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Bank denies talks held with SNP over currency

THE Bank of England has denied entering a dialogue with the Scottish Government over its plans for an independent Scotland to form a currency union with the UK.

JOHN SWINNEY: Said there had been dialogue over the pound.
JOHN SWINNEY: Said there had been dialogue over the pound.

In an embarrassing development, it rejected comments by SNP Finance Secretary John Swinney who said the Government had been in a "very helpful dialogue" with the Bank over the Nationalists' key policy to keep the pound if Scots vote to leave the UK.

Mr Swinney revealed contacts with the Bank as he gave evidence to the House of Lords Economic Affairs Committee on Tuesday. His remarks were interpreted as the start of talks between the Government and the Bank.

However, a Bank spokeswoman said: "The Bank of England did no more than answer technical questions from representatives of the Scottish Government.

"We have not entered a dialogue about the possibility of changing monetary arrangements for Scotland in future."

The SNP Government wants an independent Scotland to enter a currency union with the rest of the UK to keep the pound.

It claims it would be welcomed into a new "sterling zone". Ministers believe an independent Scotland would be entitled to a seat on the Bank of England's monetary policy committee, which sets interest rates, and could rely on the Bank to act as a lender of last resort.

Critics of the plan claim it would leave an independent Scotland with less influence over macro-economic policy than it enjoys at present.

Addressing the Lords committee, Mr Swinney said the Scottish Government had been in a "very helpful dialogue" with the Bank about plans for monetary union.

He insisted the "points raised by the bank" would "inform the model we bring forward".

Asked by Labour peer Lord Hollick why the Bank of England should act as lender of last resort to a foreign country, he said: "It would be of interest to the Bank because the Scottish economy would be contributing to the sterling zone."

Labour's Shadow Scottish Secretary Margaret Curran claimed Mr Swinney had been "economical with the truth".

She said: "He tried to mislead not just the House of Lords but the people of Scotland when he claimed he was in dialogue with the Bank on an independent Scotland keeping the pound.

"The Bank of England has now made clear that no such dialogue has taken place.

"They misled the people of Scotland on whether they had EU advice. They misled the people of Scotland on our membership of the European Union. Now John Swinney has joined Nicola Sturgeon and Alex Salmond in wilfully misleading the people of Scotland on something as basic as the currency we should have."

The row comes as the SNP Government is under pressure to justify its claim that an independent Scotland would automatically be a member of the EU on the same terms as the UK, including its opt-outs from the euro single currency.

EC President Jose Manuel Barroso said this week an independent Scotland would have to apply for membership as a new state and negotiate terms. Mr Swinney claimed Mr Barroso was wrong.

Deputy First Minister Nicola Sturgeon – who has called for talks with President Barroso – is to make a statement to Parliament on an independent Scotland's EU membership today.

A Scottish Government spokesman said: "As indicated by Mr Swinney, the Scottish Government has engaged with the Bank of England to discuss factual and technical matters around proposals for a macroeconomic framework.

"Following the Edinburgh Agreement, the Scottish Government is engaging with a range of stakeholders in preparation for the publication of the independence white paper in 2013, including the European Commission."

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Finance

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