By a Newsnet reporter
First Minister Alex Salmond has dismissed UK Chancellor George Osborne’s threat to try to stop an independent Scotland from using the pound, calling it a “Tory-led” bid to “bully and intimidate”.
Mr Salmond was responding to the widely anticipated speech given by the Tory Minister in Edinburgh this morning where Mr Osborne had been expected to formally rule out a currency union between an independent Scotland the the remainder of the UK.
Responding to Mr Osborne’s speech, First Minister Alex Salmond repeated Scottish Government predictions that the move would backfire and said:
“This is a concerted bid by a Tory-led Westminster establishment to bully and intimidate – but their efforts to claim ownership of Sterling will backfire spectacularly in terms of reaction from the people of Scotland, who know that the pound is as much theirs as it is George Osborne’s.”
In his speech, Mr Osborne, stood against a backdrop of Edinburgh Castle, said that Scotland had no right to a share of the pound, and insisted that it belonged to the remainder of the United Kingdom, “There’s no legal reason why the rest of the UK would need to share its currency with Scotland”, he said and later added: “If Scotland walks away from the UK, it walks away from the Pound.”
Despite rejecting calls for the currency to be shared, Mr Osborne insisted that Scotland should still shoulder a share of the UK’s massive £1.4 trillion of debt. The Treasury Paper which underpinned today’s speech included veiled threats should Scotland not agree to pick up a share of the massive debt burden.
On a currency union, the UK Chancellor outlined four areas he said were critical to a successfull currency agreement, which included banking, fiscal risk sharing, monetary policy and a permanence of such an agreement.
Mr Osborne said it would be “very difficult” to persuade taxpayers in the rest of the UK to underwrite Scottish banks. He described fiscal risk sharing as a “one sided deal” and added that “The citizens of the rest of the UK could not sign up to such a deal. And frankly, even if we could, I do not think Scotland would want to either.”
On monetary policy, Mr Osborne highlighted the low oil forecasts from the body he created in 2010 – the OBR – and argued that having oil revenue included in UK balance of payments calculations, as the Scottish Government has proposed, was an argument against a currency union, and not for.
Although at no point catagorically ruling out any kind of currency union other than one based on conditions set in the Treasury paper, on the issue he concluded: “The Scottish government says 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.”
Responding further, the First Minister added:
“Mr Osborne’s claims are based on a caricature of a currency union rather than the reality, and his claims, for example on the size of Scotland’s banking sector, do not reflect that reality.
“All of the issues he raises have been dealt with in great detail by the independent Fiscal Commission Working Group, who concluded a currency union is the best option, and that has been underlined again today by Professor James Mirrlees, a Nobel Prize winning economist whose work was cited just two weeks ago by the Governor of the Bank of England.
“And – as former First Minister Henry McLeish makes clear – people in Scotland will not be fooled by the bluff, bluster and posturing of Osborne, Ed Balls and Danny Alexander. The reality is that 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 of any party standing on a platform which was not only vastly at odds with majority public opinion across Scotland and the rest of the UK but would seriously damage the economy of the rest of the UK as it would cost their own businesses hundreds of millions of pounds a year, blow a massive hole in their balance of payments and it would leave them having to pick up the entirety of UK debt.”
Addressing a claim regularly levelled by Unionists, and repeated by Mr Osborne in his speech, that an independent Scotland would be seen to have “defaulted” if not accepting a share of the UK debt, Mr Salmond pointed out that the UK Treasury had already accepted sole legal liability for the debt.
He added: “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 the assertions today, Sterling and the Bank of England are clearly shared UK assets.
“This is not the first time George Osborne has made spurious claims regarding the independence debate. Two years ago he claimed the prospect of the referendum would damage investment in Scotland, claims which have been utterly blown apart by our great success in attracting inward investment, and today the Chancellor was forced to acknowledge the success of the Scottish economy.
“Mr Osborne’s speech was also completely at odds with both the letter and the spirit of the Edinburgh Agreement, which commits both Governments to working in everyone’s best interests whatever the result of the referendum.
“As such, it is the clearest signal yet that the Tory-led No campaign realise they are losing the arguments on the ground as they see the polls narrowing, and support for a Yes vote growing – a trend that today’s cack-handed intervention will only accelerate.”