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Scottish independence: Bank of England boss Mark Carney on currency plan Scottish independence: Bank boss Mark Carney urges currency plan care
(35 minutes later)
The Bank of England governor has said plans to share the pound between an independent Scotland and the rest of the UK needed "careful consideration".The Bank of England governor has said plans to share the pound between an independent Scotland and the rest of the UK needed "careful consideration".
Mark Carney said a currency union agreement, as proposed by the Scottish government, would require proper foundations to be put in place.Mark Carney said a currency union agreement, as proposed by the Scottish government, would require proper foundations to be put in place.
He argued the risks of not doing so had been demonstrated by problems in the Eurozone.He argued the risks of not doing so had been demonstrated by problems in the Eurozone.
Mr Carney's comments came ahead of the Scottish independence referendum.Mr Carney's comments came ahead of the Scottish independence referendum.
On 18 September, voters in Scotland will be asked the yes/no question: "Should Scotland be an independent country?"On 18 September, voters in Scotland will be asked the yes/no question: "Should Scotland be an independent country?"
In the event of a "Yes" vote, the Scottish government has 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.In the event of a "Yes" vote, the Scottish government has 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 has 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. 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.
Scottish Finance Secretary John Swinney said Mr Carney had recognised the benefits of a currency union, but 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.
Speaking in Edinburgh, Mr Carney stressed arrangements for a currency union in the event of independence would be a matter for the Scottish and UK parliaments.Speaking in Edinburgh, 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.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.""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.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.
"In short, a durable, successful currency union requires some ceding of national sovereignty."In short, a durable, successful currency union requires some ceding of national sovereignty.
"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.""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."
'Popular' proposition 'Technical' advice
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.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.
Following the meeting, Mr Salmond said: "The Bank of England is an independent institution. 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.
"It doesn't take a role in party politics but we had a splendid discussion and I think crucially have agreed to continue the technical discussions, not negotiations but the technical discussions, that the Bank of England has been having with the Scottish government so that our proposals are soundly based on technical terms." 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.
Mr Salmond said he was confident UK ministers would agree to a currency union in the event of Scotland voting for independence. "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.
He added: "They will agree for two reasons. It is overwhelmingly in the interests not just of Scotland but of the rest of the UK to have Scotland and England sharing the pound. "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."
"Secondly, of course, they will be driven there by the people because that proposition is popular both in Scotland and in England at the present moment.
"So the UK government ministers will do what the people tell them to do, and that is Scotland will keep the pound and England wants us to keep the pound."
Technical issues
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.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.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.""I'm sure the people of Scotland will want to be as well-informed as possible."