Chancellor George Osborne dismisses possibility of a currency union with an independent Scotland



Chancellor George Osborne dismisses possibility of a currency union with an independent Scotland

Chancellor of the Exchequer has dealt the Scottish National Party a massive blow in the lead up to this yearís independence referendum; by dramatically ruling out the possibility of a continued currency union should the country decide to split from the rest of Great Britain.

Speaking at a conference this week, Mr Osborne argued that a vote for independence would be a vote for the end of the pound in Scotland, and cited that it would simply be unworkable to continue a currency union should the almost 300 year old union be broken this year.

He emphatically added that the resulting impact of a break in the current currency union would be that Scotlandís biggest banks would leave, and this would force the country to take on high levels of national debt in order to cope financially with the new demands of being independent.

In this circumstance, the UK may opt to impose high interest rate on loans to Scotland, which could add almost £2000 onto the average mortgage payerís total bill in the future, the chancellor argued.

In a passionate speech made in the Scottish capital of Edinburgh, Mr Osborne said:

"People in Scotland are being asked to accept two diametrically opposite things at the same time - that with independence everything in Scotland will change and at the same time nothing will change.

"It simply doesn't add up for the Scottish Government.

"If Scotland walks away from the UK, it walks away from the UK pound."

The news is set to pose severe problems for the already embattled SNP, who have experienced difficulties recently trying to formulate an alternate financial route for the country to go down, should it end its union with the other home nations.

ìThe Yes campaign really now have to try to answer some of the detailed arguments or come up with a Plan B,î says Hamish Patrick, finance partner at major law firm Tods Murray.

ëWestminster Bulliesí

Despite the lack of cohesion of Britainís three major political parties when it comes to most domestic policy, all have presented a united front in regards to retaining the union, arguing that it is the best course of action for all nationís moving forward in the future.

Shadow Chancellor Ed Balls displayed a rare show of agreement with his counterpart George Osborne this week, clearly identifying the Labour partyís support of the current union, and reiterating that Scotland will lose the pound should they vote for independence.

Speaking this week, Mr Balls said: Alex Salmond is saying to people that you can have independence and keep the pound and the Bank of England. That is not going to happen. It would be bad for Scotland, it would place an unacceptable burden on the UK taxpayer, it would repeat the mistakes of the euro area. In fact worse, youíd be trying to negotiate a monetary union as Scotland is pulling away from the UK. It wonít happen, I wouldnít recommend it. Scotland will not keep the pound if Scotland chooses independence.

This view was shared by Deputy Prime Minister Nick Clegg, who said: "The point that George Osborne and Danny Alexander, on behalf of my party, and Ed Balls, on behalf of the Labour Party, are making is that if you analyse what you need to make sure that a currency union is successful, it is very difficult to make that successful if you are pulling apart in so many other ways.

However, Scottish deputy first minister, Nicola Sturgeon, has accused the countryís leading parties of being Westminster bulliesí, and called their recent activity a ëpanic move that will backfire spectularlyí.

Ms Sturgeon argued that the SNPís recent formulation of a new plan of action for the countryís currency future would counteract the remarks being made from Westminster politicians currently, and that a ësterling zoneí would be highly adequate for purpose if implemented in the future.

The issue with this line of action is that it would substantially limit the fiscal and independent monetary powers that the future Scottish government would be able to have, and would prevent the country from being involved in future financial decisions in relation to the pound.

Nevertheless, a recent opinion poll suggested that the issue of the pound is low down the list of factors that are thought to be important to the Scottish people, and it is thought that a potential backlash is possible due to pre-existing mentalities of the people in relation to ëorders from Westminsterí.

Nevertheless, whether the Scottish people will view independence in the same way is highly contentious however, with the lack of economic continuity that any outcome other than retention of the current currency union implies, being a huge knife in the heart of the SNP, who will struggle to convince the people otherwise.