Mark Carney has warned that an independent Scotland would be forced to cede some national sovereignty in order to allow a currency union with the United Kingdom to work. The Bank of England governor stressed the risks that would result from failing to previously establish solid currency foundations should Scottish citizens vote “yes” for independence this coming September. A major issue surrounding the independence debate is what Scotland would do for currency. Many Scots have expressed their desire to keep the UK pound, but the UK is skeptical about doing that citing it would be responsible to bail a foreign country out if its economy tanked.
Carney disappointed many who were hoping for him to vigorously support one side over the other. The banker made a non-politically charged speech simply illustrating the financial challenges that arise when a state is gaining independence. Nevertheless, members of both sides of the issues used his remarks to advocate for their particular cause.
John Swinney, the Scottish Finance Secretary, proposed that Carney’s remarks showed the benefits of a currency union. He stressed that both countries would be better off in terms of promoting investment, eliminating transaction costs, and easing the flow of capital. According to Swinney, a currency union would allow for the United Kingdom’s pound to grow because Scotland’s economy would inevitably flourish. Scottish independence would mean control over its own taxes, employment policy, social security, and oil and gas revenues. Pro-independence people believe this will lead to more job creation and a fairer society.
On the other hand, Carney’s comments not only warned an independent Scotland would have to cede some of its national sovereignty in the case of a currency union, but the UK would have to do the same. Some UK officials have stressed the difficulties that the European Union has had in successfully implementing a currency union. An independent Scotland using the UK pound would be dependent on the Bank of England should economic disaster strike. British politicians have declared a currency union unlikely because the people of the United Kingdom would have to agree to this, and the Euro-zone crisis has clearly shown that currency union needs political and social unity to successfully work.
Carney’s remarks demonstrated how Scottish independence is dependent on the currency issue. He made note that members of the Scottish National Party would need to devise a ‘plan B’ should the United Kingdom not agree to a currency union. With the September 18, 2014, referendum fast approaching, it is unlikely that a plan rivaling a currency union pact would be obtainable that quickly.
Although Carney did not take sides on the issue, it seems clear that Scottish independence would not mean an entirely independent Scotland. With the majority of Scottish citizens supporting the continued use of the UK pound, and the UK expressing doubt as to whether or not that is possible, both countries would have to cede national sovereignty if Scotland did not invent its own currency. The United Kingdom has already voted on such an issue before when it chose not to enter the European Union. With such political and financial turmoil surrounding the Euro, it is unlikely that the United Kingdom would be willing to risk its financial security. Scotland, it seems, is clearly not in a good position to completely sever financial ties with the United Kingdom. Carney’s remarks highlight perhaps the biggest obstacle to Scottish independence.
By Peter Grazul