Bank of England governor Mark Carney has weighed in to the debate on the future composition of the UK by declaring that an independent Scotland could not keep the pound and be free to set its own taxes.
In a major speech on currency unions in Edinburgh last week, Carney laid bare his fears that Scottish independence would repeat problems seen in the eurozone.
Scotland will hold a referendum in September on whether it should remain in the UK or become an independent nation.
The Scottish National Party wants a new, independent Scotland to keep the same monetary policy as England.
Carney said: “The risks have been demonstrated clearly in the euro area over recent years, with sovereign debt crises, financial fragmentation and large divergences in economic performance.
“The euro area is now beginning to rectify its institutional shortcomings but further very significant steps must be taken to expand the sharing of risks and pooling of fiscal resources.
“In short, a durable, successful currency union requires some ceding of national sovereignty.
“It is likely that similar institutional arrangements would be necessary to support a monetary union between an independent Scotland and the rest of the UK.”
An independent Scotland would create its own Financial Conduct Authority, Financial Ombudsman Service, Financial Services Compensation Scheme and Money Advice Service. Advisers have described the proposed changes as a “nightmare”.
Evolve Financial Planning director Jason Witcombe says: “Carney is right. There will be all sorts of ramifications arising from Scottish indepen-dence around the pound.
“It also poses problems for Scotland’s financial services industry, such as insurers based in Scotland with clients in England.”