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.

How Jim Murphy's mistake cost Labour - and helped make Ruth Davidson

Scottish Labour's former leader's great mistake was to run away from Labour's Scottish referendum, not on it.

The strange revival of Conservative Scotland? Another poll from north of the border, this time from the Times and YouGov, shows the Tories experiencing a revival in Scotland, up to 28 per cent of the vote, enough to net seven extra seats from the SNP.

Adding to the Nationalists’ misery, according to the same poll, they would lose East Dunbartonshire to the Liberal Democrats, reducing their strength in the Commons to a still-formidable 47 seats.

It could be worse than the polls suggest, however. In the elections to the Scottish Parliament last year, parties which backed a No vote in the referendum did better in the first-past-the-post seats than the polls would have suggested – thanks to tactical voting by No voters, who backed whichever party had the best chance of beating the SNP.

The strategic insight of Ruth Davidson, the Conservative leader in Scotland, was to to recast her party as the loudest defender of the Union between Scotland and the rest of the United Kingdom. She has absorbed large chunks of that vote from the Liberal Democrats and Labour, but, paradoxically, at the Holyrood elections at least, the “Unionist coalition” she assembled helped those parties even though it cost the vote share.

The big thing to watch is not just where the parties of the Union make gains, but where they successfully form strong second-places against whoever the strongest pro-Union party is.

Davidson’s popularity and eye for a good photo opportunity – which came first is an interesting question – mean that the natural benefactor in most places will likely be the Tories.

But it could have been very different. The first politician to hit successfully upon the “last defender of the Union” routine was Ian Murray, the last Labour MP in Scotland, who squeezed both the  Liberal Democrat and Conservative vote in his seat of Edinburgh South.

His then-leader in Scotland, Jim Murphy, had a different idea. He fought the election in 2015 to the SNP’s left, with the slogan of “Whether you’re Yes, or No, the Tories have got to go”.  There were a couple of problems with that approach, as one  former staffer put it: “Firstly, the SNP weren’t going to put the Tories in, and everyone knew it. Secondly, no-one but us wanted to move on [from the referendum]”.

Then again under different leadership, this time under Kezia Dugdale, Scottish Labour once again fought a campaign explicitly to the left of the SNP, promising to increase taxation to blunt cuts devolved from Westminster, and an agnostic position on the referendum. Dugdale said she’d be open to voting to leave the United Kingdom if Britain left the European Union. Senior Scottish Labour figures flirted with the idea that the party might be neutral in a forthcoming election. Once again, the party tried to move on – but no-one else wanted to move on.

How different things might be if instead of running away from their referendum campaign, Jim Murphy had run towards it in 2015. 

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to British politics.

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