The Shadow Chancellor said that the Scottish Government’s proposal for an independent Scotland to share the pound was “a none starter” adding that there is an even strong case against it than against joining the euro.
He pointed out that while one of the five tests he devised for Gordon Brown in 2000 on joining the euro had been met, a currency zone with an independent Scotland would fail all five.
He added: “I don’t see the UK joining the euro in my lifetime.”
Speaking to the House of Commons Scottish Affairs Committee, Mr Balls said that the commitment could go into the Labour manifesto for next year’s general election if Scotland votes for separation - though he stressed his hopes that, by that point, the issue would have been neutralised by a No vote.
“I could never recommend it,” said Mr Balls. “It wouldn’t happen, shouldn’t happen and won’t happen if there is a Labour government.”
Asked if he would resign if a future Labour prime minister decided to offer currency union to Scotland, Mr Balls said: “I could not imagine being part of the start of that negotiation, let alone the end.”
He also warned that with the so called sterlingisation scenario - where Scotland continues to use the pound without a formal agreement - that it would lead to people taking their money out of the country.
He said that a Scottish Government would be “forced to create its own currency” and overnight people “would realise that the cash under their beds and in their bank accounts had halved in value”.
He warned that once this happened people would “get in the cars” and take their money south of the Border.
A spokesman for SNP Finance Secretary John Swinney dismissed the evidence.
He said: “An independent Scotland will keep the pound, as confirmed by the UK Govt minister caught telling the truth by admitting that ‘of course’ there will be a currency union.
“And Ed Balls’s claims have been fatally undermined by his old boss Gordon Brown, who has pointedly refused to back his decision to join with the Tories and Lib Dems on this issue, and has attacked the Westminster parties’ approach to Scotland on currency as ‘bullying’.”