Scottish independence: 'Yes' vote means leaving pound, says Osborne


Chancellor George Osborne said the pound was not an asset to be divided up, during a speech in Edinburgh

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.

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What's really striking is the publication of the normally private advice of the top Treasury mandarin Sir Nicholas Macpherson”

End Quote

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.

The instinct of the Scottish National Party may well be to dismiss the head of the Treasury's unambiguous advice to the Chancellor that he should not enter into currency union with an independent Scotland as the public-school and Oxford establishment closing ranks to save the union.

But the letter from Sir Nick Macpherson (Eton and Balliol) to George Osborne (St Paul's and Magdalen) is a significant constitutional event.

It is unusual for the permanent secretary to the Treasury to write a public letter on any issue at all, let alone one as momentous as whether institutional arrangements should be put in place so that an autonomous Scotland could have an influence on monetary and financial-regulation policy while continuing to use the pound.

The relevant issue for Mr Salmond is only to a limited extent whether Macpherson and the Treasury are right or wrong that monetary union with an autonomous Scotland would be contrary to the interests of a still-united England, Wales and Northern Ireland.

"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."
George Osborne George Osborne's speech came as he published the latest Treasury analysis on the nature of a currency union in an independent Scotland

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.


This feels like a defining moment in the independence referendum campaign.

There will be others but this is arguably the most important so far with the possible exception of the publication of the Scottish government's White Paper.

It set out the case for Scotland to keep using the pound Sterling in a formal currency union with the rest of the UK in the event of independence.

Scottish First Minister, Alex Salmond has repeatedly said this would be in the economic interests of both countries.

Today, his pro-union opponents in all three major UK parties are effectively saying that it would not be and that they will not let it happen.

They hope to seriously undermine the credibility of the nationalists' promise of currency continuity.

The Scottish government hopes referendum voters will see it as an attempt to bluff and bully and that it will backfire.

They are determined not to abandon their preferred currency option for an alternative - using the pound anyway, creating a new Scottish currency or applying to join the Euro - that may seem much riskier.

They have also said that if the rest of the UK is not prepared to share the currency that an independent Scotland would not be obliged to take a share of UK debts.

The stakes in this campaign just got a lot higher.

"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."

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The dominant parties at Westminster sought to avoid any pre-negotiation - but now they've broken their own rule. We now have one, very important piece of pre-negotiation, by declaring no negotiation at all.”

End Quote

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?"


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  • rate this

    Comment number 5151.

    At last! In the past few years of the independence debate we have had no answers to our questions no straight talking from politicians. We now know one think about this referendum and that is we will not have the pound in a currency union. I live near the border, will I have to change my money every time I want to go to Carlisle for a meal or a drink?

  • rate this

    Comment number 5150.

    5140. Dont believe the Hype

    True but the real news here is that so do SNP politicians. They're still politicians and by definition they are liars and cheats as well. Just like all politicians, you'll believe whatever you want to believe.

  • rate this

    Comment number 5149.

    Cant help thinking this is a bit like a 16 year old announcing to their parents that they want to leave home and move into a flat without any real idea of how they will pay their way in the world. Then asking the parent to act as guarantor for the rent and bills.

  • rate this

    Comment number 5148.

    Given that Scotland has contributed more in REAL terms than it has received in recent times AND that it growing faster than the rest of the UK (stated above) surely getting out now is the perfect time?
    For those who say Scotland COULD not use the GBP then I give you this. How can so many countries use USD without formal currency unions with US?
    Scotland could use it's own pound if it has to.

  • rate this

    Comment number 5147.

    Arguing now about a minor matter like currency is a distraction. The key issue is independence to manage affairs as Scots see fit.
    If Scotland votes for independence, then the relationship with the pound will alter, but that is to be negotiated after the event. Lots of smaller countries manage independent and shared currencies OK. Independence is much bigger than currency.


Comments 5 of 5151


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