Independent Scotland WON'T be able to keep the pound, warns Bank of England
BANK of England Governor Mark Carney dealt a hammer blow to the Scottish independence campaign today by saying a currency union with the UK is "incompatible with sovereignty".
Addressing the TUC conference in Liverpool, Mr Carney said the position of the Westminster parties meant there is no way Scotland could keep the pound if it went independent.
The Tories, Labour and Lib Dems have all ruled out a currency union, but SNP leader Alex Salmond has vowed to keep the pound.
Mr Carney said: "We take note of the positions of all the major Westminster parties who rule out a currency union between an independent Scotland and the rest of the UK.
Statman Scottish Independence Special
What Scots deserve now from Alex Salmond is honesty about what his Plan B is. Would we rush to adopt the Euro? Or would we set up a separate unproven currency?
"So it's in that context, when you put it all together in that context, a currency union is incompatible with sovereignty."
Mr Carney pointed to problems in the eurozone as an example of the problems caused by currency unions.
He said in order for it to be a success, there needs to be free movement of labour, goods and capital, a banking union with an institution willing to act as a "lender of last resort", and similar fiscal policies.
Mr Carney's intervention comes as the polls tighten on whether Scotland should vote for independence.
The three major Westminster party leaders have taken the unprecedented step of skipping tomorrow's Prime Minister's Questions in the Commons to campaign in Scotland.
It has become clear that so-called 'sterlingisation' - unilaterally keeping the pound in the way that Panama and East Timor use the US dollar - is Mr Salmond's most likely fallback option.
This means there would be no backing of a central bank, with interest rates, mortgages and taxes likely to soar while public services are slashed.
And a former EU economics chief said that such an arrangement would not be compatible with European Union membership.
Olli Rehn, until recently European Commissioner for Economic and Monetary Affairs and the Euro, said such a state of affairs would "simply not be possible".
Better Together leader Alastair Darling called on Mr Salmond to reveal what his "Plan B" for Scotland's currency is after Mr Carney's remarks.
He said: "Mark Carney has confirmed what we have been saying all along a currency union is not compatible with sovereignty.
"It would mean what would then be a foreign country having control over our economy. That's why a currency union would be bad for Scotland, as well as the rest of the UK.
"What Scots deserve now from Alex Salmond is honesty about what his Plan B is. Would we rush to adopt the Euro? Or would we set up a separate unproven currency?"
