Monetary union rejection ‘final’, says Alexander

Danny Alexander has said that the decision is 'final'. Picture: Andrew Cowan
Danny Alexander has said that the decision is 'final'. Picture: Andrew Cowan
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Scottish independence: The cross-party decision to rule out a monetary union if Scotland becomes independent is final, Chief Secretary to the Treasury Danny Alexander has insisted.

Mr Alexander will use a speech in Edinburgh to the National Association of Pension Funds (NAPF) to dismiss suggestions that the rejection of the Scottish Government’s favoured currency solution is a politically-motivated and tactical move.

A formal monetary union between an independent Scotland and the rest of the UK was ruled out by Chancellor George Osborne, Mr Alexander and Labour Shadow Chancellor Ed Balls several weeks ago.

Scottish Ministers said the move was a “campaign tactic”.

On Wednesday MSPs on Holyrood’s Economy Committee were told by the leader of the fiscal commission working group, Crawford Beveridge, that Mr Osborne was not being serious.

The working group recommended a formal monetary union as the best option for an independent Scotland when it reported its findings to the Scottish Government last year.

It met again on Thursday to re-affirm its backing for this option, and set out plans to provide further analysis to demonstrate that while other options are viable for Scotland, “there are clear advantages for the rest of the UK from the proposed Sterling area”.

Mr Alexander’s speech comes as Scotland’s First Minister Alex Salmond chairs the latest meeting of his Council of Economic Advisers.

Mr Alexander is expected to tell his audience: “I’ve seen some people suggest we are not serious about refusing a currency union.

“Let’s call this the John McEnroe defence. Except in this instance it’s not just one person they’re shouting at, but three.

“And our decision - taken in the best interests of Scotland and the rest of the UK - is final.

“No ifs, no buts. No matter how much of a racket they make, it isn’t going to change.”

Mr Alexander will reiterate calls for the Scottish Government to “deal with the consequences” of the rejection of a monetary union, and publish a so-called Plan B.

He will go on to argue that independence would see the break-up of the current domestic market for pensions, and other financial products, driving up costs.

Mr Alexander will also say members of defined benefit schemes in Scotland would no longer be protected through the Pension Protection Fund.

“Of course, the Scottish Government could set up its own Protection Fund,” he will say.

“In fact, if Scotland were part of the EU, they would have to set up such a Fund.

“But unlike now, where the risks are spread across the UK, and across a large number of defined benefit schemes, the number of providers in an independent Scottish state would be much lower, which would mean the costs of a scheme becoming insolvent being spread across a much smaller base.

“As the NAPF themselves have said, this would be likely to create much higher costs.”

He will add: “For hundreds of thousands of Scots, their pension pots are literally their life savings built up over decades of hard work.

“Their financial security in retirement depends on having a stable, strong and dependable pension system.

“And in the absence of detailed and rigorous economic plans from the Scottish Government, a vote for Independence opens the flood gates to a sea of uncertainty on currency, rates and regulation all of which puts the value of those life savings at risk.”

Deputy First Minister Nicola Sturgeon said: “Danny Alexander should use his visit to Edinburgh to apologise to people the length and breadth of Scotland for the policies his Tory-led Government is imposing on them.

“Just this week, we have seen an independent report warn of a ‘humanitarian crisis’ in Scotland, with almost a million people in poverty as a direct result of those Tory-Lib Dem policies.

“Danny Alexander and his Lib Dem colleagues reneged on their promises to get into bed with the Tories - and no one in Scotland should believe a word they say now.

“And on the issue of pensions, it is Westminster that is threatening an ever-rising retirement age for the state pension, which we have pledged to review post-independence.

“An independent Scotland will be more able to afford pensions than the rest of the UK, and all pensions will be paid in full after independence.”