No currency union if Scotland votes Yes, says Miliband

Labour leader says decision is based on same reasons for UK’s rejection of euro

Labour leader Ed Miliband says that the poorest people stand to lose the most if an independent Scotland loses the pound. Photograph: Andrew Milligan/PA Wire

Labour leader Ed Miliband says that the poorest people stand to lose the most if an independent Scotland loses the pound. Photograph: Andrew Milligan/PA Wire

Sat, Aug 9, 2014, 01:00

Labour leader Ed Miliband has warned

Scots that he cannot “support a euro zone-style currency union” with Scotland if it votes for independence.

His declaration in Glasgow yesterday came just 24 hours after Scottish National Party leader and First Minister Alex Salmond insisted that Scotland “will keep the pound if it votes yes” in the referendum.

“We did not join the euro zone for clear and correct economic reasons,” said Mr Miliband. “It is for the same reasons the rest of the UK should not enter into a currency union with an independent Scotland.”

Targeting Labour supporters, Mr Miliband said the currency question is not one that most concerns Scottish-based banks but rather Scotland’s poorest.

Warnings

“That risk is going to be borne not by the richest, who can move their money around, but by working people,” he told the Glasgow Chamber of Commerce.

Companies are biding their time, but a number have already warned that independence could create serious currency problems. For engineering company Weir – advocating a No vote – independence would create some uncertainty but few definite benefits.

The bus company, Stagecoach – chaired by Brian Souter, one of stronger supporters of a Yes vote – voiced similar concerns.

However, Scotland’s finance minister John Swinney said Mr Miliband had highlighted the weakness in the case of those opposing Scotland’s use of sterling.

“Under pressure, Ed Miliband has admitted that if he does not agree to a currency union, then businesses in the rest of the UK would have to pay higher costs to do business with Scotland.

“Mr Miliband would have to say to the rest of the UK, ‘Look we are going to put a barrier up between Scotland for your trade, which would increase the cost of business in the rest of the UK by £500 million or more’,” said Mr Swinney.

Banks move to London

The National Institute of Economic and Social Research said Scotland’s major banks would be forced to leave Edinburgh, if Scotland used sterling without agreement.

Large banks, such as RBS and Lloyds, would have to move their headquarters to London so that the Bank of England would continue as “banker of last resort”.

Mr Salmond’s threat to abandon his share of the UK’s debt would see Scotland frozen out of international lending markets and EU membership, it said.

“If Scotland becomes independent, there is no question that it could use sterling. But this looks likely to be without the backing of the UK government and therefore without the Bank of England,” says the report.

“The rare examples of countries with informal currency unions . . . and a large and successful financial sector, have very strong government finances. The strength of a financial system reflects the strength of the government.”