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Scottish independence: Scotland would leave pound

George Osborne gives a speech in Edinburgh. Picture: PA

George Osborne gives a speech in Edinburgh. Picture: PA

  • by SCOTT MACNAB
 

GEORGE Osborne today ruled out the prospect of Scotland sharing the pound with the rest of the UK after independence, warning that the “people of the rest of the UK” would not accept it.

The Chancellor said in a speech in Edinburgh that such a deal was a “high risk experiment that may not work at all.”

But Deputy First Minister Nicola Sturgeon warned that the UK will “end up shouldering the entirety of UK debt” if there isn’t a “sensible discussion” about the sharing the pound.

This will be an estimated £1.6 trillion by the time of independence in March 2016, in the event of a Yes vote.

Osborne said: “The SNP says if Scotland becomes independent there will be a currency union and Scotland will share the pound - people need to know that is not going to happen.”

The UK Government today published analysis by Treasury officials into the prospect of a formal “sterling zone” after independence which advises against such a set-up. Mr Osborne also took the unusual step of publishing advice from Permanent Secretary to the Treasury Sir Nicholas MacPherson on the issue.

The Chancellor said that the prospect of a banking union and monetary sharing arrangements would be unsustainable between Scotland and the rest of the UK after independence.

He also said that the durability of such a currency union would be “in serious question from the outset”.

The advice from officials in today’s analysis is that “they would not recommend a currency union to the Government of the rest of the UK”.

Mr Osborne said: “Listening to that advice, it’s clear to me I could not as Chancellor recommend that we could share the pound with an independent Scotland.

“The evidence shows it wouldn’t work, it would cost jobs and cost money - it wouldn’t provide economic security for Scotland or the rest of the United Kingdom.

“I don’t think any of Chancellor of the Exchequer would come to a different view.”

Mr Osborne said:“It’s not in the interests of the rest of the UK.

“The people of the rest of the UK would not accept it and Parliament would not accept it.”

SNP response

Ms Sturgeon also insisted that a shared currency was in the “best interests” of Scotland and the rest of the UK.

She insisted Mr Osborne’s announcement amounted to “campaign tactics.”

“He doesn’t want Scotland to vote for independence. He’s perfectly entitled to argue the case.

“If Scotland votes for independence, it will be in our mutual interests to sit down properly and negotiate the best way forward in terms of a currency union and the best split of assets and liabilities.”

Ms Sturgeon insisted that the Bank of England was nationalised in 1946 and is a “shared asset.”

“Let’s put the legalities to one side and look at the very hard practical reasons, why it is in the interests not just of Scotland but the people across England for us to continue to use a shared currency.”

A different currency between the two countries would cost English firms trading north of the border “hundreds of millions of pounds in transaction costs”, Ms Sturgeon said.

“What the Treasury says now in the heat of the campaign will be very different to what they say after a democratic vote for independence when common sense will trump the campaign rhetoric.”

Lib Dems and Labour rule out currency union

The Chancellor’s speech was swiftly followed by a statement from Liberal Democrat UK Treasury Secretary Danny Alexander who also ruled out such a currency union if his party is still in power.

“A currency union would leave the rest of the UK highly exposed to fiscal and financial risks from a separate Scotland,” Mr Alexander said.

“As a Scot and as Liberal Democrat Chief Secretary to the UK Treasury, on the basis of this analysis, I couldn’t recommend a currency union to the people of Scotland and my party couldn’t agree to such a proposition for the rest of the UK.

“The SNP continue to pretend that an independent Scotland could continue to share the pound. It couldn’t, without agreement. And because a currency wouldn’t work for anyone, it simply isn’t going to happen.”

He called on Alex Salmond to spell out what the Scottish Government’s plan B is, given the UK Treasury’s stance.

“This isn’t bluff, or bullying, it’s a statement of fact,” Mr Alexander added. “The SNP’s claims that an independent Scotland could or should be able to share the pound are pure fiction. When we vote in September, no one in Scotland should vote for independence in the belief that we could keep the pound.”

Meanwhile, a future Labour Government has announced that it too would block a currency union if it wins power at Westminster next year.

Shadow Chancellor Ed Balls warned that such a set-up would place an “unacceptable burden” on taxpayers south of the border.

Mr Balls said: “Alex Salmond is saying to people that you can have independence and keep the pound and the Bank of England, that is not going to happen.

“It would be bad for Scotland, it would place an unacceptable burden on the UK taxpayer, it repeat the mistakes of the euro area, in fact worse, you’d be trying to negotiate a monetary union as Scotland is pulling away from the UK.

“I won’t happen. I wouldn’t recommend it. Scotland will not keep the pound if Scotland chooses independence.”

Background

Bank of England governor Mark Carney warned in a speech in Edinburgh recently that a currency union would mean Scotland giving up some “sovereignty” over tax and spending decisions. These would have to be effectively approved by London and the UK could be called on to bail out Scotland in the event of another financial crash.

Alex Salmond has warned that Scotland could walk away from its estimated £146 billion share of UK national debt if Scotland doesn’t get to share the pound in a formal “sterling zone”, but Mr Osborne warned this would have dire consequences.

“In that scenario international lenders would look at Scotland and see a fledgling country whose only credit history was one gigantic default.

“They would demand a punitively high interest rate as a result. That would be crippling for every Scottish household with a mortgage or personal loan, for every Scottish business with credit, the public finances and therefore for the public services, for taxpayers and the whole economy.

“If an independent Scotland reneged on its debt it would become an outcast among the family of responsible economic nations. It is a reckless threat and Alex Salmond knows it.”

 

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