UK overstating currency union risks - economists

Chancellor George Osborne: Opposes currency union. Picture: Getty
Chancellor George Osborne: Opposes currency union. Picture: Getty
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SCOTTISH INDEPENDENCE: Economic advisers behind the Scottish Government’s plan to join a formal currency union with the UK after independence are standing by their recommendation despite it being ruled out by the Chancellor.

Sharing sterling after a Yes vote in September remains in the best interests for both sides of the border, the fiscal commission working group insists.

The group met three weeks after George Osborne, backed by Labour and Liberal Democrats, rejected the key proposal for independence.

In a statement, the group said: “While we have also noted the statements from the Chancellor and other political parties our remit remains concentrated on economic merits.

“In this regard we believe that the analysis to date by the UK Government overstates the risks of a formal monetary union, for example, their analysis of Scottish financial sector risk is overplayed. At the same time, it fails to fully capture the benefits.”

The group reflected on comments made by Mark Carney, governer of the Bank of England, who set out the pros and cons of monetary union earlier this year.

The conclusion is also based on the UK Government’s decision to honour debt up to the date of possible Scottish independence, earmarked by the SNP administration for March 2016.

The group says it will provide more analysis to demonstrate the “clear advantages” for the rest of the UK.

Commission leader Crawford Beveridge insisted yesterday that Mr Osborne is not being serious by saying he rules out a union.

“In our opinion economics will trump the politics on this, and good heads will prevail if there happens to be a Yes vote,” Mr Beveridge told Holyrood’s Economy Committee.

Before today’s meeting, Scottish Secretary Alistair Carmichael urged the commission to think again.

In a letter, he wrote: “This decision is no bluff, as has been claimed by the First Minister.

“This was the three principal economic spokesmen of each of the main UK political parties setting out a clear position: a currency union is not going to happen.

“Your commission’s work needs to be based on this reality, not repeated recommendations for an option that is not going to happen.”