Former Bank of England governor Lord King has said Scotland “could be an independent country”, dismissing fears over the country being too small and which currency it would use.
But in an interview with BBC Newsnight, the peer did warn an independent Scotland would risk taking a hit to its public finances if oil revenues tanked, and suggested it could run up a deficit from struggling to borrow on the international money markets.
His comments come as SNP leader Nicola Sturgeon tabled a motion in the Scottish Parliament demanding an independence referendum be held between autumn 2018 and spring 2019.
Theresa May left the door open for a Scottish referendum in the aftermath of Brexit, as Downing Street refused to rule out a summer 2019 vote. But the PM has made clear she thinks now is not the time for a referendum amid Brexit talks.
Lord King, who headed the UK’s central bank between 2003 and 2013, argued many countries the size of Scotland have succeeded independently. He told presenter Evan Davies:
“Scotland certainly could be an independent country, there are plenty of small countries the same size as Scotland, it has both the people, it has a capital city, a history and culture, it could be an independent country.”ADVERTISEMENT
Ahead of the referendum three years ago, ratings agency Fitch warned Scotland continuing to use the pound without a shared fiscal and banking union with the UK could risk “high volatility and market turbulence”. But Lord King said:
“I myself don’t think there are any major problems in terms of currency, that was the thing project fear focussed on last time, but there is an issue about public finances.”
But he raised the concerns over the “consequences”. He said:
“If the oil price remains low and if they lose the money which is transferred from the rest of the UK to Scotland, then they would have to make that up in their own budget - but that’s a consequence of deciding to be financially independent, you end up paying for yourself.
“And it would be a challenge to borrow on the international market if Scotland decided to run a large budget deficit. I think that would be expensive, the interest rate would go up.”
The case for Scottish independence in the 2014 referendum was dogged by claims the SNP could not provide answers on what currency Scotland could use if it voted to leave the UK.
Speaking on Sky News’ Sophy Ridge on Sunday show this weekend, SNP leader Nicola Sturgeon claimed an independent Scotland would initially use the pound as its currency as a “starting point”.
The Scottish First Minister claimed the SNP was currently undertaking “very serious work” on what an independent Scotland would look like, and would present detailed plans by the time of the referendum.
Scottish Conservative Leader Ruth Davidson claimed it was “astonishing” the SNP could not provide full details despite calling for another vote.
An SNP spokesperson said:
“Mervyn King is absolutely right in concluding that, of course, Scotland could be an independent country – we have huge economic strengths and solid foundations on which to build.
“We’ve seen so many of the promises made to the people of Scotland in 2014 unravel – not least that if Scotland voted No we would keep our EU membership.
“Mervyn King’s remarks on the currency are welcome and roundly dispel some of the baseless scaremongering we’ve heard from the Tories over the past week.
“We will be frank about the challenges we face to grow our economy but equally serious about the opportunities of independence. That is exactly the focus of the SNP’s Growth Commission, which will set out in the coming months how Scotland can work sensibly and progressively to maintain a sustainable budget position.”