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Nobel economist: Scots would be right to refuse to share UK debt if London won't share pound

A Nobel Prize-winning economist has backed the Scottish Government's threat to renege on its proportion of the UK national debt if Westminster refuses to share the pound with an independent Scotland.

All major UK parties have ruled out a currency union but this has been dismissed as pre-referendum posturing by the SNP, who insist Scotland will keep the pound with the backing of the Bank of England.

Sir James Mirrlees, a Nobel laureate and a member of the Scottish Government's Council of Economic Advisers, has said "Britain inherits the debt" if it refuses a currency union.

"It is hard to see how Scotland can take on the debt unless there is a full currency union," he told the Daily Telegraph.

"This is implied by the hard line taken by Westminster. It is Scotland's bargaining position."

Fellow Council adviser Crawford Beveridge said last week that it was possible that Scotland could renege on its debt after independence.

He said: "One would expect that if we were to bear a proportional burden of historic liabilities then we would reasonably expect a reasonable share of the assets.

"If we were unable to get that agreement it is likely to lead to a lower debt share, perhaps even a zero debt share, than we initially set out.

"However while a low debt share may appear to be attractive, it would not be in the interests of the UK. Hence that is why a reasonable, sensible engagement to share assets and liabilities is likely, despite the posturing we see now."

A third Council adviser and Nobel laureate, Joseph Stiglitz, is making a public appearance today as part of the Edinburgh Book Festival.

Their intervention follows a weekend of political wrangling over Scotland's currency options.

Former European Council president Ruairi Quinn, who drafted the economic criteria for joining the euro, said that Scotland will have to agree to join the euro as a condition of joining the European Union.

Shadow chancellor Ed Balls reiterated that a currency union is "off the table" and said the euro may be the "least worst of all the bad options", insisting sterlingisation would lead to a flight of financial services and that a separate currency would be "very expensive, very risky".

Scottish Liberal Democrat leader Willie Rennie said Alex Salmond must provide further clarity on his currency plans in the second live TV debate tonight, amid recent comments by the First Minister that sterlingisation could be a "transitional option".

A spokesman for Scottish Finance Secretary John Swinney said: "The pound is as much Scotland's pound as the rest of the UK's, and a currency union is in the interests of both - which is why the Scottish Government proposes it, and which is why it will be agreed after a Yes vote.

"The Fiscal Commission Working Group - which includes two Nobel laureates - has addressed these issues in detail, and we have always said that there would need to be agreement on borrowing and debt."

Speaking on behalf of Better Together, Labour's shadow business minister Ian Murray said: "The well respected Fiscal Affairs Scotland highlight that a currency union would mean handing over control of Scotland's economy to what would then be a foreign country. That would be bad for Scotland and our economy.

"We know a currency union isn't going to happen and with people just about to begin casting their votes Alex Salmond has to tell us what his Plan B is."

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