Currency union bad for independent Scotland, UK: minister

Guardian News and Media/Edinburgh

Alistair Carmichael, the Scottish secretary, has said a cross-border currency union between an independent Scotland and the rest of the UK “would not work” for either country.

Carmichael said that agreeing a legally binding deal to share the pound would mean Scotland accepting the UK would set its interest rates, monetary policy and borrowing, while the UK would be expected to underwrite Scotland’s banks.

The cabinet minister did not rule out a deal being struck, but said on the Andrew Marr Show on BBC1 that if Scotland voted for independence in September’s referendum it would be voting to leave all the UK’s institutions, including sterling.

Pressed by Marr on whether it was “ridiculous” to argue that Scotland had no automatic right to use sterling after independence since the pound belonged to Scotland too, Carmichael said: “We’re not saying anything about ‘you can’t have’.

“The fact is a currency union wouldn’t work. It wouldn’t work for Scotland; it wouldn’t work for the rest of the United Kingdom.”

He said the eurozone crisis had shown that currency union needed close and successful political and economic integration the reverse of independence.

The Czech and Slovak governments had tried a currency union after they became independent, but that only lasted a matter of weeks.

In the last few days, senior anti-independence figures including Gordon Brown, the former prime minister, and Carwyn Jones, the Welsh first minister, have rejected the proposed sterling pact.

While George Osborne, the chancellor, and Ed Balls, the shadow chancellor, have said a currency union would be highly unlikely, Jones has said Wales would likely try to block a currency pact because it would threaten the Welsh economy.

Brown, writing in the Daily Record on Saturday, said Salmond’s “badly thought through proposals will end up in instability, division and self-imposed colonialism”.

The Scottish National party’s quest for a currency union is also causing divisions within the yes campaign.

The Scottish Green party, the SNP’s junior partner in the official Yes Scotland independence campaign, only supports a sterling zone as a temporary measure before Scotland sets up its own currency.

Colin Fox, leader of the Scottish Socialist party, which is also involved Yes Scotland, told Scotland yesterday that a sterling pact “renders ridiculous the idea that you have an independent country”.

Margo MacDonald, the former SNP deputy leader, said Scotland could not expect the UK to agree but would have to negotiate.

Meanwhile, a Panelbase poll for the Sunday Times found that while the gap between no and yes voters was close, at 38% in favour of independence and 47% against, more of Scotland voters were now worried about the economic risks of leaving the UK.

Following warnings last week from the Institute of Fiscal Studies that an independent Scotland would face greater austerity than the UK for decades to come, the Panelbase poll found 44% of voters thought Scotland would be worse off after independence compared with 32% who said better off. While 34% of voters thought independence would make no difference to their own wealth, 26% said they would be 500 worse off, and 15% who thought they would be 500 better off.