Scotland politics

Scottish independence: Balls defends ruling out currency union

Ed Balls
Image caption Ed Balls said that sharing the pound "won't happen" under Labour

Shadow chancellor Ed Balls has defended the decision to rule out a currency union if Scotland votes for independence.

He told MPs a currency union would fail the five economic tests used by Gordon Brown in government to rule out joining the euro.

He claimed First Minister Alex Salmond was talking "nonsense" to say the UK was bluffing on the issue.

Mr Salmond has accused the UK parties of "bluff, bluster and bullying".

The Conservatives, Lib Dems and Labour have all ruled out entering into a formal currency union with an independent Scotland in the event of a "Yes" vote in the referendum on 18 September.

Economic tests

Mr Balls reiterated to Westminister's Scottish Affairs Committee that a currency union "won't happen if there is a Labour government".

He argued that the example of the euro showed it would be difficult to make a single currency work without fiscal union, banking union and sharing of risk through the tax system.

He claimed that the case for sharing the pound would fail the five economic tests which Mr Brown applied to the UK's case for joining the euro when he was chancellor.

"I and my party had this debate over sterling's membership of the euro over 10 years ago," he said.

The five tests were:

  • whether the UK's economic cycle was in harmony with the eurozone
  • whether the UK would have sufficient flexibility to cope with recession
  • the effect on investment
  • the effect on financial services
  • the effect on growth and jobs.

"The five tests would say it would be the wrong decision and contrary to the national interest," Mr Balls insisted.

He added: "It's absolutely Scotland's choice. Everybody knows I want the union to stay, as does my party.

"But when Alex Salmond says you'll keep the pound it's just nonsense. It's a false prospectus."

Asked by the Labour MP and committee chairman, Ian Davidson, whether a currency union would be ruled out in Labour's next manifesto, Mr Balls said that if there was "ambiguity" and it was required to be in the manifesto, "then it will be in the manifesto."

Asked if he would resign if minds changed on the issue, he said: "I can't imagine being in at the start of that negotiation, never mind at the end."

The evidence session took place a month after Chancellor George Osborne told the same committee that ruling out a currency union was a "no ifs, no buts" position.

Responding to the comments by Mr Balls, a spokesman for Scottish Finance Secretary John Swinney said: "Scotland is one of the wealthiest countries in the world, more prosperous per head than France, Japan and the UK itself, but we need the powers of independence to make the most of our huge resources.

"An independent Scotland will keep the pound, as confirmed by the UK government minister caught telling the truth by admitting that 'of course' there will be a currency union.

"And Ed Balls's claims have been fatally undermined by his old boss Gordon Brown, who has pointedly refused to back his decision to join with the Tories and Lib Dems on this issue, and has attacked the Westminster parties' approach to Scotland on currency as 'bullying'."