An independent Scotland cannot continue to use the pound without terrible consequences for it and for the rest of the UK, the Scottish affairs committee of MPs claimed today.
In a strongly-worded report, the group of backbenchers argues such a set up would mean the new Scottish government immediately handing control of interest rates and other economic powers to the country it has just left.
And it said such a deal would also be damaging to the remainder of the UK, which could end up having to bail out the new nation should it get into financial difficulties – in the same way as Greece was bailed out by the rest of the Eurozone.
“The Scottish government tries to give the impression that a currency union is still a possibility. It is not. This parrot is dead,” said committee chairman Ian Davidson MP.
“The Scottish government must now explain how it can keep all its other promises; on defence, jobs, pensions and everything else, while financing them with some kind of new untried currency in an uncertain economic and political environment.”
However, the Scottish government and the Yes campaign maintain the country will continue to use the pound as part of a new sterling area, if the state becomes independent.
“Scotland is the second largest export market for the rest of the UK. It would be damaging to jobs in England, Wales and Northern Ireland, and to the economy of the rest of the UK, if Scotland did not continue to use the pound,” the campaign argues.
It also reassures borrowers that interest rates will continue to be set by the Bank of England under this scenario.
All three main parties’ finance heads – George Osborne, Danny Alexander and Ed Balls – have argued that they will not allow Scotland to use the pound if they are involved in negotiations after September’s vote.