Scotland business

Scottish independence: Bank of England role 'for politicians to decide'

Charles Bean
Image caption Charles Bean was speaking to a business audience in Glasgow

The future role of the Bank of England if Scotland becomes independent is for politicians to decide rather than the central bank, its deputy governor said.

Charles Bean, speaking to a business audience in Glasgow, also responded to criticism that low interest rates were hitting savers and pensioners hard.

And he said there was a need for the economy to return to growth.

If not capacity would be scrapped and unemployed people would become disconnected from the labour market.

The deputy governor's comment on the independence debate was a response to the question of which currency an independent Scotland would use, which has been hotly debated in recent weeks.

Monetary arrangements

The SNP government at Holyrood wants Scotland to continue using the pound sterling, and to have a formal alliance with the rest of the UK, involving the backing of the Bank of England.

Mr Bean said, in his speech, that "monetary arrangements would be one of many matters needing to be settled".

"But the exact form of those arrangements would be for the Westminster and Scottish parliaments to decide, not the Bank of England," he said.

"Until asked to do otherwise, the bank will continue to use the powers delegated to us by the UK parliament to try to deliver, to the best of our ability, monetary and financial stability for the United Kingdom as a whole."

Scotland's Finance Secretary John Swinney reiterated that an independent Scotland would continue to use the pound.

He added: "The Scottish secretary in the UK government has said that Scotland can continue to use sterling, so the Westminster coalition is totally incoherent. And we will have the full range of fiscal powers only available to an independent country to grow the Scottish economy and boost jobs - that is real independence, which Scotland needs."

Senior central banker Mr Bean also talked about the path of the economy recovery, saying falling inflation should ease the squeeze on household spending.

He said that should help "a modest pick-up in household spending", but growth was expected to "remain sluggish in the first half of the year".

Mr Bean said "the longer capacity lies idle, the more likely it is to be scrapped completely. And the longer people are out of work, the more likely they are to become disconnected from the labour market altogether".

"So there is an added incentive to getting the recovery back on track quickly," he said.

Commenting on the impact on savers and those buying pension annuities, who find the low interest rates are hurting the value of some investments, the deputy governor said: "Savers have every right to feel aggrieved at losing out. After all, they did nothing to cause the financial crisis.

"But neither did most of those in work, who have also seen a substantial squeeze in their real incomes.

"And unemployment, particularly among the young, has risen as output has fallen. There have been few winners over the past few years."

He added that pension funds should also have benefited from some of their investments being more valuable as a result of the measures being taken by the Bank of England to support the economy.

Fundamental question

Scottish Labour's finance spokesman Ken Macintosh MSP, said the issue of currency in an independent Scotland was "one of the most basic and fundamental questions people are asking and the SNP has no credible answers".

He added: "The SNP are in the absurd position of wanting to keep the same currency at present, but surrender all economic and political control over it. Not only is that incoherent, but it relies on Scotland finding an exemption from strict EU rules which, even the SNP's own economic advisers admit, would require us to join the Euro."

The Scottish Lib Dem leader Willie Rennie said the remarks by the deputy governor of the Bank of England showed that the SNP had no guarantee that "a separate Scotland would be able to adopt the pound as its currency".

He added: "The SNP assert they would have the pound but have no written guarantee, leaving voters deprived of the facts.

"It's clear that if the rest of the UK agreed to form a monetary union with us it would insist on strict spending limits to maintain the credibility of the currency. A separate Scottish government would have little say on those limits leaving us impotent."

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