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 1463.

    The vote is just a glorified opinion poll.

    Even if the Scots vote yes you can't really expect the Tories to actually honour that. If they did then they'd loose all the money their party is given by oil and gas companies as it would no longer be necessary to "donate" money to the UK Conservative party as they would no longer have any say on how much money oil companies can make off Scottish oil

  • rate this

    Comment number 1462.

    Should the people of Scotland vote for independance then they will have to accept both the good and bad that will bring. The vote will require Scots to weigh up both sides and make a judgement accordingly. The issue of the currency is not a decision for Scotland alone and, as a independant country, they cannot expect the UK to effectively bankroll thier ecconomy by underwritting it

  • rate this

    Comment number 1461.

    If. regretfully, Scottish people vote for separation, the remainder of the UK will have to act in our own best interests. Expert evidence given, the other day, to parliamentary committee was of one voice: currency union *unavoidably* means giving-up some sovereignty and control.

    It seems pretty clear from the continuing EU debate that the UK has no appetite to give up sovereignty and control.

  • rate this

    Comment number 1460.

    This will only harden opinion for a yes vote - I know I am furious at the UK stance on the pound. The reality is that when Scotland is a Nation again, the UK will fall over backwards to ensure the pound is our currency. The tactic is clear - spread the fear - and there will be a string of other threats between now and the referendum.

  • rate this

    Comment number 1459.

    Is the SNP's desperation to use the Pound an admition that an independent Scotland would be a financial minnow, at the mercy of stronger currencies and traders?

  • rate this

    Comment number 1458.

    I feel sorry for Scots who have such a vested interest in this vote and yet so little by way of honest information.

  • rate this

    Comment number 1457.

    Oh please please can the English have a vote too so that we can be certain of getting rid of the Scots' drain on UK taxpayers' resources and ensure the end of the Barnett Formula unfairness at long last.

  • rate this

    Comment number 1456.

    For all the top rated comments saying independence should mean just that and Scots should go it alone, the logical conclusion is that Scotland also has no national debt either and rUK is not only stuck with all the national debt and fewer resources to pay it off with but also a damaged credit rating too once Scotland's contribution to UK finances is removed. Happy then?

  • rate this

    Comment number 1455.

    OK we have dozens of experts here today. Can any one of you honestly claim to understand the difference between Currency Union and a publicy owned bank? Thought not.

    Go Scots go! The Popular Front of Tooting want Independence from the Bank of England scam too. Stuff the banks and stuff the politicians.

  • rate this

    Comment number 1454.

    The four best reasons for Scottish Independence
    Osborne, Balls, Cameron and Mildew.
    Scotland cannot possibly do any worst than have these twits running the show.

  • rate this

    Comment number 1453.

    If they become independent and we stick to our guns on the pound being British......

    When all the boys from Afghanistan come home with their new kit.....we should just invade Scotland and claim it as our own!

    We outnumber them.....and William Wallace is long dead! =)

  • rate this

    Comment number 1452.

    As a Scot living in England, with no vote in any decision regarding the country of my birth, I would be very interested in seeing the polling information at Ms Sturgeon relies on for the claim that the people in England want the Scots to retain the pound if they move to independence.
    Most English people I know would be glad to see Scotland go it alone...with nothing at all!

  • Comment number 1451.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • rate this

    Comment number 1450.

    Wish I could win the lottery without buying the winning ticket....

  • rate this

    Comment number 1449.

    Drunken Hobo

    "As has already been stated, it'll cost rUK businesses a lot to change currency."

    No, it will cost Scottish businesses a lot of money to change currency, not us, we wont be changing

  • rate this

    Comment number 1448.

    For an independent Scotland to keep the pound, they would have to agree to follow tight fiscal rules set by the bank of England on all countries in the currency union, otherwise we would end up with the problems of the Euro-zone. The end result would be that Scotland would not be fiscally independent.

  • rate this

    Comment number 1447.

    Add your comment...If Scotland don't get a link to the UK £ which it is a partner in then why should Scotland bear any of the burden of that currency?
    Give us the Scottish Quid and let Westminster service the UK debt without 90% of the current gas and oil revenue. They will go from being a strong European country to being an EU subsidised nation.

  • rate this

    Comment number 1446.

    With the Nats barely concealing their hatred for the English there is a wider question here regarding independence.
    Whichever way it goes there will always be a bitter tribal resentment that festers. Scotland is divided in religion east/west and economically north/south. They can't even use the 'England' word instead referring to south of the border.
    A referendum will not solve these inbred issues

  • rate this

    Comment number 1445.

    Scotland threatening to default on its share of the national debt? Kiss goodbye to your closest and largest trading partner. Your new independent people denied freedom of movement within the nation you defrauded. Or would the new Scottish nation expect a warm welcome?

  • rate this

    Comment number 1444.

    I'm all in favour of independent Scots continuing to use the pound if they wish. Just so long as it is clear that the currency is the English (N. Irish, Welsh) pound, minted in England, controlled by the Bank of England and with rates adjusted irrespective of the impact on Scotland.

    Just the same as if they decided to start using the US dollar.

    Nothing to do with hostility though.


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