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Independent Scotland needs new currency – MPs

The MPs report says the sterling plan is not happening. Picture: Ian Rutherford

The MPs report says the sterling plan is not happening. Picture: Ian Rutherford

  • by SCOTT MACNAB
 

A STAND-ALONE Scottish currency would be the best way forward for the country after independence, a report by MPs has suggested.

The SNP government wants to share the pound with the UK in a currency union after independence, keeping the Bank of England safety net.

This has been ruled out by all the main parties at Westminster, and today’s report by the Scottish affairs select committee says there will be no currency union “of any kind”.

The report says First Minister Alex Salmond’s Plan B for currency is “sterlingisation” – whereby Scotland would use the pound in the same way that Panama uses the US dollar, without formal links.

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However, a stand-alone Scottish currency would give a Scottish Government the greatest economic freedom to shape policy after a Yes vote, the MPs found.

“Despite the inherent risks involved, a new Scottish currency would give the Scottish Government the maximum economic leverage required to pursue a separate economic policy – the stated aim of separation,” the report states.

“The Scottish Government should therefore explain why a separate currency is not its preferred option, and commission and publish new work on how, and at what cost, a separate currency could be created and the implications for Scotland’s fiscal policy.”

Committee chairman Ian Davidson dismissed Mr Salmond’s plan for an independent Scotland to enter into a formal deal to continue using the pound. This has been ruled out by Chancellor George Osborne, his Labour opposite number Ed Balls and Liberal Democrat Treasury Secretary Danny Alexander.

The SNP claims this is posturing and an agreement would be reached if Scots vote Yes.

But Mr Davidson said: “The Scottish Government tries to give the impression that a currency union is still a possibility. It is not. This parrot is dead.”

The committee report adds: “Voters urgently need to be told what the Scottish Government has as a plan B.”

It looks most likely that this would be “sterlingisation” which would mean using the pound without the UK’s permission, which Scotland can do as it is a free floating international currency. But it would mean no Bank of England as a central bank and no control over interest rates.

“While sterlingisation is therefore not a credible option, it appears to be the Scottish Government’s current ‘plan B’,” the committee report adds.

A spokesman for the First Minister dismissed the findings of the report. He said: “The pound is as much Scotland’s as it is England, Wales and Northern Ireland’s. And the fact a group of anti-independence Westminster MPs feel the need to issue a lame report like this shows just how vulnerable the No campaign have become on this issue.”

The other option for Scotland could be the euro, if the country enjoys a seamless transition of European Union membership.

The report says a Scottish state would not be able to satisfy the conditions for membership of the euro, but may have to consider seeking to join it and may be obliged to make a commitment to do so as a condition of EU membership.

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