23 Apr 2013

Scottish independence: ‘no guarantees’ on currency union

In a speech in Glasgow, Chancellor George Osborne says an independent Scotland would be forced to adopt new currency arrangements that would be a “very deep dive into uncharted waters”.

Ahead of a referendum on independence next year, Mr Osborne said if Scotland left the UK there were no guarantees a currency union could be agreed.

Scotland’s SNP government, which wants to keep the pound in the event of a yes vote in the referendum, dismissed the chancellor’s warnings.

But Mr Osborne drew parallels with the US and Panama, saying that while both countries used the dollar, Panama had no control over the currency.

Let’s be clear – abandoning current arrangements would represent a very deep dive indeed in to uncharted waters. Chancellor George Osborne

He also said Scotland would have less control over the pound than at present because it would have to hand over responsibility for key areas of the economy to the rest of the UK.

He argued that the UK was unlikely to agree to a new sterling zone between the two countries.

Mr Osborne actually went further than the Treasury document saying currency union was "unlikely", not just "challenging". Read Gary Gibbon's blog

Referring to a Treasury paper on currency options, Mr Osborne said: “The fundamental political question this analysis provokes is this: why would 58 million citizens give away some of their sovereignty over monetary and potentially other economic policy to five million people in another state?”

‘Very deep dive’

“Let’s be clear – abandoning current arrangements would represent a very deep dive indeed into uncharted waters.

“Let’s stop speculating and look at the evidence. Would the rest of the UK family agree to take that risk?

“Could a situation where an independent Scotland and the rest of the UK share the pound and the Bank of England be made to work?

“Frankly, it’s unlikely because there is real doubt about the answers to these questions.”

But Scottish Finance Secretary John Swinney told the BBC’s Today programme the chancellor was “playing with fire”, saying Scotland could walk away from its share of the UK’s debts if the Westminster government refused to come to “a rational and considered agreement”.

He added: “What the Treasury paper is designed to do is to make things sound as difficult and as obstructive as possible. I don’t really think it is a particularly helpful contribution to the debate.”