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Currency threat may well backfire

This has been an important week for Scotland.

Scottish voters have been given much to reflect upon. According to the Westminster masterplan those reflections will lead to the conclusion that the SNP's currency policy is in tatters and therefore the whole case for independence has been fatally undermined.

It is, however, likely that the intervention last week by the Chancellor George Osborne, and the support he received from the other two main parties at Westminster, will have an entirely different effect.

The Chancellor's day trip to Edinburgh, during which he denied Scotland the use of the pound if it votes Yes, was at the very least ill-advised. The impression of a haughty overlord laying down the law to weak underlings was bad enough. Worse than that, his economics were unsound; and his threat ultimately baseless.

As the Wall Street Journal later pointed out, the Chancellor is wrong to assert that Scotland could not use the pound after independence. It has every right to do so, albeit not necessarily within the formal currency union Alex Salmond would prefer.

His threat - and it is all but impossible to see it as anything other than a threat - followed hard on the heels of other Coalition claims that were later proved to have no basis in fact.

Those include dire warnings by Business Secretary Vince Cable that the Royal Bank of Scotland would move out of Scotland if it were to vote for independence. Unfortunately for Cable, RBS chief executive Ross McEwan later insisted not only that the bank had no such plans, but that he had not discussed the matter with the Business Secretary.

The truth is that if Scotland was somehow forced to have its own currency the outcome might come as a surprise to the Westminster establishment. Norway and Denmark have their own currencies and are two of the wealthiest and most stable countries and weathered the 2008 banking crash largely unscathed. Compare and contrast with the UK, which has run up a debt of £1.2 trillion bailing out the City of London.

An independent Scotland could have lower debt, higher GDP per head and cheaper pensions, according to the National Institute for Social and Economic Research. It could have a more stable and equitable society, with no bedroom taxes, nuclear weapons or NHS privatisation.

The Scottish government should have no qualms in pointing out that an independent Scotland would have many currency options, and would seek to negotiate the best arrangement.

The Chancellor has damaged the unionist cause. He has misjudged the mood of Scotland. He is wrong to resort to threats and intimidation. And the Labour shadow chancellor, Ed Balls' support for the Tory chancellor will do Johann Lamont little good. Many Labour and Scottish LibDem voters were saddened by their UK party leaders joining in the rejectionist front. Far from being dealt a hammer blow, the real referendum campaign starts here.

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Local government

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