Monetary union decision 'final'

Herald Series: Chief Secretary to the Treasury Danny Alexander said the cross-party decision to rule out a monetary union if Scotland becomes independent is final Chief Secretary to the Treasury Danny Alexander said the cross-party decision to rule out a monetary union if Scotland becomes independent is final

Calls for a monetary union between an independent Scotland and the rest of the UK are akin to "embarking on a damaging divorce" but insisting on still sharing a credit card, Chief Secretary to the Treasury Danny Alexander has said.

Mr Alexander set out his reasons for rejecting the Scottish Government's preferred currency solution, as he insisted that the cross-party decision to rule it out was final.

He used his speech in Edinburgh to the National Association of Pension Funds (NAPF) to dismiss suggestions that the rejection of a monetary union, which would see an independent Scotland keep the pound, was a politically-motivated and tactical move.

A formal monetary union was ruled out by Chancellor George Osborne, Mr Alexander and Labour shadow chancellor Ed Balls several weeks ago.

Scottish Ministers said the announcement was a "campaign tactic".

On Wednesday MSPs on Holyrood's Economy Committee were told by the leader of the fiscal commission working group, Crawford Beveridge, that Mr Osborne was not being serious.

The working group recommended a formal monetary union as the best option for an independent Scotland when it reported its findings to the Scottish Government last year.

It met again on Thursday to re-affirm its backing for this option, and set out plans to provide further analysis to demonstrate that while other options are viable for Scotland, "there are clear advantages for the rest of the UK from the proposed Sterling area".

Mr Alexander's speech came as Scotland's First Minister Alex Salmond chairs the latest meeting of his Council of Economic Advisers.

Mr Alexander said: " I've seen some people suggest we are not serious about refusing a currency union.

"Let's call this the John McEnroe defence. Except in this instance it's not just one person they're shouting at, but three.

"And our decision - taken in the best interests of Scotland and the rest of the UK - is final.

"No ifs, no buts. No matter how much of a racket they make, it isn't going to change."

Mr Alexander reiterated calls for the Scottish Government to "deal with the consequences" of the rejection of a monetary union, and publish a so-called Plan B.

He argued the SNP's 'Plan A' wouldn't be in the interests of the rest of the UK, because it would decrease economic sovereignty, and increase the risk of having to bail out a foreign country.

"He (Mr Salmond) cannot honestly expect that Scotland would walk away from the rest of the UK, but taxpayers in England, Wales and Northern Ireland would still agree to stand behind the Scottish economy.

"It is like embarking on a damaging divorce, and insisting we should still share a credit card."

Mr Alexander said a monetary union was also not in the interests of an independent Scotland.

"In the event that Scotland did vote yes, I would argue just as forcefully against a currency union," he said.

Yes campaigners were "ignoring political and economic realities", he said.

A monetary union would require an independent Scotland to submit all of its tax and spending plans to a foreign government, Mr Alexander said.

"A currency union would leave Scotland far more exposed to the sorts of damaging economic shocks that we have seen in the periphery of the Eurozone," he said.

"Scotland wouldn't have its own currency to adjust,for example, to an oil price shock.

"An independent Scotland would have to respond to a fall in oil revenues by cutting public spending or raising taxes.

"As part of the UK, Scotland is insulated from these impacts."

Mr Alexander said that Treasury analysis calculated that for each 20 dollar (£11.90) fall in the price of oil, an independent Scotland could lose 11,000 jobs.

A monetary union could also lead to higher interest rates, capital flight and the possible collapse of the union itself, he told his audience.

Mr Alexander went on to argue that independence would see the break-up of the current domestic market for pensions and other financial products, driving up costs, while members of defined benefit schemes in Scotland would no longer be protected through the Pension Protection Fund.

Deputy First Minister Nicola Sturgeon said Mr Alexander should have used his visit to Edinburgh "to apologise to people the length and breadth of Scotland for the policies his Tory-led Government is imposing on them".

"Just this week, we have seen an independent report warn of a 'humanitarian crisis' in Scotland, with almost a million people in poverty as a direct result of those Tory-Lib Dem policies," she said.

"Danny Alexander and his Lib Dem colleagues reneged on their promises to not get into bed with the Tories - and no one in Scotland should believe a word they say now.

"And on the issue of pensions, it is Westminster that is threatening an ever-rising retirement age for the state pension, which we have pledged to review post-independence.

"An independent Scotland will be more able to afford pensions than the rest of the UK, and all pensions will be paid in full after independence."

SNP MSP Kenneth Gibson said: "Danny Alexander's track record on trust is abysmal, and people across the UK have learned the hard way that his word cannot be taken at face value. There is no reason whatsoever for people in Scotland to believe his attempts to scaremonger on Scotland's currency.

"After a Yes vote, the bluff and bluster will be put to one side and the Scottish and UK governments will negotiate a currency union in the mutual interests of both countries - ensuring certainty for business and in the best interests of the people."

Katja Hall, Confederation of British Industry chief policy director, said: "The Scottish Government must outline its Plan B for the currency so that businesses and consumers are fully aware of the implications of independence.

"At the moment they simply don't know what money they will have in their pockets. And there will be major implications for people's pensions.

"As an independent Scotland would also have separate regulations, business costs would almost certainly increase, which is why many Scottish businesses are starting to express their concerns publicly."

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