ALEX Salmond faces a consumer backlash on mortgages if, following a Yes vote, the SNP Government opted to use the pound without a currency union with the rest of the UK, Danny Alexander has warned.
Under so-called "sterlingisation", an independent Scotland would continue to use the pound but without the insurance policy of a lender of last resort ie the Bank of England.
While all the main UK parties have ruled out a currency union, the First Minister has forcefully maintained this is the best option for an independent Scotland but recently he insisted a new Scottish state would use sterling "come what may".
It is the biggest indication yet that sterlingisation is, in fact, Mr Salmond's Plan B, albeit for a transitional period.
The Chief Secretary to the Treasury pointed out how, should Scots vote Yes, then mortgage interest rates would be largely determined by the base rate set in a foreign country, by the Bank in London.
The general expectation is that in the coming years mortgage interest rates will rise as the base rate is increased from its historically low level of 0.5 per cent.
Mr Alexander said: "If Alex Salmond's Plan B is to use the pound like Panama uses the dollar, then this would place severe constraints on the Scottish state.
"There would be no central bank to bail out financial institutions in times of crisis or to back Scotland's mortgages, savings and pensions.
"Interest rates would be set by the Bank of England for the rest of the UK with no consideration of economic conditions in Scotland.
"A separate Scotland's increased exposure to volatile oil prices means that interest rates set for the rest of the UK are unlikely to be right for Scotland".
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