A high-profile former member of the Bank of England’s Monetary Policy Committee has backed Alex Salmond’s controversial claim that an independent Scotland should be represented on the interest-rate-setting body.
Professor David Blanchflower, who sat on the MPC from 2006 to 2009, was speaking only days after the First Minister was given short shrift by the UK Treasury for suggesting a separate Scotland would keep sterling, operate its own fiscal policy and have a seat at the MPC. Mr Salmond was criticised by, among others, Lord Lawson, the former Conservative Chancellor, and Forrest Capie, professor emeritus of economic history at City University, London.
However, Professor Blanchflower said that such an arrangement would be beneficial for both an independent Scotland and for the Bank of England.
Professor Blanchflower, head of economics at Dartmouth College, Hanover, New Hampshire, also revealed in an interview with The Times that Mr Salmond had sought his advice on the issue earlier this year. He said he told the SNP leader then that he supported the idea, and added: “He sounded me out about such a possibility and I said ‘the first thing is that the MPC has been absolutely hopeless, dominated by economists because of what Mervyn King \ has done’.
“Economists should be advisers and on the side and, in all probability, we should have representatives who know how the real world works — from different interests and places.
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“I said ‘the general principle ought to be that we ought to have representation, as the US Federal Reserve in Washington has’.” As well as its seven-strong board of governors, the Fed has representatives from 12 regional Reserve Banks. Its equivalent to the MPC is the Federal Open Market Committee. All 12 Reserve Bank presidents attend its meetings, participate in discussions and contribute to policy. However, only four of them have voting rights at any one time.
Professor Blanchflower — who is also a part-time professor of economics at the University of Stirling — met Mr Salmond when both were speaking at the National Association of Pension Funds investment conference in Edinburgh in March.
Professor Blanchflower said: “Alex Salmond would have my backing because I think it would be better to have [such an arrangement] than all theoretical male economists from the Home Counties who went to Oxbridge. It is not unreasonable to think about broadening it [the MPC]. I would broaden it to have representation from industry. It is probably not unreasonable [for Scotland] to have a seat at the table.”
He added that he would argue that, within the current constitutional make-up of the United Kingdom, regions such as the English North East, as well as the devolved nations, ought to have a seat as well.“They [the Scottish government] could negotiate it,” he said. “It would be quite a new thing, but why not? If Scotland goes independent it doesn’t go away. Presumably there’s not going to be a border with guards on the fence. In a way, we want to make sure what’s happening on that economy is represented.”
Professor Blanchflower said that he would not expect Sir Mervyn to be supportive of such a proposal. The Bank has said it would not comment publicly on the issue of Scottish representation as it was a matter for politicians.
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“This is about making the thing work better,” said Professor Blanchflower. He said the Scottish representative would be appointed by Mr Salmond and could be fired by him. The ideal candidate would be someone from business or banking, who would take soundings from industry and from economists.
Last night, a spokesman for the First Minister hailed the “positive contribution” from Professor Blanchflower. He said: “With independence, Scotland will move from a position of having no influence to having some influence, and we will also have the full range of fiscal and other economic powers only available to an independent country to grow the Scottish economy and boost jobs — that is real independence, which Scotland needs.”