and move forward. He has clearly reneged on this, and now makes the sinister prediction the independence can be achieved "by other means". He clearly only wants to follow the sovereign will of the Scottish people if they agree with him.

    Ewan, Nairn: I am 99% sure that the powers (whatever they are, nobody seems to know) won't be delivered, either with substance or in any decent time. However, it's still only scraps and why ' Scotland' voted No to running its own affairs, getting ALL powers and becoming a democratic country is beyond me. Scotland is a pitiful laughing stock. Independence will come and make no mistake, the YES movement is bigger than ever and British Nationalism here will shrink into history.

    Anon: I am a No voter and I am perfectly happy with the way things are progressing with the Westminster parties. I wish Alex Salmond would just accept that; he lost his referendum that nobody asked for and that divided Scotland.

    John in Linlithgow: Do I believe Westminster will deliver more powers to Scotland? NO. And in the declared timescale? NO.

     
  2.  
    08:59: 'Sovereign will of the people'

    Shadow Scottish secretary Margaret Curran said the guarantees made by the main parties during the referendum campaign on more powers for Scotland would not fall by the wayside.

    "The Scottish people made an emphatic decision on Thursday," she said. "All parties said before the referendum we'd respect that.

    "The sovereign will of the Scottish people has been expressed and we need to respect that and move forward with the guarantees and commitments made during the referendum campaign.

    "I absolutely guarantee that we have the work done and have substantial progress under way. We'll be moving forward on that immediately."

     
  3.  
    Text 80295 08:54: Referendum - Get Involved

    Stuart from Fife: I just wish people would be more patient and realistic. It's only been a couple of days since the vote, the country has voted No and all the moaning and groaning will never change the will of the people. Everybody was sick and tired of all the stress caused by this vote, let's move on and give the politicians breathing space to carry out the job in hand!

    Stevie, Motherwell: I knew the 3 main leaders would go back on their word to Scotland. Gordon Brown had no right promising what he couldn't keep too. It was a devo-trap and I voted Yes.

    Danny: I voted No, I don't care about devo.

    Ryan McArthur, Rothesay, Bute: The promise will not be kept, independence is unstoppable and Scotland will be independent within 15 years.

     
  4.  
    08:45: Referendum reaction Louise White Presenter, Morning Call

    An argument has erupted between Labour and the Conservatives surrounding the timetable for further devolved powers to be granted to Scotland following a 'No' vote in the referendum.

    David Cameron says that he also wants constitutional change for England with English MPs only to vote on English Laws and Ed Miliband feels that this shouldn't be attached to The Vow made to Scotland.

    Alex Salmond, meanwhile, has claimed that this shows Westminster is trying to renege on the deal.

    Do you have faith that Westminster will deliver on 'The Vow'?

    Get in touch using 0500 92 95 00 or text 80295.

    You can listen live to the programme here.

     
  5.  
    08:33: Devolution commitments 'will be honoured'

    Shadow Scottish secretary Margaret Curran insists the political parties will honour their pledge to deliver more power to Scotland.

    The pledge, made by David Cameron, Ed Miliband and Nick Clegg ahead of the referendum, has three parts and also commits to preserving the Barnett funding formula.

    Alex Salmond has accused the three UK party leaders of "reneging" on the pledge.

    The first part of the agreement promises "extensive new powers" for the Scottish Parliament "delivered by the process and to the timetable agreed" by the three parties.

    The second says the leaders agree that "the UK exists to ensure opportunity and security for all by sharing our resources equitably".

    Margaret Curran

    The third "categorically states" that the final say on funding for the NHS will lie with the Scottish government "because of the continuation of the Barnett allocation for resources, and the powers of the Scottish Parliament to raise revenue".

    "I can absolutely guarantee that the commitments we made during the campaign will be honoured," the shadow Scottish secretary told BBC Radio's Good Morning Scotland.

    "They [the Conservatives] can give that guarantee and I think they have given that guarantee. That's my understanding of what they've been saying all weekend.

    "What is clear and people should be assured about are those categoric assurances we have from all the parties that were part of this."

     
  6.  
    Text 80295 08:25: Referendum - Your Views

    Anon: We were not tricked Mr Salmond, we voted NO because you did not have answers to the big important questions.

    Robert, Glasgow: Westminster will do what keeps the rest of the UK, their main electorate happy. They don't want to see more power go to Scotland so it won't happen. 1.6 million voices in Scotland will increase to 2.6 surely!

    Janine, East Lothian: Those who voted No did so for a range of reasons. What is clear in speaking to my family and friends is that many were unsure about full independence and were attracted by the devo-max we were promised at the last minute. If they don't deliver devo-max, surely the legitimacy of the whole referendum falls apart?

     
  7.  
    08:10: What the papers say

    The Herald leads with a claim that Alex Salmond has argued that Scotland could achieve independence without another referendum.

    Newspapers

    The Daily Record says a "rattled" David Cameron has been forced to make a "no ifs, no buts" commitment to more powers for Scotland.

    The Scotsman says the leaders of the three main UK parties are at odds over the delivery of further devolution.

    Read our newspaper round-up here.

