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 In the latest salvo of a choreographed campaign to keep Scotland in
the UK, George Osborne will seek to play on Scottish fears of losing
the pound to argue that secession would put Scots' prosperity at
risk, pushing them into a tempest of volatility.
"The pound is one of the oldest and most successful currencies in
the world," Osborne, Britain's finance minister and Prime Minister
David Cameron's closest ally, will say in a speech in Edinburgh,
according to his office.
"The UK economy is growing faster than any other advanced economy in
Europe. And within the UK, Scotland is growing faster than the
rest," Osborne will say in the speech which is due to begin at 0900
GMT.
Two sources familiar with the matter said Osborne will tell Scots
they cannot keep the pound if they vote for independence in the
September 18 referendum which will be open to about 4 million
residents of Scotland over the age of 16.
In the speech, entitled "Scotland to keep the pound and the economic
security that it brings", Osborne will echo some of Cameron's
attempt last week to make the emotional and patriotic case for
unity.
But the 42-year-old architect of Britain's drive to reduce spending
will deliver a much harsher message to Scots: Leave the UK and risk
losing the pound you have used for more than three centuries.
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.
CURRENCY WAR?
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 honor.
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"Osborne's position is also a bluff," she said. "It would leave them
having to pick up the entirety of UK debt."
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.
Royal Bank of Scotland <RBS.L>, Lloyds Banking Group <LLOY.L> and
other major financial institutions based in Edinburgh, have begun
contingency planning in case of independence, Reuters reported on
Friday.
Industry sources told Reuters on Tuesday a key part of that planning
is what they will do in the event of a currency union not being
agreed. RBS, Lloyds and Standard Life <SL.L> declined to comment.
($1 = 0.6030 British pounds)
(Writing by Guy Faulconbridge and Andrew
Osborn; editing by David Evans)
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