Does the Scottish government have a currency Plan B?

First Minister Alex Salmond First Minister Alex Salmond wants to keep the pound and retain the services of the Bank of England as part of a currency union if there is a "Yes" vote in the independence referendum, on 18 September

It feels like a big moment in the fight for Scotland's future.

The decision by the UK's three biggest political parties to reject the idea of a currency union before the people of Scotland have even voted in September's referendum leaves campaigners for independence with a problem.

No matter how loudly they insist that "a Tory chancellor and his Labour and Lib Dem helpers" (get used to the phrase) are bluffing and bullying, the nationalists will still come under pressure to answer the question: "What if they are not?"

What is the Scottish government's preferred alternative if a chancellor Osborne or Balls really does reject a formal currency union with a newly independent Scotland?

Alex Salmond and his ministers know there are other options, not least because they used to champion one of them.

Not so long ago the Scottish National Party was a fan of the European single currency.

As recently as 2009, at the SNP's annual conference in Inverness, the party's former treasurer, Ian Blackford, argued that being "tied to sterling" after independence would mean Scotland having to, "pay the price in higher interest rates while being exposed to a currency that has a history of suffering from wild fluctuations".

'Millstone'

The view was common among delegates although official party policy was to put the decision to the people in a referendum.

During the same debate, the MEP Alyn Smith said Scotland was "currently part of a debt-laden sub-prime toxic asset currency we don't want to be part of and which is not serving our interests well".

And long before that, in a speech in Brussels on 9 November 1999, Mr Salmond himself had insisted that an "economic policy made in the south east of England, by the south east of England and for the south east of England" was damaging Scottish business.

The pound, he said with characteristic pithiness, was "a millstone round Scotland's neck".

The Eurozone crisis may have silenced those calls for Scottish membership of the single currency but there are still plenty of voices in the "Yes" campaign who agree with Mr Salmond's 1999 diagnosis if not with his cure.

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For the likes of the SNP's former deputy leader, Jim Sillars, the solution is obvious - a return to a more radical vision of independence in the form of a Scottish currency.

There is now "an urgent need for a Plan B", Mr Sillars told the BBC last night.

This position is supported by the pro-independence Scottish Green Party and by other "fundamentalists" in the SNP who have long disagreed with the "gradualist" tactics of Mr Salmond.

They argue the vision for Scotland being advanced by the first minister was beginning to look more like a federal UK than real independence.

Their claim appeared to be assisted by the governor of the Bank of England's speech in Edinburgh on 29 January, when Mark Carney cited the (separate) examples of the US and Canada as successful monetary unions before observing that, "effective currency unions tend to have centralised fiscal authorities whose spending is a sizeable share of GDP - averaging over a quarter of GDP for advanced countries outside the Euro area".

'Sterlingisation' option

A third option for an independent Scotland would be simply to continue using the pound without entering into a formal currency union.

However, economists have warned that this "sterlingisation" option would leave Edinburgh with no influence on interest rates and could present problems with borrowing and lender-of-last-resort facilities.

For now then, the Scottish government says it is sticking to Plan A, arguing that the additional burden to business on both sides of the border of using separate currencies makes the UK parties' position unbelievable.

Ministers in Edinburgh point to Mr Carney's summary of the rationale for sharing a currency.

Doing so, he suggested, "eliminates the transactions costs associated with using, and switching between, different currencies" and "can promote investment . . . increase the mobility of labour and capital, raise trade in goods and services, and improve the flow of technology and ideas."

Yes Scotland strategists suggest the Better Together campaign has been panicked into a "ridiculous" position by a clutch of opinion polls showing "Yes" gaining ground on "No".

The public, they argue, will see through this ploy.

Better Together insiders insist this is nonsense.

They say they have been testing the ground for today's announcement in polling and focus groups since last summer and concluded some time ago that it was the right move.

Both campaigns will now be watching public reaction more closely than ever to see whether this really is a big moment on the road to the referendum.

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