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Osborne's threat shows independence is viable

John Swinney is right about one thing.

The Treasury has indeed decided to "make things sound as difficult and obstructive as possible". The argument over the currency that might be used in an independent Scotland is essentially political, not economic. But then, what did the Finance Secretary expect?

Mr Swinney, a moderate man, probably understands exactly what George Osborne is up to with his Scotland Analysis: Currency and Monetary Policy report. In effect, the Chancellor has come to Glasgow and said: "Vote for independence if you like. But in any sense that matters, we won't allow it." In some circles, it's known as a threat.

Choose independence and hope for a formal currency union, says Mr Osborne, and we will demand control over the essentials of your economy. In fact, we will demand more control than the Germans exert over the eurozone. You will have to abide by every crackpot austerity scheme I come up with.

As Mr Osborne inquired sweetly of his Glasgow audience: "Would a newly independent Scottish state be prepared to accept significant limits on its economic sovereignty? To submit its economic plans to Westminster before Holyrood?" If your taste runs to historical melodrama, the use of the word "submit" is fascinating.

In the meantime, the venerable scare story of disappearing Scottish banknotes is revived. The word "euro" is thrown around as voodoo to conjure images of Greece and Cyprus. The costs, difficulties, problems – the sheer impossibility – of a separate Scottish currency at the mercy of bond dealers are invoked. Those would be London bond dealers, by sheer coincidence.

Meanwhile, everyone from the Treasury's number crunchers to the Little England patriot in the street offers the view that vast oil reserves are, in essence, more bother than they're worth. "Volatile", you see. No other revenue stream flowing into Mr Osborne's Treasury – let's say corporation tax – ever fluctuates in value. Except when it does.

It is a new if predictable development in the constitutional argument. Alistair Darling, the former Chancellor, has taken to using the word freedom, for example, in a manner that is not, frankly, like him. He does it in a kindly way. A currency union with the remaining UK would not be proper freedom, he explains. Mr Darling does not say why London would choose to be vindictive.

But let's be fair. The question is real enough. Why would a Treasury whose primary duty is to England, Wales and Northern Ireland give a stuff about the interests of an independent Scotland? Why would it leave itself vulnerable through a "eurozone arrangement" by which the smaller partner could be picked off and put the rest at risk?

The SNP's answer turns on the nuisance of all that still-abundant oil and gas. Those resources have been propping up the British balance of payments for decades. What sane Chancellor would throw that away, or give up the benefit of £45 billion in goods and services sold annually to Scots? The answer, very probably, is a Chancellor who believes that even if his side loses a referendum he can bully his way to keeping control of all of these things.

That, of course, is the political heart of the matter. Contrary to much of the propaganda, Scotland is a prize worth keeping. It is not some broke little country incapable of contemplating independence. It has assets that are valued, and not all of those are in the North Sea. A Chancellor who believed his accounts would be improved by Scotland's departure from the UK would not be going to the trouble to which Mr Osborne has gone.

The argument cuts both ways. The Chancellor's threats are clear evidence that an independent Scotland is viable. Even a currency union would work, if that's your taste, given goodwill on both sides. Mr Osborne has just made it clear that the prize is too valuable to let such a sentimental notion get in his way.

Before everyone gets too carried away by thoughts of the Chancellor's iron heel, Scotland twinned with Cyprus, or the possible future value of the groats in Scottish pockets, a few pertinent facts are worth remembering. Comparisons between Scotland and Norway are far from exact, sadly for the SNP, but they are far from fanciful.

Here we have a small, oil-rich, north European country with its own currency. It is not a member of the EU, but does most of its trade with the union. It is part of the European economic area and a member of the European Free Trade Association. A large part of its economy depends on a volatile trade in mineral resources, but somehow it struggles along. Norway, for the benefit of clarity, is not a fantasy country.

If you chose to believe the No campaign in which Mr Osborne is a significant player – though generally kept out of sight, for obvious reasons – Norway should not exist. It should certainly not survive. The idea that it could survive and prosper, as Norway has a habit of doing, should be beyond the bounds of credibility.

For Scotland and the Yes campaign, the Norwegians offer one clear lesson. An independent currency backed by natural resources is perfectly feasible. If Mr Osborne's attitude is any guide, it might be inevitable. As the economist Jim Cuthbert has argued recently, indeed, the Chancellor's handling of the British economy and the inherent instability of that economy make currency union a deeply suspect notion.

Mr Osborne confirms that it would be worse than that. Any idea that independence can be settled amicably has been put at risk by a figure who comes to Glasgow offering threats and menaces. The idea, obviously enough, is to undermine the SNP by putting around the belief that Alex Salmond could be leading us into a hellish fight. That would only be true if Mr Osborne so chooses.

Personally, I'd be inclined to suggest that an independent Scotland should certainly proceed with plans for a currency union. My vote is that we adopt the Norwegian krone. It would make perfect economic sense and disconcert the Chancellor, the markets and the EU mightily. Just kidding, of course. Up to a point.

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