     
  8.  
    Text 80295 07:58: Referendum - Your Views

    Martin, Glasgow: I don't think a single person in Scotland wants the West Lothian Question to remain. We understand fairness. Why, then, is fixing it supposedly the reason for the collapse of the great Scottish bribe off?

    Lorna, Glasgow: These tax proposals are exactly what Better Together objected to for independence: cross border, tax etc. We should have had more info on this before the referendum.

    Anon: Nicola Sturgeon for first minister... mon the Irn Bru Lady.

     
  9.  
    07:53: PM has 'muddied the waters'

    David Cameron has "muddied the waters" on devolved powers in the wake of Scotland's referendum vote, according to a Labour MP.

    Graham Allen, the MP for Nottingham North and chairman of the House of Commons political and constitutional reform committee, said the prime minister should deal with devolution for England separately.

    Labour MP Graham Allen

    "Promises were made by all the union parties; they have to be honoured and they will be honoured," Mr Allen told BBC Radio's Good Morning Scotland programme.

    "What's confusing people is the prime minister, threw in on Friday morning, that he wanted to look at English MPs and English votes.

    "I think that's muddied the waters and everyone would be happier if those issues were dealt with separately.

    "That won't compromise any promises that were made by those parties last week before the [referendum] vote took place.

    "There is a separate issue, which is very important, which is Scotland, through their fantastic democratic adventure of the referendum, has raised devolution for everyone else in the union.

    "Really, we just need to be honest about this. We're going to have, at some point, a federal parliament and system in the UK."

     
  10.  
    Text 80295 07:40: Referendum - Get Involved

    Anon: UK parties letting Scotland down already; we've had broken promises before. Will we ever learn?

     
  11.  
    07:34: Salmond claims voters were 'tricked'

    "No" voters in last week's independence referendum were "tricked" by a late vow of more devolved powers, according to Alex Salmond.

    Salmond, who is stepping down as Scotland's first minister, accused the three UK party leaders of "reneging" on the pledge they made days before Thursday's referendum which he claimed won the "No" vote.

    Alex Salmond

    No 10 dismissed his claims, as the three parties continue to disagree over handling the process of devolution.

    Voters in Scotland rejected independence by 55% to 45%.

     
  12.  
    haveyoursay@bbc.co.uk 07:25: Referendum - Your Views

    John Mason, Falkirk: Surely the big problem for the Tories is convincing their back-benchers that nothing is being given away to Scotland under increased powers, without letting the cat out the bag to those poor Scottish voters who misguidedly switched? While it's proposed the Barnett Formula remains, alas all new tax-raising powers are deducted from it. Hence, 'devo max' only works for Scotland if the new tax-raising powers exceed the Barnett block grant, and that's not likely to happen! Yes, Mr Brown, you can fool most of the people most of the time, you just did it!

    Ian: How dare you Alex! The people have spoken - let us do what we as a people and nation have done so well! Keep the heid, respect the democratic process and, aye, be humble. We helped create the modern world that way.

     
  13.  
    07:18: West Lothian Question David Porter Westminster correspondent

    Here in Manchester [Labour Party conference] there's a palpable sense of relief at the result of the referendum vote. Most delegates enthusiastically back the idea of more powers for Scotland but many, particularly from Labour's English heartlands, want further devolution for their areas too.

    A growing number also believe that the West Lothian Question, concerning the voting rights and responsibilities of Scottish MPs, also needs to be looked at.

    The conference will get the chance to make its feelings about Scotland known this afternoon when the Scottish leaders address delegates in their formal report on Scotland.

    The shadow Scottish secretary Margaret Curran will say that the Labour Party must reach out to people who voted Yes across Scotland last week and assure them that real change is coming.

     
  14.  
    Text 80295 07:10: Referendum - Get Involved

    Anon: Surely English people have some entitlement too? I feel Scots MPs should be banned from voting on English-only issues. In return, then Scotland will get some more powers. Let's hope the Scots don't feel that somehow they're more worthy then all others, they're not.

     
  15.  
    07:04: Commons voting rights limited?

    David Cameron is hosting a summit of senior Conservative MPs at Chequers to discuss plans to limit the Commons voting rights of Scottish MPs.

    The prime minister has said a pledge to give Scotland more powers should go hand in hand with changing the role of Scottish politicians at Westminster.

    Alex Salmond (left) and David Cameron

    However, Labour leader Ed Miliband is opposed to linking the two issues.

    The three main parties pledged more devolution during the campaign to encourage Scots to reject independence.

     
  16.  
    07:01: Labour 'reaches out' to 'Yes' voters

    Labour aims to reach out to supporters who voted for independence in last week's referendum.

    Shadow Scottish Secretary Margaret Curran said senior party figures would meet Labour voters who backed independence in last week's referendum.

    Three of the four local authorities where a majority of people voted "Yes" were Labour-controlled.

    And the SNP, Scottish Greens and Scottish Socialist Party say they have recruited many former Labour members.

     
  17.  
    07:00: Thomas McGuigan BBC Scotland News

    Good morning and welcome to today's live page coverage of the latest post-referendum news and analysis.

     

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