The UK Treasury has warned that an SNP plan for a currency union after independence could lead to the end of Scottish banknotes, a claim dismissed by Nationalists as 'scaremongering'. The Scottish government wants to keep the pound if Scotland votes for independence in September 2014.
A Treasury report, due to be published on Tuesday, will argue that independence would 'fundamentally transform' the Bank of England's role regarding Scotland. It suggests that the arrangement for Scottish commercial banks to issue sterling notes would need to be renegotiated, potentially affecting public confidence in the notes.
The SNP responded that there is no reason for current arrangements to change. A spokesman stated: 'An independent Scotland will retain the pound... the evidence shows that it is in the best interests of both an independent Scotland and the rest of the UK to have a sterling zone.'
SNP Westminster Treasury spokesman Stewart Hosie called the fears a 'scare story', noting that every Scottish note is fully covered by Bank of England assets. Finance Secretary John Swinney added: 'If this scare story is the best UK Chancellor George Osborne can do... it betrays the utter weakness of his case.'
Former Bank of England MPC member Prof David Blanchflower described the debate as 'political posturing rather than economics', highlighting that Scotland has performed better fiscally under the union than the UK as a whole.
