By Martin Kelly
The Governor of the Bank of England has said that the institution will implement any currency arrangement negotiated between a newly independent Scotland and the remainder of the UK.
Mark Carney was speaking at a press conference given during his visit to Scotland in which he met with First Minister Alex Salmond.

Speaking to business leaders, Mr Carney listed out some of the possible advantages and disadvantages of a currency agreement between the rest of the UK and an independent Scotland.  The Bank of England Chief told his audience that a currency union could work but that safeguards would have to be agreed between both sides which would mean the ceding of some power.

In his speech, that the Canadian was at pains to stress was neither an argument in favour of or against independence, Mr Carney spelled out some of the technical issues that a currency union would be required to address.

On the benefits of a currency union, he said: "Sharing a currency can promote investment by reducing uncertainty about currency movements and giving businesses access to deeper, more liquid financial markets."

Mr Carney added: "Sharing a currency also helps promote integration. It does so by eliminating one of the barriers between markets, improving transparency of pricing and increasing competition. Sharing a currency can also help to increase the mobility of labour and capital, raise trade in goods and services, and improve the flow of technology and ideas."

One of the downsides of such an agreement for Scotland, he said, would be that its government would be unable to devalue the currency in order to help exports.  On the issue of economic divergence, he said that similar economies were not always guaranteed to create a successful currency union, but that neither were diverging economies guaranteed to result in failure.

The head of the Bank of England also touched on areas of common travel, business costs and worker migration in a speech that was well rehearsed and sought to cover some issues already contested by both sides of the independence debate.

Highlighting problems in the Eurozone, the Bank of England Chief stressed the need for a robust agreement in order to ensure structures were in place that would prevent the problems that hit the European single currency, from being repeated.

He also insisted any agreement needed to ensure minimal disruption to business.

"Scotland and the rest of the UK are highly integrated.  70% of Scottish exports are destined for, and 74% of imports into Scotland come from, the rest of the UK." He said.

In his post speech Q/A Mr Carney skilfully batted away several loaded questions from journalists, including BBC presenter James Naughtie, apparently designed to elicit answers that might serve to undermine the Yes campaign. 

On the issue of fiscal constraints, something that would be necessary in a currency union, he pointed out that all countries operate under such conditions already. 

"Every government wherever they exist anywhere in the world has constraints on their fiscal policy, from markets and budgetary realities." He said, but added that there may be "additional considerations" to be addressed.

Asked to clarify what he meant when he said a currency union could result in a loss of some sovereignty, Mr Carney cited ‘fiscal rules’ and other agreements such as ‘deposit guarantee schemes’ between the parties in the union.

Asked if a currency union could work, he gave a guarded answer, simply confirming that the bank of England would implement any post referendum agreement. 

Mr Carney also rubbished suggestions that he had said an independent Scotland would be too small to host a bank like RBS.

"That’s not what I said in the speech", he told his questioner and explained that all countries needed to ensure that institutions did not become so large that they could not be allowed to fail.

"It is in the interests of all countries to sever the link between banks and sovereigns by ending too big to fail.  Governments must put in place regimes that impose losses on bank management, shareholders and creditors rather than taxpayers.

"That is exactly what is established by the UK’s recent Banking Reform Act, and the recently agreed European Bank Resolution and Recovery Directive.

"The Bank of England is at the forefront of efforts to establish the common global requirement that is needed to finish the job."  Which said Mr Carney, should mean that taxpayers no longer have to bail out banks.

Welcoming the Bank of England Governor's speech, SNP MSP Kenneth Gibson, who convenes the Scottish Parliament Finance Committee, said:

"The Governor of the Bank of England has made it perfectly clear that he will implement what is agreed between the Scottish and Westminster governments, should we achieve a Yes vote in September - underlining that a sterling area between an independent Scotland and the rest of the UK is entirely achievable.  Or, to quote Alistair Darling, the head of the No campaign, a currency union between the two independent countries is 'desirable' and 'logical'.

"It is time for the UK Government to accept that common sense position - which is also backed by 71 per cent of people in the rest of the UK.

"The UK Government has already accepted the common sense position on Westminster's debt, and in light of the Governor's speech there is no reason - other than trying to spread uncertainty on behalf of the No campaign - not to take the same sensible approach in relation to currency.  Presumably they would wish Scotland to pay its share of the UK's debt in pounds, after all.

"Under devolution, Scotland controls just 7 per cent of our tax revenues.  The difference a Yes vote for independence makes is that we control 100 per cent of our nation's abundant resources, so that we can implement economic and social policies which reflect our needs and priorities - such as on childcare, North Sea revenues, corporate tax, air passenger duty, pensions and benefits.

