By Martin Kelly
Deputy First Minister Nicola Sturgeon has warned UK Chancellor George Osborne that Scots will not be bullied, after the BBC claimed the Tory MP was about to formally rule out a currency union with an independent Scotland.
The move by Mr Osborne, which has yet to be officially confirmed by the Treasury, has ignited the referendum debate amid claims the Chancellor is trying to intimidate Scots into voting No in this year’s independence referendum.
Commenting on reports Mr Osborne will make the announcement in a speech in Edinburgh tomorrow, Scotland’s Deputy First Minister dismissed the surprise shift in stance from the UK Government as a “panic move” and insisted Scots would not be bullied into submission.
Ms Sturgeon said:
“This is the clearest sign yet that the Westminster establishment thinks it’s losing the argument on independence and they can see that in the polls. We’ve gone in under a week from David Cameron’s ‘love-bombing’ to attempted bullying and intimidation – from a charm offensive to just plain offensive.
“This is a panic move which will backfire spectacularly. People won’t take kindly to the Westminster establishment ganging up to try and bully Scotland in the decision that we are being asked to take on the referendum.
“Osborne’s position is also a bluff. For him to stick to this position after a Yes vote would put Westminster vastly at odds with majority public opinion across Scotland and the rest of the UK, it would cost their own businesses hundreds of millions of pounds a year, it would blow a massive hole in their balance of payments and it would leave them having to pick up the entirety of UK debt.”
Mr Osborne’s now heavily trailed announcement signals a change in approach from pro-Union parties who until now have refused to rule out such a currency union. However other reports suggesting Mr Osborne’s counterparts in the other two Unionist parties – Danny Alexander and Ed Balls – are to echo Mr Osborne’s threat, will be seen by many as evidence that the decision is political and not underpinned by economic motives.
Picking up on the economic weakness of Mr Osborne’s decision, Nicola Sturgeon highlighted the consequences for the rest of the UK should it be implemented after a Yes vote.
Sge added: “All the debt belongs legally to the Treasury, as they confirmed just last month – we can’t default on debt that’s not legally ours. However, we’ve always said we think Scotland should meet a fair share of the costs of that debt – but assets and liabilities go hand in hand.
“We’ve got a Tory-led UK Government and a Westminster establishment that appears to be putting forward this notion that Scotland’s deal in the Union is to shoulder all of the debt but have none of the assets, and that begs the question why would anybody want to stay part of a Westminster system where we are treated with such contempt?
“We have set out a reasonable case that we should continue to use our pound because it is ours as much as it is anybody else’s. Neither George Osborne nor anyone else can stop Scotland using the pound, which is just another reason why having a formal currency union will be in Westminster’s overwhelming interests.
“What the No campaign and Westminster establishment says now, the reality will be very different if Scotland votes Yes. People can see this for what it is and this will backfire spectacularly on the No campaign because they are treating people like fools, but people can see the common sense of the position we are putting forward for Scotland and for the rest of the UK and they know this is a cack-handed, panicky campaign manoeuvre.”
Mr Osborne’s planned announcement contradicts comments made by Scottish Secretary Alistair Carmichael in November last year, when he insisted that firmly ruling out a currency union would not be sensible.
“I don’t think that it would be sensible for George Osborne, Danny Alexander, Ed Balls or anybody else to be one hundred per cent categoric about it…” he told the BBC.
In the unlikely event that a future UK Government follow through with such a threat, they would have forfeited the right to expect a newly indendent Scotland to take on a share of the massive £1.4 trillion of debt currently in the UK’s name. The UK Government has agreed that it alone is responsible for the outstanding debts of all of the UK and that will continue to be the case post-independence.
In a recent statement, the UK Treasury said: “In the event of Scottish independence from the United Kingdom (UK), the continuing UK Government would in all circumstances honour the contractual terms of the debt issued by the UK Government.”
The Scottish Government has signalled it is willing to service its share of the debt, estimated to be around £130bn, but only on condition that it receives a share of the UK’s current assets, which includes an agreement to share the pound.
Economic specialist George Kerevan also recently revealed that, as a result of quantitative easing (printing more money), the Bank of England now owns around a third of the UK national debt. This, the Scottish Government will maintain, is an asset that comes into the negotiations over Scottish independence.
Eight per cent of the Bank of England’s Treasury bond holding – acquired through quantitative easing – should by rights go to Scotland. Such a move would transfer ownership of a chunk of rUK debt to a ‘foreign country’. It means that instead of the rUK owing itself money (because it ‘owns’ the Bank of England) it would suddenly have a new foreign creditor – Scotland.
The Scottish Government has also highlighted trade figures which it says proves a currency union is in the interests of both Scotland and the rest of the UK.
According to official figures in 2012:
- rUK exported £59bn worth of goods and services to Scotland and imported £48bn worth of goods and services from Scotland
- rUK exported more to Scotland than to Brazil, South Africa, Turkey, Russia, India, South Korea, China and Japan put together
- Scottish oil and gas production would boost the Sterling Area’s exports by £30bn
- £47bn in turnover for rUK companies was made in Scottish based operations (2012/13)
- rUK imported an estimated £13.6bn of Scottish oil and gas
Other figures suggest that a different currency would increase the costs for rUK companies exporting to Scotland, which would result in approximately £500m per year in higher transaction costs alone for businesses south of the border.