Scottish independence: 'Yes' vote means leaving pound, says Osborne
- 13 February 2014
- From the section Scotland politics
UK Chancellor George Osborne has said a vote for Scottish independence would mean walking away from the pound.
His statement came after the senior civil servant at the Treasury, Sir Nicholas Macpherson, said currency unions were "fraught with difficulty".
Mr Osborne was backed by Labour and the Liberal Democrats.
Scottish First Minister Alex Salmond said the Westminster parties were trying to "bully" voters ahead of the 18 September independence referendum.
The Scottish government has argued that keeping the pound and the services of the Bank of England as part of a currency union under independence made sense for both Scotland and the rest of the UK.
But Mr Osborne said there was "no legal reason" why the rest of the UK would want to share sterling with an independent Scotland.
The chancellor, Labour shadow chancellor Ed Balls and Lib Dem Chief Secretary to the Treasury Danny Alexander said they could not recommend such a plan.
Speaking in Edinburgh, Mr Osborne said: "The pound isn't an asset to be divided up between two countries after a break-up like a CD collection.
"If Scotland walks away from the UK, it walks away from the UK pound."
He went on: "There's no legal reason why the rest of the UK would need to share its currency with Scotland.
"So when the Nationalists say the pound is as much ours as the rest of the UK's, are they really saying that an independent Scotland could insist that taxpayers in a nation it had just voted to leave had to continue to back the currency of this new, foreign country?"
Mr Osborne added: "The UK is growing faster than any other advanced economy in Europe, and within the Union, Scotland is growing faster than the rest."
"Nothing could be more damaging to economic security here in Scotland than dividing our United Kingdom."
The chancellor's speech came as he published the Treasury's latest currency analysis paper, which said:
- The UK's successful union with its shared monetary policy and risk would be lost in an independent Scotland.
- Countries with more direct control over monetary policy can better cope with severe economic problems.
- An independent Scotland would be more exposed to risks from the "volatile" energy and finance industries.
- The eurozone crisis had shown that agreed fiscal rules are not enough to ensure a stable currency union.
- There is no rule or principle in international law requiring the continuing UK to formally share its currency with an independent Scotland.
And in a highly unusual move, the chancellor also published civil service advice from Sir Nicholas, the Treasury's permanent secretary, who stated:
- "Currency unions between sovereign states are fraught with difficulty. They require extraordinary commitment, and a genuine desire to see closer union between the peoples involved."
- "What worries me about the Scottish government's putative currency union is that it would take place against the background of a weakening union between the two countries, running counter to the direction of travel in the eurozone."
- "The Scottish Government is still leaving the option open of moving to a different currency option in the longer term. Successful currency unions are based on the near universal belief that they are irreversible. Imagine what would have happened to Greece two years ago if they had said they were contemplating reverting to the Drachma."
- "Scotland's banking sector is far too big in relation to its national income, which means that there is a very real risk that the continuing UK would end up bearing most of the liquidity and solvency risk which it creates."
- "If you follow Treasury advice and this week rule out a currency union in the event of Scottish independence, you can expect the Scottish Government to threaten not to take on its share of the United Kingdom's debt. I do not believe this is a credible threat."
Mr Salmond responded: "This is a concerted bid by a Tory-led Westminster establishment to bully and intimidate - but their efforts to claim ownership of sterling will backfire spectacularly in terms of reaction from the people of Scotland, who know that the pound is as much theirs as it is George Osborne's.
"Mr Osborne's claims are based on a caricature of a currency union rather than the reality, and his claims, for example on the size of Scotland's banking sector, do not reflect that reality."
The Scottish first minister added: "The reality is that a formal currency union with a shared sterling area is overwhelmingly in the rest of the UK's economic interests following a 'Yes' vote, and the stance of any UK government will be very different the day after a 'Yes' vote to the campaign rhetoric we are hearing now.
"To do otherwise would involve a prospective Westminster chancellor of any party standing on a platform which was not only vastly at odds with majority public opinion across Scotland and the rest of the UK but would seriously damage the economy of the rest of the UK as it would cost their own businesses hundreds of millions of pounds a year, blow a massive hole in their balance of payments and it would leave them having to pick up the entirety of UK debt."
But Mr Alexander said the Treasury had provided "crystal clear" analysis that a currency union would create unacceptable risks both for Scotland and the rest of the United Kingdom.
He also called on the Scottish government to set out an alternative currency proposal.
Mr Alexander added: "As a Scot and as Liberal Democrat Chief Secretary to the UK Treasury, on the basis of this analysis, I couldn't recommend a currency union to the people of Scotland and my party couldn't agree to such a proposition for the rest of the UK.
"The SNP continue to pretend that an independent Scotland could continue to share the pound. It couldn't, without agreement."
The Scottish Lib Dem MP said: "This isn't bluff, or bullying, it's a statement of fact."
Mr Balls, added: "Alex Salmond is saying to people that you can have independence and keep the pound and the Bank of England - that is not going to happen.
"It would be bad for Scotland, it would place an unacceptable burden on the UK taxpayer, it would repeat the mistakes of the euro area, in fact, worse.
"It won't happen, I wouldn't recommend it. Scotland will not keep the pound if Scotland chooses independence."
It is understood former Chancellor Alistair Darling, who is leading the Better Together campaign to keep the Union, was instrumental in getting the three Westminster parties to agree a joint currency position.
The referendum will see Scots asked the Yes/No question: "Should Scotland be an independent country?"