Economists And Politicians Battle Over Currency Union Ahead Of Scottish Independence Vote


Currency has continued to dominate the independence debate, with politicians and economists clashing on the subject. Unionist leaders said Scotland's Finance Secretary, John Swinney, had been "rebuked" and "slapped down" after the Bank of England released a statement to clarify its position on communication with the Scottish Government on future monetary arrangements, following comments made by Mr Swinney yesterday.

The Scottish Government said it had always "made clear" that technical discussions and not negotiations had taken place. The Bank of England statement said: "The Bank notes the comments made by the Finance Secretary of the Scottish Government regarding technical discussions between officials of the Scottish Government and the Bank of England.

"To be clear, consistent with its statement in December 2012, the Bank of England has not entered into discussions with representatives of the Scottish Government about proposals for future monetary arrangements in Scotland. As the Governor said yesterday, the design of any changes to UK monetary and financial arrangements would ultimately be a matter for negotiation between the Westminster and Scottish Parliaments. The Bank of England will deliver whatever remit it is given."

Speaking yesterday, Mr Swinney said: "The Scottish Government has had technical discussions with the Bank of England regarding our proposal for a currency union and we welcome their continued acknowledgement that the Bank will introduce whatever the politicians decide."

A Scottish Government spokesman said today: "The Scottish Government has had ongoing technical discussions with the Bank of England, as the Bank itself has previously confirmed. These technical discussions were inaugurated by former governor Mervyn King and continued under the current governor, Mark Carney, as confirmed in the statement issued after the meeting between the First Minister and Mr Carney on January 29 this year, which was agreed by the Bank.

"We have always made clear that these are technical discussions and not negotiations, and that we respect the neutrality and independence of the Bank, which had made clear it will implement whatever is agreed."

Better Together leader Alistair Darling said: "I cannot remember a time when the Bank of England have had to rebuke a politician in such stringent terms. Yesterday John Swinney told us the Scottish Government was having discussions with the Bank of England on a currency union. Today the Bank of England have said categorically that no such discussions on future monetary arrangements took place."

Scottish Conservative leader Ruth Davidson said: "It is utterly embarrassing that Scotland's Finance Secretary has had to be slapped down by the Bank in this humiliating manner. It is now clear there are no discussions between the Bank and the Scottish Government on future monetary arrangements and there never have been."

The Scottish Government favours a formal currency union with the rest of the UK which would allow an independent Scotland to continue to use the Bank of England as its central bank.The UK Government and the main Westminster parties have already ruled out that option.

Alex Salmond and his political opponents battled over the issue for the second week in a row at First Minister's Questions at Holyrood.

Meanwhile, Sir Donald Mackay, a former adviser to the Scottish Secretary, said a formal currency union would be in the interests of both Scotland and the rest of the UK if there is a Yes vote in the independence referendum, and has written a letter to Mr Salmond backing the First Minister's favoured currency option.

Sir Donald's comments contrasted with the views of Ronald MacDonald, Adam Smith Chair of Political Economy, who said the Scottish Government's plan for a currency union with the rest of the UK is ''fundamentally flawed''. He said such a union would ''inevitably'' fail if it was ever agreed by the UK Government, with devastating consequences for the economy.

Before You Go