Scottish independence: George Osborne will rule out currency union

George Osborne UK Chancellor George Osborne will set out his detailed position on a currency union this week

UK Chancellor George Osborne will rule out a formal currency union with an independent Scotland, government sources have told the BBC.

His position will also be backed by Labour shadow chancellor Ed Balls and Liberal Democrat Chief Secretary to the Treasury, Danny Alexander.

The Scottish government wants to keep the pound in a currency union if there is a referendum "Yes" vote.

SNP ministers said the Westminster parties were bullying Scotland.

Mr Osborne will set out his detailed position this week, with Mr Balls and Mr Alexander expected to follow in the days to come.

Deputy Scottish First Minister Nicola Sturgeon said the UK government's position did not bear scrutiny, adding that failure to do a deal on the currency in the event of a "Yes" vote in the 18 September referendum could leave Westminster with all UK debt.

Start Quote

We've gone, in under a week, from David Cameron's love bombing, back to bullying and intimidation”

End Quote Nicola Sturgeon Deputy first minister of Scotland

Meanwhile, Alistair Darling, leader of the Better Together campaign to keep the Union, accused the Scottish government of making a "reckless threat".

The Scottish government has set out a plan to retain the pound and the services of the Bank of England, in the event of a "Yes" vote, which it said would be in the best interests of Scotland and the rest of the UK.

Until now, Mr Osborne has said such an agreement would be "unlikely", but a formal ruling out of such a move would pile huge pressure on the Scottish government's currency plan, said BBC political correspondent Tim Reid.

Answering questions at a Downing Street news conference on Tuesday, Prime Minister David Cameron, said: ''I think it would be very difficult to justify a currency union post-independence."

Cash Currency is a major issue in the referendum debate

Ms Sturgeon told BBC Radio's Good Morning Scotland programme the UK government had given its clearest sign yet that it was losing the argument.

"We've gone, in under a week, from David Cameron's love bombing, back to bullying and intimidation," she said.


George Osborne has suggested that a currency union between an independent Scotland and the rest of the UK is highly unlikely.

But I understand he is going to go further this week, suggesting that a formal currency union with the rest of the UK will be ruled out.

That is a hugely significant point in the referendum campaign for both sides, because the currency of a new independent Scotland - should voters vote that way in the referendum - would be fundamental, arguably one of the biggest decisions a government could take.

If the UK government is ruling out that formal currency union, the possibility of the SNP carrying on the next seven months saying that it will have that currency union seems a pretty difficult case for it to make.

The Scottish government has described this as a bullying attempt by the Westminster establishment and First Minister Alex Salmond has already claimed that the former Bank of England governor, Mervyn King, suggested that what the UK government says now and what it says after a referendum may be two different things.

One other question that arises is that the Scottish government has suggested previously that if Scotland were not allowed to go into that formal currency union, it may not pay its share of the UK's debt.

That would make it a difficult proposition for the UK government as well.

"It is a bluff, because if this was to be the position of the Westminster government then it would put them in a position that's at odds with majority public opinion in Scotland, it would put them at odds with majority public opinion in England.

"It would cost their own businesses hundreds of millions of pounds, it would blow a massive hole in their balance of payments and it would leave them having to pick up the entirety of UK debt."

The Scottish government has said Scotland should meet a fair share of the cost of servicing UK Treasury debt, but that "assets and liabilities" went together.

Ms Sturgeon said that, no matter what Westminster said now, the reality would be very different if Scotland voted "Yes".

Responding to the comments, Mr Darling said: "The nationalist threat to default on debt if they don't get their way on currency is reckless.

"The impact of Alex Salmond's default would be to say to the world that we cannot be trusted to honour our debts. The result would be higher interest rates for Scots on mortgages and credit cards."

The former UK chancellor added: "One thing is certain - the only way to guarantee to keep the UK pound as our currency is to vote to keep Scotland a strong part of the UK."

Scottish economic commentator Bill Jamieson said Mr Osborne's intervention raised a series of questions, including whether it was within the chancellor's gift to make such a ruling.

He said: "This is a very fluid situation with a UK general election coming up next year and I would suspect that any decision on currency sharing would be a matter for the Westminster parliament, rather than a Conservative or coalition chancellor."

The referendum will see voters in Scotland asked the Yes/No question: "Should Scotland be an independent country?"


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  • rate this

    Comment number 63.

    I'm afraid I am of opinion that independence means just that- let them join the Euro!.
    Also we can go back to making Royal Navy ships in England and let Glasgow make ships for the scottish navy!

  • rate this

    Comment number 62.

    Dear God!! I am sick and tired of listening to Sturgeon and her cohorts rattle on about English bullies. Stop acting like a damn victim!! You want your cake and eat it?? Get stuffed. I love this Union but I totally understand the democratic right to self determination. You want to go it alone? Then GO IT ALONE!! Stop acting like a spoilt little brat wanting everything and offering nothing......

