'Pound may not work for an independent Scotland'

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The Independent Online

George Osborne has given the clearest indication yet that an English government might not support an independent Scotland in keeping the pound.

In a speech to business leaders in Glasgow last night, the Chancellor said the lesson of the eurozone crisis was that it was not possible to have currency union without full political union. But he said he backed plans for a Scottish referendum on independence – if only to end "the uncertainty that is disruptive for UK and Scottish business alike".

Mr Osborne's remarks represent the starkest threat yet to Scottish voters on the consequences of a Yes vote to independence. He has previously said that an independent Scotland might join the euro – but has never suggested it would not be able to keep the pound. However, his words are likely to be seized upon by nationalists as evidence of bullying tactics by Conservative politicians in London, whom they say are inherently hostile to an independent Scotland.

Mr Osborne said the UK's single currency had "supported more than three centuries of economic and social integration". But he added: "The conundrum of the eurozone crisis is how difficult it is to combine currency union with full fiscal and political independence. The members of the eurozone are now faced with what I've described as the 'remorseless logic' – the very lesson of the eurozone crisis – that you can't have monetary union without greater fiscal and political integration."

Mr Osborne suggested that the Scottish government's position – that an independent Scotland would seek to enter a formal monetary union within a sterling zone – might not be practical. "It's difficult to argue for establishing a monetary union while pursuing fiscal and political separation," he said. "What mechanism could there be for the Bank of England to set monetary policy, as it does now, to suit conditions in both Scotland and the rest of the UK?"

The Chancellor of the Exchequer George Osborne said that support for a Scottish referendum "should not be misinterpreted as indifference about the outcome".