UK Politics

Scottish independence: Treasury 'strongly' against currency union

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

The Treasury's top official has "strongly" advised against a currency union with an independent Scotland.

Sir Nicholas Macpherson said such an arrangement was "fraught with difficulty".

His recommendations to the chancellor were published as the three main Westminster parties ruled out a currency union.

But the Scottish government said Sir Nicholas's advice was "incomplete" and "backward-looking".

BBC political editor Nick Robinson said it was "really striking" that a normally private briefing by a senior civil servant was being made public.

The dispute over a possible currency union comes ahead of September's referendum on Scottish independence, where Scots will be asked the yes/no question "Should Scotland be an independent country?".


The Conservatives, Labour and the Liberal Democrats put on a united front over the issue as Chancellor George Osborne delivered a speech in Edinburgh.

In his advice, Sir Nicholas, the Treasury's permanent secretary, told Mr Osborne: "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."

The current sterling union between England, Scotland, Wales and Northern Ireland had "all the necessary ingredients: political union, economic integration and consent".

Sir Nicholas added: "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.

"I would advise strongly against a currency union as currently advocated, if Scotland were to vote for independence."

And a Treasury analysis paper says:

  • 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 shows that agreed fiscal rules are not enough to ensure a stable currency union.

In his speech, Mr Osborne said there was "no legal reason" why the rest of the UK would want to share sterling with an independent Scotland, as Scottish ministers have proposed.

He 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."

Image copyright PA
Image caption Deputy First Minister Nicola Sturgeon accused UK politicians of "intimidating" Scotland

Mr Osborne added: "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?"

For Labour, shadow chancellor Ed Balls said currency union after independence "would place an unacceptable burden on the UK taxpayer" and "repeat the mistakes of the euro area".

And Liberal Democrat Chief Secretary to the Treasury Danny Alexander added that he "couldn't recommend a currency union" on this basis.

But the Scottish Finance Secretary, John Swinney, said: "That advice is incomplete and with regard to the size of the Scottish financial sector and operation of monetary unions is backward-looking and takes no account of the comprehensive evidence provided by the independent economic experts of the fiscal commission, including two Nobel laureates, Professor James Mirrlees and Professor Joseph Stiglitz."

He added: "All sovereign states have the ability to determine currency arrangements that are appropriate for their circumstances. That is not a barrier to successful currency unions."

Scotland's Deputy First Minister Nicola Sturgeon dismissed the chancellor's remarks as "campaign rhetoric", telling the BBC News Channel: "George Osborne wants people in Scotland to vote No. So do Ed Balls and Danny Alexander.

"They're entitled to that view, but what they are saying needs to be seen in the context of a campaign that wants to frighten and intimidate people in Scotland."