  • rate this

    Comment number 61.

    I thought we were in a union and if one part of the union decides it's finished then the assets are shared appropriately but then the Tories live in an 18th Century world. The rUK will need Scottish balance of payments in a currency union or risk a massive run on the GBP

  • rate this

    Comment number 60.

    This means an independent Scotland wouldn't have to take on any debt Sweet!

  • rate this

    Comment number 59.

    When Salmond started his ill-fated ego trip he expected an independent Scotland to join the Euro. Although, long term, that would still be the best bet, the Euro is now regarded as a vote loser so he has come up with a ridiculous plan which basically involves the Bank of England and the UK government doing what he tells them.

    Cancel the referendum and save us all a lot of money!

  • rate this

    Comment number 58.

    7. SJR82
    "An overnight doubling of the rUK's BoP deficit would be catastrophic for sterling "

    who is bullying who now?

    Where was the 5% of GDP when Salmond was joining the Euro a few years ago with the pound a "Millstone around Scotland's neck". We are supposed to trust you?

    I get everything about the indy argument but the currency union males not sense. It must be a bargaining position.

  • rate this

    Comment number 57.

    You cant be 100% independant if you partly depend on another countries currency .

    Basic economics.

  • rate this

    Comment number 56.

    Separate currencies for Scotland and England. Scotland joins the EU, England joins NAFTA. Lots of cross-border trade benefits the North East of England. Result!

  • rate this

    Comment number 55.

    Sad to say that certain aspects of the Scottish Government seem to be in denial about what Independence will actually entail. It's all very well saying 'They'll change their tune if we vote Yes', but that seems to me to be more based in wishful thinking that verifiable fact.

  • rate this

    Comment number 54.

    The SNP has never wanted true independence , it wants all of the freedoms without any of the responsibilities. I would like to see Nicola Sturgeon give one tiny shred of evidence for her assertion that the majority of England is in favour of a currency union.

  • rate this

    Comment number 53.

    Good stuff, and only right. Now, on to more important issues such as will we still have to suffer the Scottish football results on Final Score....

  • rate this

    Comment number 52.

    I really hope Osbourne goes further totally rules out a currency union. Independance should mean independance. Currency unions ONLY work where political, tax and fiscal union is present. Sterling is the currency of the UK. The UK will still exist without Scotland.
    You can't get divorced and still use the ex partners electricty. You can't leave the UK and still use its currency!

  • rate this

    Comment number 51.

    Her in Prague you can convert British pounds into crowns (and other currencies) at the banks and currency exchange places.

    They also have a rate for Scottish pounds - it is worth 25% less!

    That's why the SNP want to keep the British pound.

  • rate this

    Comment number 50.

    As a Scot I personally am fed up with the bullying tactics and threats made against the people of Scotland. We have been told we are disrepectful, stupid, mercenary, incompetent etc etc.

    It is the British pound not the English pound and I would ask the question no-one seems to have asked. If we vote yes there is no UK so where will that leave England Wales and NI. What will they be called?

  • rate this

    Comment number 49.

    The Scottish government should understand what independence actually means. If Scotland wants independence then they should be completely independent, including having their own currency. If they join the Eurozone then all they're doing is giving up one union for another. Hardly true independence then is it..........

  • rate this

    Comment number 48.

    If rUK wants a clean break then fine. But no share of UK assets for Scotland also means no share of UK debts.

    Alternative currency arrangements will not be an issue, just use sterling outside of formal agreement or use a Scottish pound pegged to sterling.

  • rate this

    Comment number 47.

    You cannot have monetory union without fiscal union, you cannot have fiscal union without political union. If you are an independent country, you need your own currently. The Euro crisis we had demonstrates this admirably.

    If Scotland votes 'Yes' they should have their own currency, and not be allowed to keep the pound.

  • rate this

    Comment number 46.

    'it would put them at odds with majority public opinion in England'

    That's the second time Ms Sturgeon has alluded to this in as many weeks. I've been following the debate fairly closely (from england) and wonder if there's something i'm missing? Have the CBI come out in favour of currency union? Or the bank of england? Where are the facts to back this up?

  • rate this

    Comment number 45.

    17. You missed out a few countries - Norway, Finland, Denmark......

    No individual chancellor has the power to say what the Parliament will or will not agree too, that is for the Parliament to decide after negotiations and a vote, or have I missed the part about democracy.

    No pound = no debt for Scotland, instant removal of trident,.......

    Scotland has to stand up to the playground bully!

  • rate this

    Comment number 44.

    Putting aside whether a currency union is appropriate, why wasn't this discussed before a referendum was agreed? It concerns me that this could be one of many assumptions made by the SNP and whilst Osbourne could be criticised as bullying, Salmond shouldn't have simply assumed his ideas would be accepted by the remainder of the UK. After all this affects all of us, not only Scotland


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