A senior UK Government minister has branded claims that an independent Scotland could be part of a sterling currency union “fantasy”.
Chief Secretary to the Treasury Danny Alexander said he, Chancellor George Osborne and shadow chancellor Ed Balls were not bluffing when they ruled out SNP plans to keep the pound.
The Highland MP told a group of MSPs there was “no point pretending that it is something that could be agreed”.
Mr Alexander said: “What is being proposed is to create a currency union in circumstances of disintegration and that is something that would amplify economic risk for both Scotland and the rest of the UK to an unacceptable degree.”
He added that continuing to state there would be a currency union following a Yes vote was “not a credible position” for SNP ministers to take.
The MP said: “I really don’t think that people should accept this line that somehow this is a bluff that will change after the referendum.
“The idea that any of us would have chosen to make the statement we did, based on the rigorous analysis that was published, and plan to change our minds a few months later, I am afraid, is just a fantasy.”
Mr Alexander claimed a new state would have to either establish a separate currency as a staging post to joining the euro or opt for “sterlingisation” outside a formal union.
“The advantages of a Scottish currency would be the power to set your own interest rates, the ability for your exchange rate to fluctuate,” the MP added.
“But the weaknesses of that option would very much be the damage to trade, and the extra barriers which would be created between Scotland and the rest of the UK.”
Mr Alexander warned that “sterlingisation” could be “very dangerous” as it would leave Scotland without a lender of last resort – the Bank of England – and this would be “critically important” given the size of its financial sector.
Highland SNP MSP Mike MacKenzie said he was disappointed that the MP had failed to provide figures on the cost to UK businesses post-independence if a currency area was not agreed.
“It is simply not credible for the anti-independence parties to have taken the stance they have on currency without expecting to have to justify their claims,” added the Nationalist.