"Very many successful and fully independent countries share a currency in the 21st century, including France, Austria and the Netherlands - and a sterling area would be in the overwhelming interests of the rest of the UK as well as an independent Scotland."

Head of the anti-independence, campaign Darling 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.

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

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."


# call me dave 2014-01-29 23:10
Well I never heard Mr Carney say there would be no shared currency.
He said more or less, " Both Scotland and rUK will have to negotiate"

Look at what has happened, he got on a plane to Edinburgh to meet Mr Salmond and acknowledged in his first few sentences that Scotland had a culture and a proud history of developing economies all over the world. More than Mr Robertson did.

He spoke about loss of some sovereignty to construct this agreement but that must include the rUK as well as Scotland.

He also spoke about the dangers of not making an agreement and that, in my opinion, includes rUK losing the Scottish economy and especially the black gold in the waters. They have to avoid at all costs Scotland waving goodbye.

All bubbling along nicely, there will be a currency union.

Mr Bateman 3 posts today:

# James01 2014-01-30 00:06
Some hilarious tosh from the BBC in London today, especially from Robert Peston pondering Scotland's imminent economic demise after independence and having to be bailed out by rUK. Oh yes and don't forget the obligatory comparison of Scotland with our Mediterranean neigbours Greece, Portugal and Cyprus.
# call me dave 2014-01-30 00:24
Odds 1/100 on.

Edit. Silly me news rolls on
Here is yesterdays headline.
# Purr 2014-01-30 00:52
Welcome to the BBC'S parallel Universe,
Closely followed by STV.
When are our broadcasters going to report facts, instead of spin misinformation and omission when it does not suit their agenda.
# gus1940 2014-01-30 03:46
It is interesting to see that Scottish Independence has suddenly leapt up The Metropolitan News Agenda.

Furthermore, from having previously ridiculed the concept of Independence the commentators in the media particularly in debates seem to be talking about Independence as if a YES result is a given.

Although Westminstwer refuses to enter into any talks about Independence prior to 18/9 the media are now actively discussing what WILL happen subsequent to a YES vote.

On a slightly different tack on the subject of Currency El Comatoso Darling and his pals keep banging on accusing YES for having no Plan B should Westminster deny us a Currency Union.

I would have thought that the answer is obvious - continue using the Pound irrespectively and if at some future date changing to a Scottish Currency or joining The Euro seems to make sense the electorate of Independent Scotland will decide what action to take.
# Breeks 2014-01-30 05:19
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."
Makes a change from the people of Scotland having to put up with things they have never been asked about, or worse, asked about then ignored. - Trident, illegal wars, bailing out bankers, bedroom tax, Tory governments, high speed rail links, nuclear power renewal, austerity, Neo liberalism, corrupt media, denigration of our culture.

Its just more of the same guff from Alister "oh dear" Darling.
# gus1940 2014-01-30 08:43

Yesterday I took delivery of a new Smart TV.

For convenience sake let's say it cost £1200 which means that I paid £200 VAT on it.

I am not a tax expert and this raised a few questions to which I would like answers as to what Tax charged where is at the end of the day attributed as tax colllected in Scotland.

The TV was made in Korea or China and on arrival Import Duty and Initial VAT were applied on its delivery to Samsung UK. It was then purchased by John Lewis Central
Buying with further VAT applied by Samsung on their price.

It was then passed by John Lewis Central Buying to the Edinburgh Store with further VAT applied. At each stage profit was added and the net of VAT Inputs and Outputs was sent to HMRC.

However, the only bit of the £200 VAT paid by me that coud be credited as Scottish paid tax was 20% of the difference between what the store paid and what it charged me. (contd.)
# JimW 2014-01-30 09:03
I am not a tax expert either, but my understanding is that VAT is paid at the location of a company's headquarters. If that is the case, none of your VAT would be accredited to Scottish taxation as John Lewis does not have its company headquarters registered here.
# WRH2 2014-01-30 08:55
The debate about a currency union has shown the stark difference between the Yes and No campaigns and Scotland and RUK. Scotland and the Yes campaign have been considering this for some time and the argument is set out clearly in "Scotland's Future". It shows the maturity of Scotland and Yes when compared to the woeful knee jerk reactions of rUK and No. If they could stop for a minute they would see this is the best solution in the immediate future but I also suspect that Westminster knows it is going to be more affected by this than they care to admit. They would have to become more fiscally responsible and as suggested by Derek Bateman, is Dr Carney using this to gain more control for BoE? Like Gus above, I've noticed as well that it's almost as if a Yes vote has happened. This shift will have a subtle effect on the Don't Knows.
# Caithness Calling 2014-01-30 09:03
Did I or did I not hear Darling Alistair say we would have to abide by the UK tax systems? As far as I know the Isle of Man and the Channel Islands are in the "Sterling Zone" but they certainly do not have the same tax systems. Can someone explain that one to me, and if I am correct, then explain it to Darling Alistair
# gus1940 2014-01-30 09:26

