Scottish independence: Coalition minister breaks ranks on currency union

Yes campaigners seize on unidentified source’s suggestion that a deal could be cut on the pound

Chancellor George Osborne has denied claims that Scotland would be allowed to keep the pound in the event of a Yes vote for independence later this year.

An unnamed coalition minister was reported yesterday as saying a deal could be brokered to allow Scotland to maintain a currency union with the remainder of the UK. The Scottish National Party gleefully warned that Mr Osborne and his deputy, Chief Secretary to the Treasury Danny Alexander, appeared “frantic” at the news. Insiders in the pro-UK “Better together” campaign conceded yesterday that they are starting to look “a little nervous”.

London has consistently warned that an independent Scotland would not be able to retain the pound, adding to criticism that unionists are running an overly negative campaign. Yesterday’s unattributed remarks represent an embarrassing break with that position, and expose the Government to a charge of bluff.

Support for independence is growing, according to opinion polls. A recent YouGov survey found that the number who said they would vote Yes in September was up two points to 37 per cent. The anonymous minister undermined his colleagues by arguing that currency union was inevitable in the event of secession as a shared pound would ensure economic stability on both sides of the border.

Mr Osborne and Mr Alexander hit back at independence campaigners in a rare joint statement. They said: “There will not be a currency union in the event of independence. The only way to keep the UK pound is to stay in the UK.

“Walking out of the UK means walking out of the UK pound. The Scottish government are proposing to divorce the rest of the UK but want to keep the joint bank account and credit card.”

They added that the UK could not be expected to “put its taxpayers at risk of bailing out a foreign country and its banks”. The SNP might advocate a currency union, but the coalition argued that an independent Scotland would have no control over mortgage rates and have restricted power on tax policy to raise money for public services.

Nicola Sturgeon, Scotland’s Deputy First Minister, argued: “Westminster’s words on currency have now been exposed as the bluff and bluster that we always said they were. The result is a deeply damaged No campaign that is riven by splits, in disarray and which will now find it impossible to recover. For all George Osborne and Danny Alexander’s frantic denials, by definition this is a story which is impossible to deny, because the story is specifically that everything the UK Government and the No campaign are saying on this issue ahead of the referendum is a campaign tactic.”

Mr Osborne’s choice of the words “foreign country” to describe an independent Scotland have previously been condemned by Alex Salmond. Yesterday, he repeated his criticism of Mr Osborne’s language. “Scotland will not be a foreign country after independence, any more than Ireland, Northern Ireland, England or Wales could ever be ‘foreign countries’ to Scotland,” he said. “We share ties of family and friendship, trade and commerce, history and culture, which have never depended on a parliament here at Westminster, and will endure and flourish long after independence.”

Yesterday’s report prompted a witch-hunt among political pundits, several of whom pointed to Defence Secretary Philip Hammond as a possible source. The minister has been quoted as suggesting that, if Britain wanted to keep its Trident nuclear deterrent at Faslane and Scotland wanted a currency union, “you can see the outlines of a deal”.

However, Mr Hammond has been in the US most of the week and the unnamed source used the term “Trident nuclear weapons” – a mistake a defence minister would not make, according to his spokesman. Trident is a defence programme that ensures at least one British submarine carrying missiles and warheads is at sea at any time so as to provide a continuous nuclear deterrent.

The spokesman added that Mr Hammond has “consistently said that an independent Scotland couldn’t use the pound”.

The Bank of England governor, Mark Carney, has also questioned the “viability” of a currency union. He told MPs this month: “The issue for the rest of the UK would be: ‘would it be credible?’ I’m not predicting this, but one has to plan for contingencies; would it be credible to stand by if an independent Scotland were to be in fiscal difficulties?

“If it is not credible, then the structure of the currency union obviously is less than perfect, but it is also taking on a contingent liability or responsibility to the rest of the UK balance sheet.”

However, Mr Carney also insisted that he has no view on whether currency union is a good or a bad idea for Scotland.

Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
ebooks
ebooksA special investigation by Andy McSmith
Life and Style
life
News
news

The party's potential nominations read like a high school race for student body president

Voices
A mother and her child
voices
Voices
The veterans Mark Hayward, Hugh Thompson and Sean Staines (back) with Grayson Perry (front left) and Evgeny Lebedev
charity appealMaverick artist Grayson Perry backs our campaign
Arts and Entertainment
Cold case: Aaron McCusker and Christopher Eccleston in ‘Fortitude’
tvReview: Sky Atlantic's ambitious new series Fortitude has begun with a feature-length special
Voices
Three people wearing masks depicting Ed Miliband, David Cameron and Nick Clegg
voicesPolitics is in the gutter – but there is an alternative, says Nigel Farage
News
i100
News
people
Sport
Chelsea manager Jose Mourinho
footballI have never seen the point of lambasting the fourth official, writes Paul Scholes
Life and Style
Vote green: Benoit Berenger at The Duke of Cambridge in London's Islington
food + drinkBanishes thoughts of soggy school dinners and turn over a new leaf
News
Joel Grey (left) poses next to a poster featuring his character in the film
peopleActor Joel Grey comes out at 82
2015 General Election
May2015

Poll of Polls

Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Recruitment Genius: External Relations Executive

£33000 per annum: Recruitment Genius: An External Relations Executive is requi...

Ashdown Group: Web Developer (PHP & Wordpress) - Central London

£25000 - £28000 per annum + 25 days holidays & pension: Ashdown Group: Web Dev...

Recruitment Genius: Production Operative - Unskilled & Skilled

£7 - £9 per hour: Recruitment Genius: An exciting opportunity has arisen to jo...

Ashdown Group: Marketing Manager - Law Firm - Bromley

£45000 - £50000 per annum + Benefits: Ashdown Group: Marketing Manager (Market...

Day In a Page

Isis hostage crisis: The prisoner swap has only one purpose for the militants - recognition its Islamic State exists and that foreign nations acknowledge its power

Isis hostage crisis

The prisoner swap has only one purpose for the militants - recognition its Islamic State exists and that foreign nations acknowledge its power, says Robert Fisk
Missing salvage expert who found $50m of sunken treasure before disappearing, tracked down at last

The runaway buccaneers and the ship full of gold

Salvage expert Tommy Thompson found sunken treasure worth millions. Then he vanished... until now
Homeless Veterans appeal: ‘If you’re hard on the world you are hard on yourself’

Homeless Veterans appeal: ‘If you’re hard on the world you are hard on yourself’

Maverick artist Grayson Perry backs our campaign
Assisted Dying Bill: I want to be able to decide about my own death - I want to have control of my life

Assisted Dying Bill: 'I want control of my life'

This week the Assisted Dying Bill is debated in the Lords. Virginia Ironside, who has already made plans for her own self-deliverance, argues that it's time we allowed people a humane, compassionate death
Move over, kale - cabbage is the new rising star

Cabbage is king again

Sophie Morris banishes thoughts of soggy school dinners and turns over a new leaf
11 best winter skin treats

Give your moisturiser a helping hand: 11 best winter skin treats

Get an extra boost of nourishment from one of these hard-working products
Paul Scholes column: The more Jose Mourinho attempts to influence match officials, the more they are likely to ignore him

Paul Scholes column

The more Jose Mourinho attempts to influence match officials, the more they are likely to ignore him
Frank Warren column: No cigar, but pots of money: here come the Cubans

Frank Warren's Ringside

No cigar, but pots of money: here come the Cubans
Isis hostage crisis: Militant group stands strong as its numerous enemies fail to find a common plan to defeat it

Isis stands strong as its numerous enemies fail to find a common plan to defeat it

The jihadis are being squeezed militarily and economically, but there is no sign of an implosion, says Patrick Cockburn
Virtual reality thrusts viewers into the frontline of global events - and puts film-goers at the heart of the action

Virtual reality: Seeing is believing

Virtual reality thrusts viewers into the frontline of global events - and puts film-goers at the heart of the action
Homeless Veterans appeal: MP says Coalition ‘not doing enough’

Homeless Veterans appeal

MP says Coalition ‘not doing enough’ to help
Larry David, Steve Coogan and other comedians share stories of depression in new documentary

Comedians share stories of depression

The director of the new documentary, Kevin Pollak, tells Jessica Barrett how he got them to talk
Has The Archers lost the plot with it's spicy storylines?

Has The Archers lost the plot?

A growing number of listeners are voicing their discontent over the rural soap's spicy storylines; so loudly that even the BBC's director-general seems worried, says Simon Kelner
English Heritage adds 14 post-war office buildings to its protected lists

14 office buildings added to protected lists

Christopher Beanland explores the underrated appeal of these palaces of pen-pushing
Human skull discovery in Israel proves humans lived side-by-side with Neanderthals

Human skull discovery in Israel proves humans lived side-by-side with Neanderthals

Scientists unearthed the cranial fragments from Manot Cave in West Galilee