Former chancellor says voters in rest of UK could block currency union with Scotland if it voted for independence
Alex Salmond’s plans to form a new currency union with the rest of the UK after an independence referendum could be blocked by voters in the rest of Britain, Alistair Darling has warned.
The former chancellor, who will launch a campaign opposing Scottish independence next week, said voters might ask for a fresh referendum across the UK to vote on such a deal, which would involve the rest of Britain in effect sharing economic and monetary policy, and the Bank of England, with a foreign country.
He said it was “surreal” that the Scottish government had not yet asked whether voters or MPs in England, Wales and Northern Ireland would agree to a sterling currency union after the referendum.
Speaking after he addressed a conference run by the Scotsman newspaper on the economics of independence, Darling told the Guardian there was a clear principle among all the major parties that joining a new currency, such as the euro, would be decided at a referendum.
“It’s the settled view amongst all the political parties at Westminster that if anything changes in our currency, people will be asked,” Darling said. “I’m not saying this will happen at all but all I’m saying is that you can’t automatically assume that the rest of the UK will want to enter into the arrangements that the nationalists are talking about.”
Darling was speaking after a poll by Ipsos Mori for the Times and the Sun found that support for independence had fallen from 39% in January to 35%, based on Salmond’s preferred but controversial question: “Do you agree that Scotland should be an independent country?”
That figure is very close to other recent polls, but follows the launch of the SNP’s official Yes Scotland campaign for independence in late May. Figures inside the SNP admit the campaign was launched too early and without enough planning, and has since failed to gain momentum.
John Swinney, the Scottish finance secretary, told the conference an independent Scotland would be in a far stronger position to put in place economic policies best suited to its needs, but its economic strength would benefit the rest of the UK.
He said Scotland’s economy was one of the strongest within the UK with or without oil, while its North Sea oil and gas revenues, and its £4bn-a-year whisky exports, were valuable assets for the UK balance of trade. As England’s closest trading partner, currency union would benefit both countries, he said.
“Our economies share broadly the same structures with a free flow of goods, services, labour and capital across the border which is in contrast to many in the euro area,” he said.
“A sterling zone will provide businesses both in Scotland and the rest of the UK with the certainty and stability for trade, investment and growth. Away from the heat of the constitutional debate it is not in the interests of any party or part of the UK to oppose a sterling zone.”
Darling said setting up a new currency union and allowing Scotland to help run the Bank of England after winning independence was mired in significant political and economic questions for Scotland and the rest of the UK.
A currency union would require agreements on interest rates, debt levels, borrowing limits, taxation rates and tax regimes between both countries, in effect tying the hands of an independent Scotland. But that would mean the Westminster parliament, the UK government and voters in the rest of Britain accepting that arrangement.
At the same time, however, Salmond’s government is planning to cut corporation tax rates to attract more jobs and investment, competing directly with the rest of the UK, its biggest and nearest trading partner, Darling said.
“There’s something surreal about this: nobody is asking people in England, Wales and Northern Ireland what they think,” he said.
“It’s entirely conceivable they may think: ‘Let’s make it the Bank of England in fact as well as in name.’ Nearly all its capital comes from the UK Treasury. It is not a free-standing, free-thinking organisation.
“Although it’s independent in terms of fixing interest rates, on the rest of it it’s not independent. The bank governor has to ask the chancellor for everything, so the idea that you can simply say: ‘We in Scotland want to change things, therefore you in England, Wales and Northern Ireland have to change things as well to fit in with us …’ Think of any English politician trying to sell that to his or her electorate. They will find that quite difficult.”
He said this was a central flaw in the Scottish National party’s plans. Voters in Scotland would ask themselves whether voting for that kind of proposal gave Scotland any real independence, and the eurozone crisis showed that currency unions often led to closer political and economic ties, not weaker ones.
“I just wonder why, if you believe that the source of your problems is being in political and economic union in the first place, why you would want to get yourself into a situation where you actually go around in a circle and end up back where you started a few years further down the line,” Darling said.