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Blow dealt to currency union plan

Plans for a currency union between an independent Scotland and the rest of the UK have been dealt a major blow as all three of the main UK parties insisted they would not agree to such a deal.

In what could be a key moment in the debate over Scotland's future, Chancellor George Osborne, his Labour shadow Ed Balls and Liberal Democrat Chief Secretary to the Treasury Danny Alexander all declared a formal currency union was "not going to happen".

Scottish First Minister Alex Salmond branded it a "concerted bid by a Tory-led Westminster establishment to bully and intimidate".

Mr Salmond's Scottish Government wants to create a ''sterling zone'' with the rest of the UK if there is a Yes vote in the independence referendum.

But Chancellor George Osborne came to Edinburgh and declared: " If Scotland walks away from the UK, it walks away from the UK pound.''

Mr Osborne added: ''The SNP says that if Scotland becomes independent, there will be a currency union and Scotland will share the pound.

''People need to know that is not going to happen.

''Because sharing the pound is not in the interests of either the people of Scotland or the rest of the UK.''

The Conservative said official advice from civil servants was that ''they would not recommend a currency union to the government of the continuing UK''.

Mr Osborne continued: ''Listening to that advice, looking at the analysis myself, it is clear to me I could not, as Chancellor, recommend that we could share the pound with an independent Scotland.

''The evidence shows that it wouldn't work, it would cost jobs and cost money. It wouldn't provide economic security for Scotland or for the rest of the United Kingdom.''

He added: ''I don't think any other Chancellor of the Exchequer would come to a different view.''

Both Mr Balls and Mr Alexander also made clear they would not sign up to a formal currency union if Scots vote in favour of leaving the UK on September 18.

Mr Balls said: " 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, you'd be trying to negotiate a monetary union as Scotland is pulling away from the UK."

He insisted: "It won't happen. I wouldn't recommend it. Scotland will not keep the pound if Scotland chooses independence."

Meanwhile Mr Alexander said it was "crystal clear a currency union would create unacceptable risks both for Scotland and the rest of the United Kingdom".

He stated: "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. And because a currency union wouldn't work for anyone, it simply isn't going to happen.

''The SNP now need to work out what their alternative currency proposal is and set it out openly.''

The Liberal Democrat rejected claims the ''Westminster establishment'' was attempting to bully Scotland ahead of the referendum, saying: " 'This isn't bluff, or bullying, it's a statement of fact.

" The SNP's claims that an independent Scotland could or should be able to share the pound are pure fiction. When we vote in September, no-one in Scotland should vote for independence in the belief that we could keep the pound.''

Mr Salmond hit back, saying: "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."

The Scottish Government has previously set out its blueprint for retaining the pound if people vote for independence, creating a ''sterling zone'' with the rest of the UK.

This plan has been endorsed by experts on the Fiscal Commission Working Group, set up by Mr Salmond, which concluded that keeping sterling as the currency in an independent Scotland would be ''sensible'' and an attractive choice for the rest of the UK.

The First Minister insiste d: "P eople in Scotland will not be fooled by the bluff, bluster and posturing of Osborne, Ed Balls and Danny Alexander.

"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."

On the issue of an independent Scotland's share of UK debt, Mr Salmond said: " All the debt accrued up to the point of independence belongs legally to the Treasury, as they confirmed last month - and Scotland can't default on debt that's not legally ours.

"However, we've always taken the fair and reasonable position that Scotland should meet a fair share of the costs of that debt. But assets and liabilities go hand in hand, and - contrary to the assertions today, sterling and the Bank of England are clearly shared UK assets."

Earlier in Edinburgh Mr Osborne insisted the pound was "not an asset to be divided up between the two countries after a break-up".

But Mr Salmond said: "This is not the first time George Osborne has made spurious claims regarding the independence debate.

"Two years ago he claimed the prospect of the referendum would damage investment in Scotland, claims which have been utterly blown apart by our great success in attracting inward investment, and today the Chancellor was forced to acknowledge the success of the Scottish economy."

He claimed the intervention from the Conservative, Labour and Liberal Democrats was " the clearest signal yet that the Tory-led No campaign realise they are losing the arguments on the ground as they see the polls narrowing, and support for a Yes vote growing".

The First Minister added that this was "a trend that today's cack-handed intervention will only accelerate".

After the three main Westminster parties rejected a currency union with an independent Scotland, Alistair Darling, the leader of the pro-UK Better Together campaign said: " It is now clear beyond any doubt - the only way to keep the pound is for Scotland to remain in the UK.

"People need to know that when they go into a polling station in September they will be voting either to keep the pound or ditch the pound. A vote to leave the UK is a vote to lose the pound."

He argued the intervention left Mr Salmond with " no plan for currency in an independent Scotland".

The former Labour chancellor said: "The SNP Government have ruled out using the pound without agreement in the way Panama uses the dollar. So what money will Scotland use?"

"What we need now from the SNP isn't so much a Plan B but a Plan A. Now that using the pound is off the table, would we be rushing to join the euro or set up an unproven separate currency?"

Andrew Tyrie, chairman of the Commons Treasury Committee, said the Conservatives, Labour and Liberal Democrats were right to rule out a formal currency union.

" I've felt for some time that both the UK and Scottish governments should recognise reality and rule out a formal currency union," he said.

Mr Tyrie said it was for independence campaigners to decide which of the other currency options a new Scottish state would use.

He said: " Scotland would have other options open to it. It could create its own currency, whether pegged or free floating; it could create a currency board; or it could join the euro. Each would have benefits and drawbacks.

"A decision among these options now needs to be made by the Yes campaign. In that way, the Scottish electorate can make an informed choice on whether to stay in the UK."

Liz Cameron, the chief executive of Scottish Chambers of Commerce, said the issue of what currency an independent Scotland would use was key to businesses, pointing out the rest of the UK was the "dominant market" for Scottish exports, with £47 billion of goods and services going south of the border each year.

She said the Chancellor's " clarification of the UK Government's stance is extremely useful to businesses as they approach the referendum".

Ms Cameron added that Mr Osborne's statement "does of course raise the importance of the consideration of alternative models for currency in an independent Scotland and scrutiny of how these may impact businesses in the future".

Ms Sturgeon insisted the SNP would "continue to argue" for a joint currency because it would be the best option for the rest of the UK as well as an independent Scotland.

During a question and answer session at University College London she said: "We think it is right for Scotland, obviously that's why we are advocating it, but we believe it is right for the rest of the UK.

"I also strongly believe that what's said in the heat of a campaign changes and common sense prevails after that campaign is over.

"I think it would be an odd chancellor of the Exchequer, whether that's George Osborne or whoever, that would chose to go down a path that would incur extra costs for businesses, seriously dent the balance of payments and increase the trade deficit and have implications for the value of sterling."

She added: "We will continue to argue the case we have set out because we think it's the right one."


From Belfast Telegraph