Salmond defends currency union plan

Herald Series: Alex Salmond said George Osborne had presented a 'caricature' of research by economic experts which backed a currency union Alex Salmond said George Osborne had presented a 'caricature' of research by economic experts which backed a currency union

The war of words between Westminster and Alex Salmond's government over whether an independent Scotland could use the pound escalated today as the Scottish First Minister defended his plans for a currency union.

Mr Salmond said forcing Scotland to use an alternative currency would cost businesses south of the border "many hundreds of millions of pounds".

He branded that the "George Tax" after UK Chancellor George Osborne, who last week ruled out a currency union.

In a speech in Edinburgh last week, the Tory Chancellor said: "If Scotland walks away from the UK, it walks away from the UK pound."

Today, Mr Salmond told business leaders in Aberdeen that "diktat" had "backfired badly" on those campaigning for Scotland to stay in the UK.

Mr Osborne in turn claimed Mr Salmond "now is a man without a plan", after the Chancellor and his Labour and Liberal Democrat counterparts Ed Balls and Danny Alexander all dismissed the idea of a currency union between Scotland and the rest of the UK.

Former chancellor Alistair Darling, the leader of the pro-UK Better Together campaign, said it was "now simple fact that Scotland cannot keep the pound if we leave the UK".

Mr Salmond said Mr Osborne had misrepresented the impact a currency union would have on the rest of the UK.

"The Chancellor downplayed the disadvantages to the rest of the UK from a sterling zone," Mr Salmond said.

"I am publishing today an estimate of the transaction costs he, the Chancellor, would potentially impose on businesses in the rest of the UK if he tried to force Scotland into a different currency.

"They run to many hundreds of millions of pounds.

"This charge - let's call it the George Tax - this would be impossible to sell to English business, to be charged by their own Chancellor for the privilege of exporting goods to Scotland."

The SNP leader, speaking in Aberdeen, said: "In short, what was presented by Mr Osborne was not an economic assessment but a campaign tactic."

He said that stance would backfire when Scots go to the ballot box to decide the country's future on September 18.

The First Minister claimed Mr Osborne's speech had been received "poorly" in Scotland.

"Phone-ins, newspaper polls taken after the Chancellor's statement indicated his diktat had backfired badly," he said.

"People do become sick and tired of the succession of day-tripping Conservative ministers flying up to Scotland to deliver lectures and then flying back to Westminster again."

He added: " No one with a semblance of understanding of Scottish history and indeed the Scottish character would have made a speech such as the Chancellor delivered last week. To be told that we have no rights to assets jointly built up is as insulting as it is demeaning.

"To be told there are things we can't do will certainly elicit a Scottish response that is as resolute as it is uncomfortable to the No campaign - it is 'yes, we can'.

"It is a sign of how out of touch and arrogant the Westminster establishment have become."

He insisted that the main UK parties would change tack on the issue of currency if Scots voted for independence.

"What is said by Westminster during the heat of a political campaign will differ greatly from the reality of life after the referendum," the First Minister said.

"In the event of a Yes vote, the campaigning will stop and the common sense agreements will start."

Mr Salmond said expert economists in the Fiscal Commission Working Group he established had already concluded that a currency union would be a sensible and attractive choice for an independent Scotland and the rest of the UK.

He accused Mr Osborne of being "totally unaware" of the research.

The Fiscal Commission set out how a currency union "differed fundamentally" from the eurozone and would have a "robust framework to ensure its success", Mr Salmond said.

The First Minister also stressed a currency union would be governed by "sensible rules" but would still give a separate Scotland "control over fiscal levers".

But Mr Osborne reiterated his claim that if Scotland left the UK it would be walking away from the pound.

The Chancellor said: "We were promised a detailed response to the economic arguments that I, the Chief Secretary and the shadow chancellor made last week, but instead we got an empty speech. It's now even clearer that Alex Salmond is a man without a plan.

"Detailed analysis and independent advice shows clearly that what is best for Scotland is keeping the stable and durable currency union we have now. The only way to do that is to keep the UK together. If Scotland walks away from the UK it walks away from the pound."

Mr Darling said the First Minister was "pretending the last week never happened" as he called on Mr Salmond to set out his plan B.

The Labour MP said: "It is now simple fact that Scotland cannot keep the pound if we leave the UK. Alex Salmond has a responsibility to tell us what will replace the pound. Will we set up a separate, unproven currency or will we be rushing to join the euro?"

Mr Salmond said joining forces with Mr Osborne to rule out a currency union would come to "haunt" Labour and its leader Ed Miliband.

He added: "The sight of a Labour shadow chancellor reading from a script prepared by George Osborne was too much to bear for many Labour supporters in Scotland."

The First Minister said that "siding with the man who is intent on dismantling the post-war welfare state and imposing permanent austerity" would "prove to be one of Westminster Labour's leadership's biggest misjudgements".

As well as arguing Westminster's stance to a currency union would change if there was a Yes vote, he said such "common-sense" would apply to an independent Scotland's membership of the European Union.

Yesterday European Commission president Jose Manuel Barroso said it would be ''extremely difficult, if not impossible'' for an independent Scotland to get the necessary approval from the existing member states for it to join the European Union.

