Scottish independence: FM stands firm on currency

First Minister Alex Salmond. Picture: Getty

Amid growing unrest among his own supporters and a slump in the polls, the First Minister is refusing to back down on his policy, which will be given a final seal of approval by his hand-picked group of economic advisers next week.

Last night there was no sign of the issue going away when leaders of the three opposition parties at Holyrood wrote to Salmond demanding that he sets out a Plan B, arguing that his proposal for a formal currency union with the rest of the UK is “impossible”.

Labour, the Conservatives and the Liberal Democrats have said an independent Scotland will not be entitled to insist on a formal currency union – sharing the pound and the Bank of England with the rest of the UK.

Salmond’s failure to deal with Alistair Darling’s criticisms of his currency plans during last week’s STV televised debate has led to discontent within the Yes movement and support for independence falling in the polls.

His display has also encouraged the No campaign to concentrate even more of its efforts on attacking his currency plans, sensing a fatal flaw.

Better Together yesterday launched the first poster of the campaign to feature a personal attack, with a picture of Alex Salmond’s head on a pound coin with the slogan: “Is this your Plan B, Alex?”

Next week the First Minister’s commitment to a formal currency union will be underlined in a keynote speech by Crawford Beveridge, the Scottish-American executive who sits on the Scottish Government’s Fiscal Commission Working Group, which was set up to look at the currency.

His speech will emphasise the group’s belief in sharing the pound and will attempt to strengthen the arguments for it by addressing how such an arrangement will meet the Bank of England’s five tests for a currency union.

The group, which contains the Nobel Prize winning economists Professor Joseph Stiglitz and Professor Sir James Mirrlees, has been examining how Salmond’s plans can meet the tests to promote investment, financial services, growth, stability and employment.

Speaking ahead of his speech at Glasgow Caledonian University, Beveridge said: “As we approach the referendum this is an opportunity to bring that considerable body of work together, including our clear recommendation that a currency union is the best route for both Scotland and the rest of the United Kingdom, our consideration of the range of currency options for Scotland and our work on the economic tools that would be available to Scotland as an independent country.”

Scotland on Sunday understands the speech – a week tomorrow – will not see any deviation from the position that a formal currency union should remain Plan A. It is not expected to spell out a specific Plan B.

Since March, the working group has been conducting work on how to respond to George Osborne’s visit to Scotland at the beginning of the year when he ruled out Scotland sharing sterling.

Alternatives to Plan A, a formal currency union with the UK, may include ‘Sterlingisation’, which is the informal use of the pound outwith a currency union; the creation of a new Scottish currency; or joining the euro.

In an open letter published yesterday, Salmond said he would not consider a Plan B because he would not settle for second best for Scotland.

He also repeated his threat to default on Scotland’s share of the UK debt if the country did not get a share of the Bank of England after independence.

His uncompromising stance comes amid more signs of unhappiness amongst those fighting for independence.

After the welter of unflattering headlines that greeted Salmond’s performance in the televised debate and some damaging briefings to the Press against the First Minister, SNP MSPs received an e-mail instructing them not to deal directly with journalists.

“It has not been a good week and, of course, there’s a feeling that Alex wasn’t at his best last week. The thing is there are perfectly good arguments for the pound, but Alex didn’t get them over,” one SNP insider admitted.

“Speaking to activists, they are disappointed and there are rumblings of discontent.

“People were quite shocked at how badly he reacted when he was booed by the studio audience.”

Jim Sillars, the former SNP deputy leader who has long argued that an independent Scotland should have its own currency, yesterday said: “The political flaw is that by doing this [a formal currency union] you have handed over the political initiative to your opponents, because it takes two to make a currency union – just like it takes two to tango. If one says no, you can’t tango, and you can’t have a currency union”

Scottish Secretary Alistair Carmichael said: “It has had an impact on their campaign. They are losing their message discipline for the first time. People are being move vocal. They are talking about other options.

“For the first time, they look like people who have not got all the answers. They have lost some of their self-assurance and that matters when you are knocking on doors.

“If you can’t answer that central question, then there are enormous doubts about your case.”