Cantillon: Dismal science cuts through Scottish debate

Mark Carney talks softly, has an Irish passport in the breast pocket of a well-cut suit, but carries a big stick – as those with tuned political antennae amongst his audience in Edinburgh yesterday will no doubt have grasped only too well.

Being a central banker, he issued the usual self-deprecatory flummery, insisting that people such as he could only offer "technocratic assessments" on whether Scotland could use sterling after a pro-independence vote in September, and, if so, how.

The “dismal science” can take people only so far in politics, he went on. In the end, choices about sovereignty that limit the autonomy of free-born people are matters “beyond mere economics” and must be made by politicians, he said.

However, Carney is no bystander. Between the lines, he pretty much filleted the case made by the Scottish National Party, which has moved from wanting a free Scotland to be part of the euro to now wanting it to continue using sterling.

Clearly, it can, Carney accepts, but not on the no-questions-asked basis promulgated by the SNP: the euro zone is a mess because the proper rules were not in place. The same could not be allowed to happen if Scotland votes to split away from the United Kingdom.

The SNP has yet to lay out its currency plans in detail. It could seek to create a bank of the rest of the UK and Scotland, where it would have an equal place at the table of governors – although it is hard to see why rUK (as it is known in the jargon) would agree.

Currently, notes issued by Scottish banks are backed by similar ones held by the Bank of England in London, though that would not continue if the Yes side wins – unless both sides reach a deal.

In Salmond’s view, a Yes vote would force London to agree a deal.

North Sea oil and gas revenues are useful on the UK’s balance of trade and balances and London would be loath to let them go. For now, Salmond is seeking to inspire the ambitious and soothe the fretful at one and the same time by arguing that everything will change, but nothing will change after a Yes vote on September 18th. It is an extraordinary balancing act that will be hard to keep up.