An independent Scotland would be denied currency union deal to share pound, admits Salmond

In a hypothetical address to the nation on the day he had pencilled in for Scotland's exit from the UK, he describes a new Scottish Central Bank considering whether the newly independent state should continue to use the pound on an ad hoc basis or create its own currency.

The picture he paints contradicts reassurances he sought to give voters in the run-up to the independence referendum 18 months ago.

He claimed Chancellor George Osborne was "bluffing" when he ruled out the SNP's plan for a currency union on the grounds it would be too risky for the rest of the UK.

The issue of the currency was seen as a major weaknesses in the SNP's economic case for independence.

The Nationalists wanted an independent Scotland to share sterling in a formal currency union, with a say in Bank of England decisions on interest rates.

Mr Salmond insisted Mr Osborne would drop his opposition to the idea in the event of a Yes vote.

But in his fictional 'independence day' address, he appears to accept that would not have happened.

He says Scotland would continue to use sterling immediately following independence.

But he adds: "Our Scottish Central Bank under the leadership of Professor John Kay has set out the options for the future but whether we continue to use sterling or develop our own currency at a parity with sterling, asset values will remain protected.

"The refusal of former Chancellor George Osborne to agree to our offer of a shared currency was a factor in the turmoil which has recently engulfed the English Conservative Party.

"However, this and other negotiations on the distribution of other assets and liabilities carried the not insubstantial benefit of relieving our new state of close on £150billion of accumulated UK debt and the interest payments thereon."

The prospect of using the pound without a formal deal - an option known as Sterlingisation - was widely criticised by economists during the referendum campaign.

They argued it was not appropriate option for an economy the size of Scotland's.

Some economists also advised against refusing to take on the country's share of UK national debt, arguing it would increase the costs of borrowing.

Alastair Cameron, director of the pro-UK campaign group Scotland in Union, said: "Alex Salmond told us an oil boom would fund all of his pre-referendum promises and instead we found out we would have a multi-billion pound deficit.

"Now he has admitted his currency union was always unlikely despite dismissing warnings at the time as scaremongering.

"How can we trust Alex Salmond and the independence movement ever again when they tell us one thing before the referendum and only admit the truth afterwards?"

He added: "While Alex Salmond indulges his independence fantasies, the people of Scotland have moved on and are thankful we have the strength of the UK to help us through our current economic challenges."

Mr Salmond's insights follow an interview with the BBC in which he backed the continued use of sterling but said the SNP needed a fresh approach to the currency issue.

Referring to Mr Osborne's threat to block a currency union, he said: "I think the argument you have got to put forward is one which can withstand any position adopted by your opponents.

"So, you mustn't allow yourself to be gazumped by your opponents.

"Now, I think sterling is the right currency for Scotland, because of a whole range of reasons that we gave during the campaign."

He said the case for independence needed "refurbishment".

Scottish Labour's Iain Gray said: "As far as I can make out he seems to be arguing again for Sterlingisation, a proposal that would have meant Scotland would have become an independent country and at that very moment given up control over its currency and much of its fiscal policy.

"That didn't make sense in 2014, the majority of the Scottish public didn't think it made sense, and it still doesn't make sense now."