February 13, 2014 9:06 pm

Osborne ups stakes by ruling out shared pound

  • Share
  • Print
  • Clip
  • Gift Article
  • Comments

George Osborne has emphatically dismissed Scottish National party calls for a post-independence currency union, warning Scotland’s voters they cannot keep the pound if they choose to end the three-century old union with England.

Launching a combined effort with the UK’s two other biggest parties to destroy a pillar in the SNP’s economic vision, the chancellor said a formal currency union with an independent Scotland could not be made to work.

Analysts say the SNP’s insistence that it does not need an alternative has saddled the party with a major political vulnerability.

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

Any alternative approach would be politically difficult, however.

Many in the Yes campaign would welcome a switch to advocacy of a new Scottish currency – which would maximise future fiscal and monetary autonomy – but such a change in strategy would go against the SNP’s central strategy of stressing continuity in order to reassure voters fearful about economic disruption.

Scotland could also insist it would continue to use the UK pound without a formal currency or banking union, but this would severely limit the new state's fiscal options, leave it with no say at all on monetary policy and put in doubt its status as a financial centre.

Mr Salmond’s initial response was to double down on existing SNP arguments. A currency union would be in the UK interest and pro-union claims to the contrary were mere “campaign rhetoric”, the first minister said.

Yet even some pro-union politicians say currency warnings from Westminster-based politicians such as Mr Osborne risk alienating Scottish voters who can be prickly at being lectured to from London.

David McCrone, co-director of Institute of Governance at University of Edinburgh, said the sudden hardening of the UK stance also went against the tone taken by David Cameron last week, when the prime minister stressed the emotional case for the UK and told Scots: “We want you to stay.”

“Last week we had ‘We’ll love you into the union’ – this week it’s: ‘We’ll threaten you into the union,” Prof McCrone said. “It’s a rather feckless political strategy.”

Lombard: Scots and the pound

Jonathan Guthrie

It has been widely claimed that England can stop an independent Scotland from using the pound. This is a bad example of a political and journalistic shorthand fostering a popular misconception, writes Jonathan Guthrie.

Continue reading

Henry McLeish, a former Labour first minister of Scotland who plans to vote against independence but yearns for a positive vision of reform and devolution within the UK, also warned on the dangers of the No campaign become mired in “relentless negativity”.

“This looks more like a threat that if you vote Yes to independence you’ll be punished, Mr McLeish said. “[People] don’t like being threatened.” 

There was some nervousness in pro-union Westminster parties about how the currency intervention would affect the independence debate.

One shadow minister said: “This is a bit risky, but it is probably justified.” An adviser added: “We will have to wait and see over the next 24 hours to see how this is received.”

Some analysts also warned that Mr Osborne’s currency move falls short of being a killer blow.

John Curtice, Scotland’s most high-profile psephologist, said ruling out currency union would bring less of a boost than the big parties hoped, since surveys suggest retaining the pound is a low priority among voters and that many are already sceptical that it would actually happen.

As dusk fell on Edinburgh's London Road, it was hard to find many voters who saw Mr Osborne's intervention as having a major impact on their referendum choice.

Some independence supporters said adoption of an independent currency or the euro might anyway be better, while others said they would back staying in the UK even if an independent Scotland could keep the pound.

Rob Mundell, an Edinburgh general practitioner, said economic issues such as the currency were likely to influence how he would vote in September’s referendum, but that he was unimpressed by an intervention from Mr Osborne that smacked of standard political scare tactics. “I’m already disillusioned with Westminster politics, but this makes me more disillusioned,” Dr Mundell said. 

Copyright The Financial Times Limited 2015. You may share using our article tools.
Please don't cut articles from FT.com and redistribute by email or post to the web.

  • Share
  • Print
  • Clip
  • Gift Article
  • Comments


Sign up to UK Politics, the FT's daily briefing on Britain.

Sign up now


Sign up for email briefings to stay up to date on topics you are interested in