A referendum on currency union

Bank of England Governor Mark Carney re-entered the referendum debate in its penultimate week when he said a currency union between an independent Scotland and the remainder of the United Kingdom would be incompatible with sovereignty.

Carney recalled a speech he made in January in which he said a successful currency union would require cross-border agreements on tax and spending as well as on banking rules. He also noted the opposition of Britain’s three main political parties to a currency union with an independent Scotland, as proposed by the SNP.

There had to be three successful components to a successful currency union, he said; the free movement of goods and services across the different parts of the currency, a banking union underpinned by common institutions such as a central bank, and elements of shared fiscal arrangements. “You only have to look across the continent to look at what happens if you don’t have those components in place,” said Carney.

Behind the scenes though, the possibility of post-referendum negotiations over currency – along with other issues involved in Scotland being independent – remains. Early in the campaign, an unnamed UK Government minister “at the heart of the pro-union campaign” was quoted by The Guardian as saying: “Of course there would be a currency union,” in order to ensure fiscal and economic stability on both sides of the border.

Last week, ITV’s political editor Tom Bradbury floated the idea that Westminster might simply sidestep the issue: “I have been told that Tory and Labour leaders feel a currency union with independent Scotland would have to be put to the rest of the UK in a referendum. Senior Conservative figures say they do not think the party or the country would accept it, therefore feel it is dead in the water as an idea. Labour’s leaders feel the same. They don’t want to underwrite Scotland’s financial system and they think English voters would agree.”

Another referendum? David Cameron has said he will deliver a referendum on the UK’s European Union membership by 2017 if he remains PM after the next general election. But an e-petition earlier this year requesting that “the remaining UK population” is offered a referendum on a currency union with an independent Scotland garnered only 497 signatures. Then again, perhaps the rest of the UK’s appetite for referenda will have been whetted by Scotland’s experience.