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Osborne: Impossible for financial firms to operate independent Scotland

  • 16/05/2014
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Osborne: Impossible for financial firms to operate independent Scotland
Financial services companies will find it “impossible” to remain in an independent Scotland even if it adopted sterling outside of a currency union, George Osborne has warned.

The Chancellor told the Scottish Affairs select committee it was not “remotely possible” financial services firms could remain headquartered in Scotland if the vote on independence went through.

The government is firmly against plans being pursued by Scottish ministers, with the Chancellor already rejecting the preferred option of a currency union between the UK and an independent Scotland.

Some pro-independence groups have countered by saying Scotland could go for the option of sterlingisation – which would see it retain the pound even though it is not in a currency union.

But Osborne said on Wednesday Scotland would lose its ability to print its own pounds if it opted for independence, effectively removing this as a solution. He added financial services firms would not be able to function in such an environment and would have to relocate.

He said: “It is inconceivable you could have a financial sector anything like the size and sophistication of Scotland’s, employing tens of thousands of people, when you are trying to grab pound notes as they come across the border.

“I do not think it would be remotely possible for all these great companies that have their headquarters in Scotland to remain under the sterlingisation plan. There would be challenges for some of these companies remaining [in Scotland] even under independence with a different currency.”

Breaking up the UK’s integrated financial system may lead to job losses in Scottish financial services industry, he added.

Osborne and permanent secretary for the Treasury Sir Nicholas MacPherson also hammered home their view the rest of the UK would not agree to a sterling currency union.

Explaining his decision to publish correspondence on the Treasury’s opposition to a currency union, MacPherson said he wanted to make the position of the institution “crystal clear”.

He told MPs: “By publishing my advice I showed this was not merely political manoeuvring. You could not put a proverbial cigarette paper between the official machine and the politicians.”

If he had not acted, he said, there might have been a risk of volatility in the gilt markets: “It was my view the cost of borrowing would increase because of the lack of clarity over what the Treasury intended.”

In the white paper on independence, the Scottish government outlined plans for a sterling currency union. However, in a rare show of unity, the three main Westminster parties have said they will block such a plan should Scots vote for independence in September.

In response, Scottish first minister Alex Salmond said an independent Scotland could refuse to pay its share of the national debt if there was no deal on a sterling currency union.

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