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Scottish banks would be stopped from printing sterling banknotes and Scots would need to hold on to pound currency that crossed the border if the country continued to use sterling after declaring independence, George Osborne has said.
The chancellor told the cross-party Scottish affairs committee on Wednesday that if Scots wanted to continue using the pound, they would do so without the authority of the Bank of England. Mr Osborne said this would mean Scotland could no longer mint its own distinctive pound banknotes. as it does today, Scots would also have to hold enough currency to run their economy.
The chancellor told fellow MPs: “It would be a situation where [Scots] would wait for coins and notes to come across the border and then you want to try and hold that money in the country, which means you have to always run a balance-of-payments surplus with your neighbour.”
Mr Osborne’s words are the latest escalation in the battle over what currency Scotland would use if it votes for independence in four months’ time.
Pro-unionists see the Scottish National party’s wish to keep the pound after independence as unrealistic. They tried to exploit the issue earlier this year in a co-ordinated move by all three Westminster parties ruling out the SNP’s preference for a formal currency union to keep sterling.
That move appeared to backfire, however, with the pro-independence movement gaining strength in the polls afterwards. John Swinney, the Scottish finance minister, said on Wednesday: “This was a desperate attempt from the chancellor to try and recover some credibility, after his ‘Sermon on the Pound’ completely backfired and has led to a surge in support for ‘yes’.”
Mr Osborne stood by his position on Wednesday, despite a briefing by an anonymous minister to the Guardian in March saying that the currency issue would be on the table in any independence negotiation.
The chancellor said: “There will not be a currency union, no ‘ifs, no ‘buts.” He added that he “could not see the circumstances” in which such a suggestion would be put to a referendum of the whole UK.
In response, Alex Salmond has accused Mr Osborne of “bluff, bluster and bullying”, insisting that a currency union will be agreed if Scotland goes independent. But pushed on what his “Plan B” would be, the first minister told the BBC in February: “The pound is an internationally tradeable currency. It’s not a question of ‘keeping the pound’; it’s a question of whether there would be an agreed currency union.”
His words have led to speculation he would try and use the pound despite there being no formal agreement between the two countries, an arrangement Mr Osborne ridiculed on Wednesday. The chancellor said: “This is an option used by Panama and Montenegro; Scotland is not Panama or Montenegro, it is much better than that.”
Meanwhile, Sir Nicholas Macpherson, the Treasury’s top civil servant, defended his decision to ignore Whitehall’s normal practice of keeping advice to government confidential and publish his recommendation against a currency union.