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Salmond's threat to ditch debt in sterling struggle

AN INDEPENDENT Scotland would walk away from the UK without paying a share of national debt unless it was able to keep the pound as part of a sterling zone, Alex Salmond has said.

driving FORWARD: Alex Salmond and Nicola Sturgeon launched their economic report at Alexander Dennis coach builders in Falkirk. Picture: Jeff J Mitchell
driving FORWARD: Alex Salmond and Nicola Sturgeon launched their economic report at Alexander Dennis coach builders in Falkirk. Picture: Jeff J Mitchell

In a clear warning, the First Minister said he regarded sterling and the Bank of England as assets to be shared between the UK and a go-it-alone Scotland.

He said an independent Scotland would not take on a portion of the UK's trillion-pound national debt unless Westminster agreed to a currency union – a move Chancellor George Osborne has described as "unlikely".

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The First Minister was speaking after the launch of a Scottish Government paper highlighting strengths in the country's economy but arguing growth had been undermined by UK policy decisions going back decades.

The document said an independent Scotland "could not reasonably be expected" to shoulder a share of the UK's national debt "if Westminster insists Scotland is not entitled to a share of assets".

Mr Salmond insisted: "The financial assets of the country include sterling and sterling reserves: they obviously do. We have made the point that sterling is our currency as well as the rest of the UK's, just as the Bank of England is our central bank as much as the rest of the UK's."

The UK's national debt was £1.1 trillion at the end of the 2011/12 financial year.

The Scottish Government says Scotland's per capita share of the debt would be £92 billion, though ministers have also calculated an alternative "historic" share of £56bn.

The SNP has called for a currency union with the rest of the UK if Scots back independence in next year's referendum. UK ministers have refused to rule out the idea, although Chancellor George Osborne has claimed a deal would be unlikely because it would pose added risks to the economy of the remaining UK.

Yesterday Mr Salmond insisted that a sterling zone would be "a reasonable way to proceed" and would be seen as a common-sense plan by both countries if Scotland voted Yes.

But, backing up his threat, he said Scotland would not be damaged if it became independent without taking on national debt.

Dismissing claims by the Chief Secretary to the Treasury Danny Alexander that Scotland would be viewed as a "basket case" if it refused to take on a share of debt, he said: "This has no comparison at all with an international default situation."

SNP ministers say a currency union would be negotiated in the event of independence and have resisted pressure to say whether they have a "Plan B" for a Scottish currency if a deal could not be struck.

Yesterday's report – titled Scotland's Economy: The Case for Independence – accepted that a sterling zone would limit an independent Scotland's borrowing and debt levels.

However it claimed an independent Scotland would be in full control of its tax policies. It highlighted previous claims that cutting corporation tax, the main levy on business profits, below UK levels would boost the economy.

The claims contradicted UK Treasury warnings that a currency union would mean more stringent constraints being put on Scotland's economic policies.

Responding to the debt threat last night, Mr Alexander repeated the UK Government's warning that a currency union was unlikely to work. He said: "A vote to leave the UK is a vote to leave its institutions, like the Bank of England, and to leave the pound. The UK would not be duty-bound to enter a currency union and as the Treasury's recent analysis shows, it is unlikely that such an arrangement could be made to work."

Alistair Darling, the head of the pro-UK Better Together campaign, added: "The whole nationalist economic argument is undermined by their failure to articulate a clear currency policy.

"Even if the rest of UK hadn't rejected a Eurozone-style deal to keep the pound, the truth is that such a deal would mean that Scotland's budget would have to be signed off by what would then be a foreign government in London.

"Why on earth would the rest of the UK allow Scotland to undercut their economy?"

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