It's Scotland's pound and we're keeping it, says Alex Salmond

Alex Salmond

Alex Salmond has provoked a fresh battle over his plans for the Scottish currency after independence by declaring "it's our pound and we're keeping it."

The first minister gave the clearest indication yet that an independent Scotland would use sterling after a yes vote even if a formal sterling zone was rejected by the UK government – an option known as dollarisation or the Panama option.

As his opponents distributed leaflets shaped like a pound coin with Salmond's head replacing the Queen in a bid to mock his policies, the first minister insisted the UK government had no moral right to stop Scotland using sterling after a yes vote. During an ill-tempered session of first minister's questions, he said that if the UK government ignored a democratic endorsement by yes voters, Scotland would be entitled to renege on its share of the UK's debt. That would force the Treasury to pay an extra £5bn a year in debt repayments, Salmond claimed.

"The reason we are keeping the pound in a currency union, and the reason we are so unambiguous about it, is because we are appealing to the greatest authority of all, that is the sovereign will of the people of Scotland," he told Holyrood. "It is Scotland's pound. It doesn't belong to George Osborne [the UK chancellor], it doesn't belong to Ed Balls [the shadow chancellor]. It's Scotland's pound and we are keeping it."

He later added: "It would be extremely attractive for Scotland to be debt-free. We would be in balance of payments and budget surplus, but it's not a reasonable position to put forward, which is why in the white paper we are offering to pay our fair share of the massive liabilities built up by the likes of George Osborne." But a central plank of Salmond's case – that this option was spelt out in his government's independence white paper, came under attack after it emerged that the key passage in the paper contained a serious factual error.

Salmond repeatedly referred during question time to page 110 of the white paper, insisting that it was the definitive explanation of his government's currency policy. However, Salmond's chief spokesman later admitted that passage was wrong to state that the continued use of sterling was "pegged and flexible." The words pegged and flexible referred to the other option, creating a new Scottish currency that could be linked to sterling.

That was "effectively a typo", his spokesman said, adding that the correct explanation could be found buried in the annex to a report on Scotland's currency options by the Scottish government's fiscal commission.

Currency experts and economists have disputed the Scottish government's case that sterling is an asset, since the pound is simply a system of exchange based on trust and confidence in the bank which issues it, and a government's ability to meet its debts.

Salmond's offensive on his currency plans came two days after a bruising exchange with the former Labour chancellor Alistair Darling in their first live TV debate on independence. Darling, leader of the Better Together pro-UK campaign, had repeatedly asked the first minister to set out his plan B for a Scottish currency if, as all three UK parties have insisted, they would veto a formal deal to share sterling by creating a new single currency. After a snap poll for the Guardian found Darling had won that debate by 56% to 44%, Salmond has come under intense pressure from the worried SNP backbenchers and ministers to regain the initiative against his opponents.

During opening exchanges at first minister's questions, Johann Lamont, the Scottish Labour leader, retorted that the British prime minister had a "sovereign mandate" to say no to a formal currency union, since all UK parties believed that was in the best interests of the UK's wider economy.

"It is not for the first minister, no matter how limitless he thinks his powers are, to determine what is in the national interest of another country," she said.

Ruth Davidson, the Scottish Tory leader, batted away Salmond's references to an interview where she appeared to endorse a currency union, and insisted no UK party or leader had accepted a post-independence currency pact. She said a currency union was not in Salmond's gift, "and all the wishing in the world won't make it so." She added: "The vast majority of the people of England and Wales said in June it is not in their interests.

"The first minister of Wales said it is not in their interests. The permanent secretary to the Treasury [Sir Nicholas Macpherson] has said it is not in England, Wales or Northern Ireland's interests. The chancellor, the shadow chancellor, the chief secretary to the Treasury, have said it is not in their interests. The markets have said it is not in their interests."

Powered by article was written by Severin Carrell, Scotland correspondent, for on Thursday 7th August 2014 15.58 Europe/London © Guardian News and Media Limited 2010