But today Mr Salmond said EU law "would require all parties to negotiate in good faith and a spirit of co-operation".

He said: "The decision is one for member states, but not to recognise the democratic will of Scotland would run counter to the entire European Union ideal of democratic expression and inclusion. It would pose a challenge to the integrity of the European Union even greater and more fundamental than the threat of British withdrawal.

"That is why of course no member state has suggested they would seek to block Scottish membership."

Mr Salmond said the last week has been "excellent" for the Yes campaign, offering to pay Mr Osborne's bus fare for a return visit.

He challenged David Cameron to a "Dust-Up In Dyce" when he comes to Aberdeenshire next week.

Mr Salmond will be in Portlethen when the Prime Minister visits nearby Dyce, offering a handy opportunity for the two to hold a head-to-head public debate, according to Mr Salmond.

He also hailed indications that European Commission president Jose Manuel Barroso's office has been "starting to climb down" from his most recent remarks that it would be "almost impossible" to secure unanimous EU support for Scotland's independent membership.

Speaking to journalists after his speech, Mr Salmond said: "I think the last week has been excellent, certainly the Osborne speech.

"Even the Better Together campaign are accepting it has caused them some, as they put it, 'short-term damage'.

"I think the damage will be a bit longer-term than they think.

"There has been people moving towards Yes decisively in reaction to the Osborne speech.

"The more that George Osborne comes to Scotland, I think the better for the Yes campaign. I should probably send him his bus fare to come back.

"Next week, we are in Portlethen and Mr Cameron is in Dyce. We can have the 'Parly in Portlethen', the 'Dust Up In Dyce' or we can go to the STV studios in Aberdeen and have the debate that the people want to see.

"I can ask Mr Cameron directly if he's sticking with the Edinburgh Agreement, or are all these unattributed briefings that 'a yes might not mean a yes' come from him or is he disavowing himself from them."

He added: "Throughout history Scotland has shown a aversion to being told what it can or cannot do.

"My father would have referred to it as 'thrawn', and it's one of our outstanding and best characteristics.

"I'm not a 'wha's like us?' kind of person, there are many aspects of Scotland I would like to see changed, but that has certainly been an aspect of the Scottish character for generations.

"Scotland has had recent experience of London politicians laying down the law to Scotland with the likes of the 'poll tax', and the political reaction to that is not good."

He said the Scottish Government paper outlining the costs to UK business of a separate Scottish currency should not be construed as a "Plan B" from the Scottish Government.

"The Fiscal Commission Working Group hasn't put forward a second best option," he said.

"They have put forward the best option, and they have said that other options are perfectly viable.

"I'm going to concentrate on putting forward the best option, and I'm not going to get knocked off that by George Osborne running a bluff."

Commenting on Mr Barroso's remarks, he added: "It's always interesting to hear what Mr Barroso has to say but this is not a judgment of the Commission, as it's for the Council of Ministers to decide these matters, and it's certainly not a judgment for Mr Barroso as he won't be here because he's retiring in the autumn.

"I understand his spokesperson in the European Parliament is starting to climb down from some of these remarks, and I welcome that because to compare Scotland to Kosovo is absurd."

Mr Cameron told the BBC: "The point is that Alex Salmond is now a man without a plan.

"He told us that he wanted to have a currency union and that now looks under threat. He told us that he wanted Scotland as part of the European Union. That is under threat.

"He is making, I think, quite an empty and rather angry speech today, but he hasn't got a plan and I think people will see that he hasn't got a plan."

Yes Scotland board member Pat Kane, a political activist and member of 1980s pop band Hue and Cry, said Scotland may have to look at its currency options again in a couple of years if a currency union is achieved after independence.

"My position is I think a sterling zone is a good idea for the first couple of years of how Scotland and England will go forward," he told Channel 4 News.

"But like my Green compatriots and my SSP (Scottish Socialist Party) comrades, I think we will need to look at it again if the prevailing conditions change.

"The one thing I would say about a currency union, if you look through history the Benelux one worked pretty well, but if you look at the Czechesolvakia break-up that didn't work so well.

"It works well when there is trust and mutual respect on both sides.

"We haven't seen much good will coming up from George Osborne's 'Sermon on the Pound' last week in Edinburgh."

Benelux is an economic treaty between Belgium, the Netherlands and Luxembourg which has persisted for half a century.

The currency union between Slovakia and the Czech Republic fell apart just 33 days after the country split.

Mr Kane's comments hark back to former Conservative Prime Minister Margaret Thatcher's "Sermon on the Mound", an address to the General Assembly of the Church of Scotland in 1988 which was poorly received by her opponents.

Earlier, Mr Salmond acknowledged that there are a range of views on the best currency option for Scotland, and that these views can change over time.

"People are free to argue for the position that they want," he told journalists in Aberdeen.

"I was in the UK Parliament when Alistair Darling was a keen advocate of the euro. I've advocated the euro in the past.

"Danny Alexander was the coordinator of the euro campaign. He's Chief Secretary to the Treasury, with George Osborne who was always against it.

"Most people would accept that the immediate instinctive reaction is against Mr Osborne's remarks, and for that matter Ed Balls combining with him which sticks in the craw of many Labour people in Scotland."

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