Would Scotland be forced to join the euro?

Osborne uses the most devastating weapon in the No campaign's arsenal.

The logic of George Osborne leading the charge against Alex Salmond is slowly revealing itself. The government's trump card is that an independent Scotland could be forced to join the euro, and the Chancellor is the man to play it. He told ITV News last night: "Alex Salmond has said he'd want Scotland to join the euro and you have to ask yourself is that the currency you want to be joining at the moment."

In fact, Salmond's stance on the euro is considerably more nuanced than Osborne suggests. True, in 2009, the First Minister quipped that sterling was "sinking like a stone" and argued that euro membership was becoming increasingly attractive ("the parlous state of the UK economy has caused many people in the business community and elsewhere to view membership favourably"). But that, to put it mildly, is no longer the case and, consequently, Salmond has changed tact. Like Gordon Brown circa 2003, he now states that Scotland will retain the pound until it is in the country's "economic interests" to join the euro.

But last night Osborne refused to guarantee that Scotland could keep sterling. In truth, this was a bit of mischievous politicking by the Chancellor (no one believes that the UK would stop Scotland using the pound) but the Treasury has warned that it could ban Scotland from printing Scottish bank notes (just as the eurozone requires all members to use identical bank notes) and ensure that it has no say over valuation decisions, a situation comparable to Kosovo's membership of the euro.

The SNP has since come out fighting, declaring that "the more a Tory chancellor tries to lay down the law to Scotland, the stronger support for independence will become" but this is uncomfortable territory for the party. A spokesman for John Swinney, the Scottish finance secretary, insisted that the currency situation was "crystal clear" but in reality it is several shades of grey.

EU law currently requires all new member states to join the euro area once the necessary conditions are fulfilled. As a briefing note by the House of Commons library states:

EU Member States, with the exception of Denmark and the UK, are expected to join the single currency if and when they meet the criteria. Five of the twelve states joining the EU since 2004 have gone on to join the euro. Whether Scotland joined the euro would have implications for its post-independence monetary policy, and the size of its liability for loans provided to countries facing sovereign debt problems.

Whether or not Scotland kept the UK's derogation from the euro would be dependent on the will of other EU member states. There is no precedent for a devolved part of an EU country becoming independent. For once, we really would be in uncharted territory.

Thus, there is sufficient legal uncertainty for Osborne to speculate that Scotland could be forced to join the euro. And that is the most devastating weapon in the No campaign's arsenal.

Update: I should have added that Sweden, of course, has no official opt-out from the euro but has not joined the single currency after voting no in the 2003 referendum. The country is not party to the ERM II Central Bank Agreement (part of the criteria for euro membership) giving it a de facto opt-out.

Should this precedent apply to an independent Scotland, it would similarly not be forced to join. But this is hardly the cast-iron guarantee that many Scottish voters will want.

George Eaton is political editor of the New Statesman.

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The Fire Brigades Union reaffiliates to Labour - what does it mean?

Any union rejoining Labour will be welcomed by most in the party - but the impact on the party's internal politics will be smaller than you think.

The Fire Brigades Union (FBU) has voted to reaffiliate to the Labour party, in what is seen as a boost to Jeremy Corbyn. What does it mean for Labour’s internal politics?

Firstly, technically, the FBU has never affliated before as they are notionally part of the civil service - however, following the firefighters' strike in 2004, they decisively broke with Labour.

The main impact will be felt on the floor of Labour party conference. Although the FBU’s membership – at around 38,000 – is too small to have a material effect on the outcome of votes themselves, it will change the tenor of the motions put before party conference.

The FBU’s leadership is not only to the left of most unions in the Trades Union Congress (TUC), it is more inclined to bring motions relating to foreign affairs than other unions with similar politics (it is more internationalist in focus than, say, the PCS, another union that may affiliate due to Corbyn’s leadership). Motions on Israel/Palestine, the nuclear deterrent, and other issues, will find more support from FBU delegates than it has from other affiliated trade unions.

In terms of the balance of power between the affiliated unions themselves, the FBU’s re-entry into Labour politics is unlikely to be much of a gamechanger. Trade union positions, elected by trade union delegates at conference, are unlikely to be moved leftwards by the reaffiliation of the FBU. Unite, the GMB, Unison and Usdaw are all large enough to all-but-guarantee themselves a seat around the NEC. Community, a small centrist union, has already lost its place on the NEC in favour of the bakers’ union, which is more aligned to Tom Watson than Jeremy Corbyn.

Matt Wrack, the FBU’s General Secretary, will be a genuine ally to Corbyn and John McDonnell. Len McCluskey and Dave Prentis were both bounced into endorsing Corbyn by their executives and did so less than wholeheartedly. Tim Roache, the newly-elected General Secretary of the GMB, has publicly supported Corbyn but is seen as a more moderate voice at the TUC. Only Dave Ward of the Communication Workers’ Union, who lent staff and resources to both Corbyn’s campaign team and to the parliamentary staff of Corbyn and McDonnell, is truly on side.

The impact of reaffiliation may be felt more keenly in local parties. The FBU’s membership looks small in real terms compared Unite and Unison have memberships of over a million, while the GMB and Usdaw are around the half-a-million mark, but is much more impressive when you consider that there are just 48,000 firefighters in Britain. This may make them more likely to participate in internal elections than other affiliated trade unionists, just 60,000 of whom voted in the Labour leadership election in 2015. However, it is worth noting that it is statistically unlikely most firefighters are Corbynites - those that are will mostly have already joined themselves. The affiliation, while a morale boost for many in the Labour party, is unlikely to prove as significant to the direction of the party as the outcome of Unison’s general secretary election or the struggle for power at the top of Unite in 2018. 

Stephen Bush is editor of the Staggers, the New Statesman’s political blog.