Better Together adviser admits: advice ruling out currency union may be wrong

A former civil servant who joined the No campaign in January, Gallagher was asked about a memo written by Treasury Permanent Secretary Sir Nicholas Macpherson warning that the SNP's plan for a currency union would mirror the eurozone and therefore prove unstable.

In an exceptional step, the advice was published on February 13, just two days after it was written, to coincide with the Chancellor and his Labour and Liberal Democrat counterparts ruling out a formal currency union for the first time.

In normal circumstances, such a confidential memo would have been kept secret for 30 years.

Its release prompted accusations that, instead of observing the civil-service code of strict neutrality, the Treasury had become politicised.

Alex Salmond also insisted all three unionist parties were bluffing.

The PASC is now holding an inquiry into civil service impartiality and referendums.

Gallagher, who has a history of making remarks unhelpful to the No campaign, was asked whether Macpherson's advice had been impartial.

He replied it had been "perfectly reasonable" in nature, but did not say he agreed with it. He said: "I think the advice met the standards of the civil service code. It was based on evidence. It was objective. It might be right, it might be wrong - that is a different question."

Gallagher, a fellow of Oxford University's Nuffield College, has challenged No campaign messages before.

Two years before Osborne's intervention on the pound, Gallagher told a Lords Committee that the UK was "an optimum currency union" and that "having one currency makes a lot of sense".

Last July, when Better Together was warning that an independent Scotland would have to join the eurozone and the Schengen free travel area as a new EU member, Gallagher wrote that Scotland would avoid having to join the euro and Schengen.

The SNP said his remarks to the PASC suggested Gallagher was equally unimpressed with the Treasury's advice on a currency union.

MSP Kenneth Gibson, convener of Holyrood's finance committee, said: "The fact that a senior member of the No campaign is suggesting the Treasury advice could well be wrong underlines the extent to which the bluff and bluster on the pound is devoid of any credibility."

Elsewhere in his PASC evidence, Gallagher rubbished the SNP government's White Paper on independence, saying it crossed a line into manifesto promises.

He said: "I will put my cards on the table: I think it is a rotten White Paper and it has rotten arguments but, then, I am against independence."

The day after Gallagher's evidence, Macpherson told the PASC it had been his decision and his "duty" to make his advice public, and denied he had been leaned on to write the memo to suit a political agenda.

The Sunday Herald revealed last week the Treasury had "no record" of when Macpherson first warned Osborne against a currency union, either verbally or in writing, before the memo of February 11.

The lack of a paper trail for the date led the SNP to claim the advice had been cooked up for political reasons to help the Better Together campaign in the independence referendum.

An unnamed Coalition minister was reported last month as saying "of course" an independent Scotland could share the pound - perhaps in return for Trident remaining on the Clyde.

It was also reported that rejection of a currency union had been engineered by Better Together's chairman, the former Labour chancellor Alistair Darling, to boost the No campaign and undermine Alex Salmond.

Darling and Macpherson "meet socially from time to time", according to the Treasury.

A Better Together spokesperson said: "A currency union would not happen. It has been ruled out by the Prime Minister, Chancellor, Chief Secretary to the Treasury, shadow Chancellor and the Permanent Secretary at the Treasury. Just this week a new poll showed that people in the rest of the UK are overwhelmingly against it."