A letter by the Governor of the Bank of England shows that an independent Scotland would require "huge reserves" of sterling, a senior MP has said.
Treasury Select Committee chairman Andrew Tyrie recieved the letter from Mark Carney today. It outlines the reserves held by Hong Kong, Denmark, Bulgaria, Estonia, Latvia and Lithuania - all of which have adopted another currency outside a formal currency union or are pegged to another currency.
Mr Tyrie said: "The Governor’s letter demonstrates that, whatever currency arrangement is chosen, a separate Scotland would require huge reserves.
"The Governor noted that £15bn would be at the 'upper end of the range' that Scotland might reasonably inherit as reserves. Scotland would need a multiple of that. The comparisons with Denmark and Hong Kong in the Governor’s note say it all.
"Meeting the shortfall in reserves means that Scotland would, as the Governor also pointed out, face ‘real fiscal costs’.
"Scotland’s ability to borrow would be heavily restricted. Obtaining the reserves would mean much higher taxes or lower spending, or both, for years to come."
It follows the news that two of Britain’s biggest banks have made contingency plans to leave Scotland in the event of a ‘yes’ vote in the independence referendum.
The Royal Bank of Scotland has announced it will consider moving its headquarters to London if Scotland becomes independent after the vote in September 18th.
Meanwhile, Lloyds Banking Group confirmed it was considering shifting its business away from Scotland. “We have contingency plans in place which include the establishment of new legal entities in England," the bank said.
Business Secretary Vince Cable told MPs this morning an independent Scotland "would not be able to support" large financial institutions, while his Labour counterpart Chuka Umunna warned of a "lorry-load of uncertainty" in the banking sector.
Mr Tyrie said: "RBS and Lloyds appear to have concluded that this would be unrealistic for Scotland even to attempt and that therefore a separate Scotland could not provide a credible guarantee for deposits.
"That is probably why RBS and Lloyds have announced that they would move their headquarters following Scottish independence. They would need to protect their customers and shareholders."
Alex Salmond accused the Treasury of leaking the details of the RBS move.
"A totally extraordinary development in the campaign. There can be no greater difficulty for anyone in government to be caught briefing market sensitive information," he said.
"I will be writing to the Cabinet Secretary today to ask for an immediate investigation as to who in the treasury was briefing such information."
http://www.politicshome.com/uk/story/44254/
Poll
Author