Britain warned Scotland on Thursday it would lose the pound if Scots vote for independence, the most aggressive attempt yet to scuttle a nationalist bid to break the 307-year-old union with England.
In the latest salvo of a choreographed British campaign to keep Scotland in the UK, George Osborne sought to play on Scottish fears of losing the pound to argue that secession would cost Scots dearly and cast them into a tempest of volatility.
“The pound isn’t an asset to be divided up between two countries after a break up as if it were a CD collection,” Osborne, Britain’s finance minister and Prime Minister David Cameron’s closest ally, said in a speech in Edinburgh.
“If Scotland walks away from the UK, it walks away from the UK pound,” he said.
Scotland votes in a yes/no referendum on independence on Sept. 18. The vote will be open to about 4 million residents of over the age of 16.
The speech, entitled “Scotland to keep the pound and the economic security that it brings”, echoed Cameron’s attempt last week to make the patriotic case for unity.
But the 42-year-old architect of Britain’s drive to reduce spending delivered a much harsher message to Scots: If you leave the UK, you will lose the pound and pay higher rates of interest.
“There is no legal reason why the rest of the UK would need to share its currency with Scotland,” Osborne said.
Osborne’s warning will be repeated in future days by the finance chiefs of Britain’s two other main parties, Labour’s Ed Balls and the Liberal Democrat Danny Alexander.
By honing in on Scottish hopes of keeping the pound, London politicians hope to undermine the economic case for independence though the leaders of Scotland’s bid to breakaway said it amounted to panicked bullying and would cost London dearly.
“We’ve gone in under a week from David Cameron’s ’love-bombing’ to attempted bullying and intimidation - from a charm offensive to just plain offensive,” Scotland’s Deputy First Minister Nicola Sturgeon said.
“This is a panic move which will backfire spectacularly. People won’t take kindly to the Westminster establishment ganging up to try and bully Scotland in the decision that we are being asked to take on the referendum,” she said.
Sturgeon indicated that if London prevented a currency union, an independent Scotland could refuse to take on a share of the UK’s 1.2 trillion pounds ($1.99 trillion) of government debt which Britain has promised to honour.
“Osborne’s position is also a bluff,” she said. “It would leave them having to pick up the entirety of UK debt.”
Osborne said the nationalist threat to walk away from its share of UK debt would mean punitively high interest rates for an independent Scotland.
“In that scenario, international lenders would look at Scotland and see a fledgling country whose only credit history was one gigantic default,” Osborne said.
Nationalists in Scotland, whose waters contain the European Union’s biggest reserves of oil and gas, say they want the Bank of England to remain the lender of last resort for financial institutions after possible independence.
Bank of England chief Mark Carney cautioned last month that any currency union would entail a surrender of some sovereignty and nationalists have refused to say what they would do if they failed to get a currency union.
One possible option would be for an independent Scotland to continue to use the pound in a similar way that Ecuador uses the U.S. dollar ahead of a possible entry into the European single currency, the euro, at some later date.
Carney has refused to speculate on the risks of Scotland using the pound without a formal currency union. Scotland’s First Minister Alex Salmond has said that despite the rhetoric before the vote, London might be willing to do a deal on the currency if Scots voted for independence.