Whether or not the fraction of my VAT paid is credited to Scotland depends on whether John Lewis HQ in England breaks up their VAT payment to HMRC to show that attributable to the Edinburgh store separately. This also raises the matter of attribution of the Income Tax and NI paid by the staff in the Edinburgh store. Is this broken up by the JL Central Accounting system and appropriate amounts attributed to Scotland when payment is made to Central Government. When I worked for a US Company with UK HQ in England in the 70's my Tax District was Reading and I doubt if the tax paid by the Scottish arm was accounted for separately.

Just walk along Princes St. or any High St. and see how many stores have their HQs and Central Accounting in England and it raises the question of just what taxes that are actually paid by Scots are credited to Scotland.

Perhaps a relevant article by a tax expert would be useful.
# gus1940 2014-01-30 10:23
If my amateur suspicions re attribution of tax paid in Scotland are anywhere near correct the total tax paid by Scots is massively under-reported while that attributed to England is grossly inflated as regards VAT, Income Tax and NI not forgetting the % of profit and resultant Corporation attributable to Scottish operations of English HQ'd companies.

Regarding the foregoing 3 comments I have made what would be the situation post Indpendence?
# gus1940 2014-01-30 16:16
Sorry - 'would' in last sentence should read 'will'.
# proudscot 2014-01-30 12:00
The main thing I took out of Mark Carney's visit to Scotland, was the fact that he paid Alex Salmond the courtesy of a face-to-face meeting to discuss the issue of a possible currency zone.

Quite a contrast to the Better Together politicians and "experts" who merely shout assertions from the sidelines, usually through the medium of a compliant press and broadcasting media.
# call me dave 2014-01-30 14:01
Just watched Lamont being hoisted with her own petard in another cringing exhibition at FMQ's.

I reckon she will be / should be gone asap. Surely there are labour people in Scotland who are better quality than this.

Mr Salmond did not have to breaksweat perspiration to swat away her childlike argument. Resign...but not now, not now, after the referendum.

Ruthie attacked straight away by Mr Salmond on Lang's remarks. She had no answer to give on that.

In addition she does not understand the ramifications in Mr Carney's speech which means the ceding works both ways.
# bringiton 2014-01-30 14:24
Saw that as well.
Lang attacking the desire for democratic government in Scotland as somehow being disrespectful to war dead.
Tell that to any of the other countries who have parted company with Westminster but have sacrificed so many lives in UK wars.
What is it with these creatures who think that unless we do as London says,we are no longer worthy.
Lang sounds like an imperial politician from the past and is certainly now in the place which best demonstrates that.
I suppose this speech was somehow designed to support Cameron's WW1 year of celebration but will not go down well here in Scotland.
Better pull up your drawbridge Mr Lang.
# zorbathejock 2014-01-30 16:11
Does the union not disrespect all those who died to keep Scotland independent.At Bannockburn etc.
# creigs1707repeal 2014-01-30 14:56
"...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."

Even if this were ever to be put to the rUK in a referendum (highly doubtful), then given the fact that 71% of people in the rUK have already indicated their preference to have a currency union with indy Scotland, I rather doubt it will be the problem Better Together / Project Fear think it to be.
# Will 2014-01-30 15:20
Breeks writes of "the people of Scotland having to put up with things they have never been asked about, or worse, asked about then ignored. - Trident, illegal wars, bailing out bankers, bedroom tax, Tory governments, high speed rail links, nuclear power renewal, austerity, Neo liberalism, corrupt media, denigration of our culture." The people of the rest of Britain were never asked about most of these policies either. That's the way a class society works: the rulers rule in their own interests. How would splitting the British working class, the great majority of us, help to defeat that minority ruling class (which does not live just in Westmnister, contrary to what some think)?
# Breeks 2014-01-30 18:03
Independence won't change our people, just the way we are governed.

We can choose another destiny to better husband our resources for the benefit of our kids, and our kid's kids, so why on earth wouldn't we?

If we vote NO, it is them we will answer to, and with the greatest respect, not the working class people of England if we vote YES.
# Will 2014-01-31 12:31
No Breeks, if you break away, you will still be governed by the capitalist class, whose rule will be reinforced by the EU (Employers' Union).
The SNP won't even allow you to vote on whether you want to be in the EU or not. So the EU will govern you.

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