When the triumvirate of George Osborne, Ed Balls and Danny Alexander pledged earlier this year to veto a currency union with an independent Scotland many questioned their judgement. Such “bullying” tactics, it was said, would backfire and only encourage the Scots to vote for separation. For a period, as the polls narrowed, it appeared the critics were right.
But the events of the last few days have vindicated Westminster’s stance. It was the currency question, more than any other, that had Alex Salmond on the ropes in his debate with Alistair Darling on Tuesday and he has not regained his poise since. With all three of the main parties adamant that there will be no currency union, Salmond is torn between insisting they are bluffing (they aren’t) and declaring that Scotland would continue to use the pound regardless (just as Panama and Ecuador use the dollar).
“It is Scotland’s pound. It doesn’t belong to George Osborne, it doesn’t belong to Ed Balls. It’s Scotland’s pound and we are keeping it,” he said at First Minister’s questions yesterday. It is what this would entail that means voters are stubbornly refusing to change sides (the Yes campaign continues to trail by a double-digit margin). Scotland would be left with no central bank, no lender of last resort (the role currently filled by the Bank of England) and no control over its interest rates.
As Ed Miliband said in Scotland today: “On Tuesday night Alex Salmond didn’t have an answer on the pound. The currency that Scotland uses is crucial for Scotland’s future. Nobody claiming to be a social democrat who cares about Scottish pensioners, Scottish families and Scottish businesses should dare take this risk without a currency plan. If you care about social justice in our country, you can’t leave the economics to guesswork.
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“That’s why businesses and families are demanding answers on the currency. Those at the top can move their money across the border and keep the pound. We know that the people who would stand to lose most from making this decision, are those who have the least. It would be working people, small businesses across Scotland who would be left to deal with the consequences of no Plan B.”
In desperation, Salmond continues to threaten to default on his country’s share of the UK’s national debt if the government vetoes a currency union. But any default would render Scotland an economic pariah, destroying its creditworthiness at a single stroke and preventing it from raising the funds it needs on the international money markets.
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For all this, it is hard to see how Salmond could have handled the issue better. The alternatives of a new currency and the euro are even less attractive to voters than his “crossed fingers” approach. But that is only further proof of why it’s wrong to raise the question of independence in the first place.