Alex Salmond was left floundering over his plans for independence yesterday after it emerged that he has not discussed with the Bank of England what role an independent Scotland might have on the Bank’s Monetary Policy Committee, which sets interest rates.
His claim that a separate Scotland would be represented on the MPC was rubbished by the Treasury, which said that it would not get a say on sterling.
Mr Salmond was exposed after his deputy, Nicola Sturgeon, said at the weekend that Scotland would have a place at the committee. In an uncharacteristically halting appearance at First Minister’s Questions at Holyrood, Mr Salmond was unable to answer Scottish Labour’s request for confirmation of the talks he had had with the Bank, the details of the agreement, and when talks started.
The exchange threw up more questions about the detailed vision that Mr Salmond — a former economist — has for the finances of an independent Scotland. The Treasury said later that an independent Scotland would have to cede some of its fiscal powers to a central bank or go it alone and have no control over its own monetary policy.
The Treasury gave short shrift to any suggestion of a sterling zone, similar to a eurozone, where countries have monetary union without fiscal union.
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David Bell, the leading Scottish economist, said that Scotland would be able to remain in sterling and keep its fiscal independence, but have no say over monetary policy. However, if it were to enter some kind of monetary union with the rest of the UK, it would likely face strict rules on its financial policies to ensure that the currency did not become unbalanced.
The SNP previously backed an independent Scotland joining the euro but now says it would use sterling, although it has not ruled out joining the euro after a referendum.
Speaking in a Times debate this year, Ms Sturgeon said that a seat at the table would be “reasonable” and on Sunday said that although there was currently no Scottish representation on the MPC this “would change if Scotland were independent, and we’d get the fiscal levers that we don’t have”.
Yesterday Mr Salmond backed her up and also appeared to suggest that, as well as being part of the appointment process to the MPC, Scotland would have a floating observer, as the Treasury currently has. “I think the UK Treasury and the Bank of England would be glad to have us there,” he said.
Johann Lamont, the Scottish Labour leader, accused the First Minister of making “meaningless assertion after meaningless assertion” and having a position that was only “about belief and hope”.
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Mr Salmond’s spokesman conceded later that the only conversation the First Minister had had with the Governor was about economic measures to boost growth and about banks’ lending to small businesses. He said that Scottish government policy was that the Bank would continue to be Scotland’s central bank within a shared sterling zone in the event of independence.
The Treasury warned that full monetary union was not possible without some fiscal union. “If that [eurozone] crisis tells us anything, it is that strong control of fiscal policy and borrowing would have to be exercised centrally,” a spokesman said. If Scotland went it alone with sterling, it would have no say over its own monetary policy, he added.
A spokesman for John Swinney, the Scottish Finance Secretary, said: “Given that Scottish Secretary Michael Moore has already agreed an independent Scotland can continue to use sterling, the UK Government are clearly at sixes and sevens. There is absolutely no comparison between a sterling zone comprising an independent Scotland and the rest of the UK — given that the productivities of our economies are virtually identical — and the eurozone.
“Indeed, the National Institute of Economic and Social Research has described Scotland and the rest of the UK as ‘an optimal currency area’. The Scotland Office may not know it, but the UK Government has had no say over monetary policy since the Bank of England was made independent in 1997.”