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POUNDING HEADACHE; YOU DECIDE 18.09.14 215 DAYS TO GO; Pressure grows on Salmond after his bid for independent Scotland to share sterling is shot down by Chancellor.

Byline: DAVID CLEGG d.clegg@dailyrecord.co.uk

THE Yes campaign was in crisis last night after Alex Salmond's plan to keep the pound after independence was comprehensively demolished.

The First Minister was under huge pressure to come up with a Plan B after George Osborne categorically said a currency union between a separate Scotland and the rest of the UK "is not going to happen".

On a defining day in the independence debate, the Chancellor teamed up with Lib Dem Chief Secretary to the Treasury Danny Alexander and Shadow Chancellor Ed Balls to torpedo Salmond's bid to share the pound.

All three ruled out the prospect of a eurozone-style sterling currency area for Scotland and the rest of the UK in the event of a Yes vote.

Salmond accused Osborne of bullying and repeated threats to default on Scotland's share of UK national debt if the plan is blocked.

But his response was slated as weak - even by many supporters of independence. And behind the scenes, SNP strategists were frantically trying to come up with a credible counterattack to Osborne's hammer blow as their referendum campaign was plunged into chaos.

However, the First Minister dismissed Osborne, Balls and Alexander last night as "bluff, bluster and bullying. Bluff because what they say now and what they say the day after a Yes vote will be two entirely different things.

"Bluster because we are expected to believe that Ed Balls and George Osborne are going to tell businesses in England that they are going to impose a Balls-Osborne tax to export their goods to Scotland of several million pounds.

"And bullying because this is Westminster trying to lay down the law to Scotland and that sort of stuff doesn't wash any more."

Asked if he had a Plan B in light of the unlikely Westminster alliance, Salmond said: "No. I think we have to articulate Plan A. "I want to see us build up the pressure on England in favour of Scotland keeping sterling."

But SNP strategy chiefs were also under pressure from their own side, with many senior figures in the Yes campaign determined to use Osborne's speech as a chance to switch to their preferred option of a separate Scottish currency.

Ex-SNP deputy leader Jim Sillars, Yes Scotland chairman Dennis Canavan and Scottish Green Party co-convener Patrick Harvie have all urged Salmond to do this.

Earlier, Osborne took the unprecedented step of publishing official advice from his top civil servant that Salmond's plan for the pound should be avoided by the rest of the UK.

Permanent Secretary to the Treasury Sir Nick Macpherson said: "I would advise strongly against a currency union as currently advocated."

But Salmond cast doubt on Macpherson's impartiality.

He told STV's Scotland Tonight: "The impartial guy was Mark Carney, the governor of the Bank of England, who explained how a currency union could work just a couple of weeks ago.

"He is impartial, independent and non-political. The Treasury civil servants do what they are told by George Osborne."

In his speech in Edinburgh yesterday, Osborne said there was "no legal reason" why the rest of the UK would want to share sterling with an independent Scotland.

He outlined the measures that would be needed to make a currency union work, based on new Treasury analysis, and said neither the Scottish nor British public would accept such an arrangement.

Asking taxpayers in England, Wales and Northern Ireland to stand behind Scottish banks was a non-starter, Osborne said. He added: "The SNP say 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. The people of the rest of the UK wouldn't accept it and Parliament wouldn't pass it.

"The pound isn't an asset to be divided up between the two countries after a break-up as if it were a CD collection." Agreeing with his rival, Labour's Balls said: "It would be bad for Scotland. It won't happen."

Osborne also took Salmond to task for threatening to walk away from Scotland's PS150billion share of the UK national debt if there is no deal on a currency union.

He claimed it was an "empty and reckless" proposal that would lead to rocketing mortgage and borrowing costs in Scotland.

Osborne said: "That's like saying because my neighbour won't agree to my unreasonable demands, I'm going to burn my own house down.

"If an independent Scotland reneged on its debts it would become an outcast among responsible economic nations."

Salmond is faced with three options after independence - adopt the euro, start a new currency or keep the pound without a formal deal. He hinted at the last option when he said Osborne "can't stop people using the pound".

Such an arrangement would see Scotland lose the Bank of England as lender of last resort - a major blow for the Scottish financial sector - and have no control over monetary policy.

But Salmond refused to accept defeat. He said: "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 standing on a platform which was not only vastly at odds with majority public opinion but would seriously damage the economy of the rest of the UK.

"It would cost their own businesses hundreds of millions of pounds a year, blow a massive hole in their balance of payments and leave them having to pick up the entirety of UK debt.

"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 assertions today - sterling and the Bank of England are clearly shared UK assets."

Sillars said the SNP must find a Plan B. He added: "We have to be able to provide an answer on what the currency is going to be. The position that five million people in Scotland can impose a currency union on 55million people in England borders on believing in fairies."

Westminster is trying to lay down the law to Scotland and that doesn't wash any more ALEX SALMOND

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Publication:Daily Record (Glasgow, Scotland)
Geographic Code:4EUUK
Date:Feb 14, 2014
Words:1112
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