Scottish independence carries huge economic risk, says Alistair Darling
Vote would backfire, says former chancellor, as he urges Treasury to publish secret studies on impact of a Scottish split
The Scottish people will take a “massive risk” with their economic future if they vote for independence, former chancellor Alistair Darling has warned.
In an interview with the Observer, Darling says that if the Scots vote to leave the 300-year-old union and then keep sterling, adopt their own currency, or join the euro, the country will be plunged into unparalleled economic uncertainty.
“The downsides are immense, the risks are amazing, the uncertainties I just don’t think are worth gambling on, Darling said. “There are times when you should gamble and there are times when you shouldn’t.”
He said that the world was now in a period of deep economic trauma and shock that would probably endure for many years. It was clear that Scotland’s future would be more secure at such a time as part of the United Kingdom.
If Scotland retained sterling, as Scottish first minister and SNP leader Alex Salmond has suggested would happen in the event of a vote for independence, Darling said it would find itself in a mini-version of the eurozone, unable to set its own interest rates, tax rates, or spending policies.
“This is precisely the argument that is being engaged in the eurozone at the moment,” he said. “If you have a single currency area [for sterling] you come back to having an economic if not a political union [with London].
“So you go through all the trauma and expense of leaving the union, only to come back and discover that because you want to be part of this common currency you are back to where you were. I just don’t see the sense of that.”
Darling spoke out following a week in which the issue of Scottish independence has shot to prominence after David Cameron demanded last weekend that Salmond come clean over his plans for a referendum.
The former chancellor, who correctly predicted the depth of the current economic downturn in 2008, rejected suggestions that he should lead the “no” campaign before the referendum, which Salmond says will take place in 2014. But he said he would play a prominent part in highlighting the dangers to Scotland of a split at a time of huge economic uncertainty made worse by the problems of the eurozone.
If Scotland were to go down another route and adopt its own new currency it would also be taking a gamble of incalculable proportions because no one could be certain of the currency’s value on the launch date, Darling said. “You would be a brave country indeed to say, here is our new currency. We are not actually sure how much it is going to be worth after the first day’s trading. It would be one hell of a risk.”
Equally, splitting off from the UK and then joining the euro would bring economic risk and mean less independence rather than more, as the Scottish budget would be monitored by Brussels and interest rates set in Frankfurt.
On Saturday fears about the impact of the eurozone sovereign debt crisis deepened after ratings agency Standard & Poor’s stripped France and Austria of their coveted AAA rating, and downgraded seven other eurozone member states. The agency’s move came 100 days before the first round of the French presidential election, when Nicolas Sarkozy is expected to seek a second term.
The prime minister, François Fillon, said a downgrade had been expected but was badly timed. It was, he added, “an alert that should be neither over-dramatised nor underestimated”.
Darling is now seen by the unionist camp as the man best able to spell out the economic dangers of a split to the Scottish people. In the interview he called for the Treasury to publish, as soon as possible, extensive work he believes it is conducting on the economic implications of independence. “I have every reason to believe that this work is under way.”
He said that while he was sure Scotland could survive outside the United Kingdom, he was in no doubt that its best interests would be served by staying inside. Salmond’s preferred option of keeping sterling would mean, he said, that Scotland’s monetary policy would be run by a “foreign country” as it would not have its own central bank, but come under the control of the Bank of England.
He accused David Cameron of “cack-handed” behaviour last weekend when the prime minister reignited the independence issue during a TV appearance. This had allowed Salmond to claim the English Tory-led government was interfering in Scottish affairs and stir up nationalist sentiment in the process.
On Saturday it emerged that Scottish secretary Michael Moore had asked Salmond to meet him in Edinburgh for the first formal talks between the governments on the independence referendum. Moore and ministers from several government departments have also been asked by Cameron to make the case for Scotland to stay in the UK.
Moore, who has suggested a meeting on Thursday with Salmond, said: “We want to have this referendum made in Scotland and we can start the work in the nation’s capital this week.”
The Scottish secretary will address the CBI in Edinburgh on Monday and the advocate general will set out the legal situation with the referendum at Glasgow University on Friday.
Moore added: “Since Tuesday, when I set out our plans for how Scotland can hold a legal referendum, I have spoken to the first minister and asked him to meet for talks. I have also written to him.
“I was pleased to hear him suggest talks with the UK government and I want us to meet in Edinburgh this week to start making progress. We should not waste any more time talking about talks. Let’s get around the same table and get cracking with the arrangements for the most important decision Scotland will ever make. The sooner we sort out the process, the sooner we can get into the real debate about Scotland’s future.”
Darling said independence would raise other huge economic question for Salmond, including whether he would seek to take the Royal Bank of Scotland under his wing and if so, how much of its liabilities the country would agree to take on.
“They could leave it behind. But the rest of the UK could say it is grossly unfair that you ask us to take on the burden of a Scottish bank that made a colossal mistake in Scotland. And you are saying tough luck you have got to take the burden.”