'No guarantee' that independent Scotland could reach currency deal, Osborne warns
Scotland would be left with three options - keeping pound, creating Scottish currency or joining euro
Tuesday 23 April 2013
The economic rationale for the UK to enter into a formal agreement that would see an independent Scotland retain the pound is “not clear”, a new report from the Treasury said.
An independent Scotland would be forced to adopt new currency arrangements that would be a "very deep dive into uncharted waters", George Osborne warned today.
The Chancellor said there were four currency options for Scotland if it left the UK, and all of them would be "less suitable" than the current system.
Launching a new report from the Treasury in Glasgow, Mr Osborne said there was no guarantee that the UK and Scotland would be able to come to an agreement on a currency union.
That would mean a separate Scotland was left with three options - unilaterally keeping the pound, creating a Scottish currency or joining the euro.
Mr Osborne said: "All of these alternative currency arrangements are less suitable economically than we have now for both Scotland and the rest of the UK."
The Chancellor said the Treasury analysis showed that the imperative to agree to a currency union would "not be as strong" for the UK as for Scotland.
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?"
Around a third of total Scottish output relies on exports to the rest of the UK while the reverse only amounts to less than 5%, he said.
"The rest of the UK, as the larger economy, would be much more exposed to the risk of an independent Scotland running into fiscal and financial difficulties.
"Let's be clear - abandoning current arrangements would represent a very deep dive indeed in to uncharted waters.
"Would a newly independent Scottish state be prepared to accept significant limits on its economic sovereignty? To submit its economic plans to Westminster before Holyrood?"
He went on: "The conclusion is clear - the pound we share works well. The saying goes 'If it ain't broke, why fix it?' but I say 'If it ain't broke, don't break it'.
"The alternatives to the way Scotland now uses the pound are second best. Is second best really good enough for Scotland and for all our United Kingdom? We are better together."
Mr Osborne dismissed claims that it would be in everyone's interest to keep the pound as part of a sterling zone.
He added: "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.
"In other words, the only way to be sure of keeping the pound as Scotland's currency is to stay in the United Kingdom."
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