Ed Balls has hinted that if he were chancellor in a future Labour government he would resign if talks began on currency union with an independent Scotland.
He claimed the pact would be "very dangerous" for both countries. The shadow chancellor said currency union tying Scotland, if separated, with the rest of the UK would be so difficult to make work all five of the tests that Labour used to veto UK membership of the euro in 1997 and 2003 would be failed.
"I could never recommend it," Balls told parliament's Scottish affairs select committee at Westminster. "It wouldn't happen, shouldn't happen and won't happen if there is a Labour government."
Insisting the shadow cabinet was 100% opposed to Alex Salmond's plan for a sterling zone following a yes vote, Balls then responded to a question about whether he would stand down if a Labour prime minister opened talks over a deal.
"I could not imagine being part of the start of that negotiation, let alone the end," he said. Pressed on whether Labour would agree to negotiate if there were a yes vote in September's referendum, Balls said the eurozone crisis had proved that very close political and fiscal union was essential for successful currency union.
"Our position is unequivocal: it would not be in the interests of the rest of the UK or Scotland to attempt to negotiate a currency union. It can't be negotiated. It would be flawed, risky and unstable, and I wouldn't embark upon it. No ifs, no buts," he said.
Flanked by Cathy Jamieson, the Scottish Labour MP and the party's shadow chief secretary at Westminster, Balls said that a successful post-independence sterling zone would mean the loss of so much financial and political independence for a new Scottish state that no Edinburgh government could agree to it. It would need "very, very, onerous fiscal strictures", Balls said.
The five eurozone tests devised by Gordon Brown, when he was chancellor and Balls his closest adviser, included the assessment of whether the UK and Europe economic cycles were compatible.
The tests also covered decisions about whether there was enough flexibility to solve economic problems, whether monetary union made it easier for foreign firms to invest in the UK, and whether joining the euro would promote growth, stability and a lasting boost to jobs.
The impact of joining the euro on the UK's financial services industry and the City's competitiveness were also factors to consider.
The UK parties cite evidence from Mark Carney, governor of the Bank of England, who told a business audience in Edinburgh this January that a successful cross-border currency union required a high degree of financial pooling, worth roughly a quarter of its GDP.
But Andrew Goudie, a professor and former chief economic adviser to the Scottish government, has said it was "almost certain" the UK government would negotiate a currency union if it lost the referendum.
Writing in the latest economic outlook report for Strathclyde University's Fraser of Allander Institute, Goudie said: "It would seem inconceivable that, given the present, deeply-embedded, role of sterling across the UK, a future UK government could refuse to at least discuss the conditions under which a formal sterling area would be acceptable."
It was possible Scotland could agree to meet all the UK's demands, which would be a good result for the UK: that would prevent Scotland damaging the UK economy with more competitive taxes, or failing to help pay off British debts.
Goudie added that the onerous conditions mentioned by Balls could mean the Scottish government refusing to sign a deal, not the UK government. "That these conditions might ultimately prove unacceptable to Scotland is a different, though critical, point," he said.
Goudie said it would be "extraordinary" if the Scottish government were not secretly considering an alternative currency plan: Scottish ministers had insisted they were not doing so, citing admissions by one UK minister in the Guardian that Britain would negotiate a sterling pact.
"Failure to do so would risk either a further period of damaging uncertainty or an ill thought-out leap to an alternative without the necessary preparation," Goudie said.
theguardian.com
He claimed the pact would be "very dangerous" for both countries. The shadow chancellor said currency union tying Scotland, if separated, with the rest of the UK would be so difficult to make work all five of the tests that Labour used to veto UK membership of the euro in 1997 and 2003 would be failed.
"I could never recommend it," Balls told parliament's Scottish affairs select committee at Westminster. "It wouldn't happen, shouldn't happen and won't happen if there is a Labour government."
Insisting the shadow cabinet was 100% opposed to Alex Salmond's plan for a sterling zone following a yes vote, Balls then responded to a question about whether he would stand down if a Labour prime minister opened talks over a deal.
"I could not imagine being part of the start of that negotiation, let alone the end," he said. Pressed on whether Labour would agree to negotiate if there were a yes vote in September's referendum, Balls said the eurozone crisis had proved that very close political and fiscal union was essential for successful currency union.
"Our position is unequivocal: it would not be in the interests of the rest of the UK or Scotland to attempt to negotiate a currency union. It can't be negotiated. It would be flawed, risky and unstable, and I wouldn't embark upon it. No ifs, no buts," he said.
Flanked by Cathy Jamieson, the Scottish Labour MP and the party's shadow chief secretary at Westminster, Balls said that a successful post-independence sterling zone would mean the loss of so much financial and political independence for a new Scottish state that no Edinburgh government could agree to it. It would need "very, very, onerous fiscal strictures", Balls said.
The five eurozone tests devised by Gordon Brown, when he was chancellor and Balls his closest adviser, included the assessment of whether the UK and Europe economic cycles were compatible.
The tests also covered decisions about whether there was enough flexibility to solve economic problems, whether monetary union made it easier for foreign firms to invest in the UK, and whether joining the euro would promote growth, stability and a lasting boost to jobs.
The impact of joining the euro on the UK's financial services industry and the City's competitiveness were also factors to consider.
The UK parties cite evidence from Mark Carney, governor of the Bank of England, who told a business audience in Edinburgh this January that a successful cross-border currency union required a high degree of financial pooling, worth roughly a quarter of its GDP.
But Andrew Goudie, a professor and former chief economic adviser to the Scottish government, has said it was "almost certain" the UK government would negotiate a currency union if it lost the referendum.
Writing in the latest economic outlook report for Strathclyde University's Fraser of Allander Institute, Goudie said: "It would seem inconceivable that, given the present, deeply-embedded, role of sterling across the UK, a future UK government could refuse to at least discuss the conditions under which a formal sterling area would be acceptable."
It was possible Scotland could agree to meet all the UK's demands, which would be a good result for the UK: that would prevent Scotland damaging the UK economy with more competitive taxes, or failing to help pay off British debts.
Goudie added that the onerous conditions mentioned by Balls could mean the Scottish government refusing to sign a deal, not the UK government. "That these conditions might ultimately prove unacceptable to Scotland is a different, though critical, point," he said.
Goudie said it would be "extraordinary" if the Scottish government were not secretly considering an alternative currency plan: Scottish ministers had insisted they were not doing so, citing admissions by one UK minister in the Guardian that Britain would negotiate a sterling pact.
"Failure to do so would risk either a further period of damaging uncertainty or an ill thought-out leap to an alternative without the necessary preparation," Goudie said.
theguardian.com
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