ONE of the UK’s leading economists has said it would not be in Britain’s interest to share the pound with an independent Scotland, arguing George Osborne was “correct” to rule out Alex Salmond’s plan for a currency union.
Dr Angus Armstrong, of the National Institute of Economic and Social Research, told MSPs that the Chancellor’s position is “entirely rational” in refusing to agree to a monetary union in the event of a Yes vote on 18 September.
He said a currency union would be a heavily one-sided agreement, with the UK able to bail out an independent Scotland in the event of a debt crisis. Dr Armstrong suggested there would be very little benefit for the remainder of the UK in sharing sterling as an independent Scotland would be unable to deliver a debt rescue package for Britain.
The Chancellor said last month that an independent Scotland sharing the pound with the remainder of the UK would “not work” and “was not going to happen”.
Dr Armstrong, speaking at Holyrood’s economy committee yesterday, said that an independent Scotland should start its own currency that would be pegged to sterling.
But Crawford Beveridge, the chairman of Mr Salmond’s fiscal working group, told MSPs it would be “sheer spite” to prevent Scotland being part of a formal currency union after a Yes vote.
Mr Beveridge told the committee that he expects the group to reaffirm this position when it meets today.
He also told MSPs that Mr Osborne’s rejection of a monetary union was a political position, and economics would “trump politics” in the event of a Yes vote.
Nationalist MSP Chic Brodie said the Chancellor’s refusal to back a currency union was “sabre-rattling” and “nonsense” during the committee hearing.
However, Dr Armstrong said: “I don’t think it’s nonsense I’m afraid. I think it’s a reality” as he replied to Mr Brodie’s claims.
Dr Armstrong said: “Based on the aspiration, pointed out in the white paper, to build a Scotland which reflects the values and aspirations of Scottish people, then I think you want to have something that allows you the policy levers to be able to do that.
“There is, in my view, only one option which allows you that full range and that would be your own currency.”