In a provocative speech to business leaders in Glasgow last night, a defiant chancellor said the lesson of the Eurozone crisis was that it was not possible to have currency union without full political union.
“In a world in which a separate, independent Scotland wished to pursue divergent economic policies, what mechanism could there be for the Bank of England to set monetary policy, as it does now, to suit conditions in both Scotland and the rest of the UK?” he asked.
But Osborne still said he supports the Scottish government’s plans to hold a referendum, respecting the country’s right to decide its own future.
The chancellor also argued that removing obstacles to private sector growth would be good for the long-term health of the economy.
“A far-reaching programme of supply side reform to restore our lost competitiveness and deliver real prosperity for the future instead of the illusion of prosperity built on debt” should go alongside a loose monetary policy and a responsible strategy on government spending, he said.