Alex Salmond should not take a currency union with the UK as granted

Scottish First Minister Alex Salmond Photo: Andrew Milligan/PA Archive/Press Association Images

A lot of the comment by Alex Salmond's opponents today has not been very positive, but he no doubt expected that. Here are some thoughts:

Currency union

Alex Salmond is clearly proceeding on the assumption that, since an independent Scotland would remain one of the UK's biggest trading partners, we would want to continue in a currency union.

It is hard to see English businesses opting to mess about with the uncertainty of a different currency, so this at first sight seems like a logical assumption. If we really are 'better together', as Salmond's opponents claim, wouldn't we also still be better together in a currency union?

And yes, that would mean the Bank of England taking Scottish factors into consideration when sitting interest rates - and wanting to keep a pretty close eye on its tax and spend decisions - but Salmond is clearly indicating that he expects the UK to take this decision in the best interests of English, Welsh and Northern Irish taxpayers rather than any lingering sentimentality.

Will UK taxpayers be willing to bail out a Scottish bank like RBS if Scotland became independent? Credit: David Cheskin/PA Wire

Bail outs

Given that we bailed out the Irish, it seems practical to conclude that the Bank of England will remain in reality the lender of last resort for this currency union.

So yes, in theory the UK could be asked to bail out a bank like Royal Bank of Scotland in the future, but this would ultimately be done in the best interests of UK taxpayers as well. However…

Divorce

The evidence of the euro crisis is that monetary union does not work without fiscal union. And it is fiscal independence that Mr Salmond wants.

He also assumes that we will all be terribly grown up in the aftermath of divorce, but there is every possibility that we won't (how many happy divorces do you know?)

It is rather hard to imagine taxpayers in the rest of the UK ever agreeing to bail out a Scottish bank. This may be why English politicians are indicating they won't agree to a currency union.

Salmond said an independent Scotland would be theoretically entitled to 8.3 percent of the British embassy in Paris Credit: Chris Radburn/PA Wire

8.3 percent of everything

Alex Salmond is making it clear that he believes Scotland is entitled to walk away with 8.3 percent of everything. He mentioned the embassy in Paris, but in fact this could include a mind-boggling degree of detail.

The Scots helped build the UK in every way, so we should recognise straight off that they are entitled to their share of the proceeds. What about the military hardware (ships, tanks, fighter jets)? What about the retail value of all the central government property in London vis-a-vis that in Edinburgh and Glasgow?

The reality is that Scotland is not going to force a sale of the embassies in Paris and Washington, but it might want to take a smaller share of the national debt in lieu. The exact division of all that could make the divorce very messy indeed. And that is before we even start debating North Sea oil.

EU

My understanding from Brussels is that Alex Salmond will have to rejoin the EU. He might get in without this commitment, but I don't think he can bank on it.

In summary, it seems fair to say this: The Scots played a huge part in building the UK and have a perfect right to leave if they so wish. But I am less certain they have an inalienable right to stay in a currency union if the rest of us don't much fancy it. It seems to me politically unwise for Mr Salmond to have insisted that he can do so.

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