CBI and IoD leaders both say currency union would be 'unstable' as Scottish first minister makes major speech in Aberdeen
Britain's two leading business organisations have dealt a blow to Alex Salmond in his fightback against the rejection by Britain's three main political parties of a currency union with an independent Scotland.
The leaders of the Confederation of British Industry and the Institute of Directors both warned that a currency union would be "unstable" as David Cameron said that the Scottish first minister was "now a man without a plan".
In a direct challenge to the Scottish first minister, Salmond was told that his warnings of increased transaction charges for businesses on both sides of the border were outweighed by the disadvantages of creating a currency union outside a full political union.
The CBI and the IoD turned on Salmond after he responded to last week's rejection of a currency union by George Osborne, Ed Balls and Danny Alexander by accusing the Westminster establishment of resorting to destructive campaigning to frighten Scottish voters from supporting independence with scare stories.
In a speech to the Business for Scotland group in oil-rich Aberdeen, the first minister said a currency union would be in the interests of both an independent Scotland and the remainder of the UK because it would ensure there were no transactions costs for businesses on both sides of the border. Warning that such costs would run into hundreds of millions of pounds, Salmond said: "My submission is that this charge – let us call it the George tax – would be impossible to sell to English business. In fact, if you remove oil and gas from the equation, Scotland is one of the very few countries in the world with which England has a balance of trade surplus."
But Simon Walker, director general of the Institute of Directors, said: "While businesses on both sides of the border would regret new transaction costs resulting from an independent Scotland adopting a new currency, this inconvenience would pale in comparison to the financial danger of entering an unstable currency union.
"As we've seen with the eurozone, having countries with separate fiscal plans using the same currency can be very problematic. And if an independent Scotland did not have control of its monetary policy, it would raise the question, is that independence?"
John Cridland, director general of the CBI, said: "Scotland needs a stable currency, within a secure single market, so that Scottish companies have the best chance to grow and create jobs. Staying in an unstable currency union would have serious economic consequences.
"With the three main UK political parties making it clear that keeping the pound after independence is not an option, it is maintaining the union that offers the stability of sterling that businesses need."
Salmond argued in his speech that Osborne made one of the biggest mistakes of the pro-UK campaign when he rejected a currency union with an independent Scotland. The chancellor said in Edinburgh last Thursday that the most senior Treasury civil servant, Sir Nicholas Macpherson, had advised him that a sterling union would be unworkable, unstable and damaging to both countries.
Salmond said: "No one with a semblance of understanding of Scottish history and indeed the Scottish character would have made a speech such as that. To be told that we had no rights to assets jointly built up is as insulting as it is demeaning.
"To be told that there are things we can't do will certainly elicit a Scottish response that is as resolute as it is uncomfortable for the no campaign – it is: 'yes we can'. It is a sign of just how out of touch and arrogant the Westminster establishment has become."
The first minister accused Osborne, Balls and Alexander of a "casual Westminster dismissal" of the findings of the Scottish government's fiscal commission. This set out how financial regulation would work, suggesting there would be no need – as Osborne said – for a banking union.
The commission also said a stabilisation fund should be established to lessen the shock of a fall in oil prices. Osborne said the instability of oil prices would heighten the need for fiscal transfers between the rest of the UK and an independent Scotland.
Salmond also said there was no legal basis for the chancellor's assertion that Scotland would be in default if it declined to take on a share of the UK's liabilities.
Prof Christine Bell of Edinburgh University said last week that if the UK does, as it said it would, assume responsibility for all UK debt then "it keeps its liabilities for the debt".
Salmond was also scathing about the way in which Labour endorsed the rejection of a currency union. He said: "This isn't just the Tories – sadly we have come to expect it from the Conservatives. But the sight of the Labour shadow chancellor reading from a script prepared by George Osborne was too much to bear for many Labour supporters in Scotland.
"For Alistair Darling's former election agent it was the straw which broke the camel's back and made him declare for a yes vote. I predict that moment will prove to be one of the Westminster Labour leadership's biggest misjudgments."
The first minister also criticised Osborne for suggesting an independent Scotland would be a "foreign country" to the rest of the UK. He said: "Let me be clear. For Scots whether independent or not, the rest of the UK will never be foreign."
He said the 1948 Government of Ireland Act, "negotiated after infinitely more difficult circumstances than we have, specifically states that Ireland is not to be regarded as a 'foreign country'. And so despite the chancellor's campaign rhetoric I don't believe his 'foreigner' language represents any significant view in Scotland or indeed England, Wales and Northern Ireland."
Salmond added: "I want to emphasise that contrary to the destructive campaigning style and rhetoric of the Westminster establishment, the Scottish government will continue to be constructive and positive about the future of this country."
The first minister also used his speech to hit back at the European commission president, José Manuel Barroso, who said on Sunday said it would be "difficult, if not impossible" for it to join the EU. Barroso said EU members, such as Spain, which are nervous about autonomous regions breaking away would be prepared to block Scottish membership.
The first minister said EU member states would be keener on negotiating with a pro-European Scotland than with a Eurosceptic UK seeking to renegotiate EU membership terms, which would be the case if the Conservative party won the 2015 general election.
Salmond said: "The decision is one for member states, but not to recognise the democratic will of Scotland would run counter to the entire EU European ideal of democratic expression and inclusion.
"It would pose a challenge to the integrity of the European Union even greater and more fundamental than the threat of British withdrawal. That is why no member state has suggested that it would seek to block Scottish membership."
Cameron told the BBC: "Alex Salmond is now a man without a plan. He told us that he wanted to have a currency union and that now looks under threat. He has told us that he wanted Scotland as part of the EU. That is under threat. He is making quite an empty and rather angry speech today. But he hasn't got a plan and people will see that he hasn't got a plan."
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