POLITICS

Scottish Independence 'Could See Taxes Rise By Up To £20,000 Per Person', Says Alexander

12/09/2014 12:11 BST | Updated 12/09/2014 12:59 BST
PAUL ELLIS via Getty Images
Bank of England governor Mark Carney answers questions after addressing the annual TUC Congress in Liverpool, northwest England, on September 9, 2014. Carney hinted in his speech to union leaders that the bank could raise its main interest rate from a record-low level in early 2015, citing the country's solid economic recovery. AFP PHOTO/PAUL ELLIS (Photo credit should read PAUL ELLIS/AFP/Getty Images)

An independent Scotland could have to raise taxes by as much as £20,000 per person in order to ensure financial stability, Danny Alexander has suggested using Bank of England figures.

The Liberal Democrat chief secretary to the Treasury said that a letter from Bank governor Mark Carney to MPs, outlining the reserves of countries who have adopted another currency without formal agreement, gave "further damning evidence of the massive cost to every Scot of it going alone.”

This comes amid reports that Scots would have to pay almost double their current licence fee if they wanted to have access to BBC shows.

Carney has previously indicated that Scotland keeping the pound through a formal currency union with the rest of the United Kingdom would be "incompatible" as all three main Westminster parties have ruled it such an option.

Speaking to MPs on Wednesday about the scope for Scotland to keep the pound informally, in a process called "sterlingisation", Carney said: "You have to make decisions about the priorities consistent with the currency arrangement you wish to adopt."

Questions have now been raised as to how much an independent Scotland would have to raise in reserves in order to safely use the pound without agreement from the rest of the United Kingdom.

Labour Treasury select committee member John Mann concluded that Carney had "spelled out" that an "independent Scotland requires huge Scottish tax increases or cuts to keep sterling".

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Alexander said that Carney's letter to the Commons Treasury select committee suggested that an independent Scotland would have to raise almost £100 billion in a one-off move to shore up reserves as it could no longer rely on the Bank of England to print sterling,

He warned: "To match the reserves held by Denmark would cost each of us £4000, but if we had to build up Hong Kong style reserves the cost would be five times greater.

“In the end, that money would have to be found from every Scots wages, taxes, or the public services like the NHS that we cherish. It is extraordinary that this fundamental issue has not been talked about or thought about by nationalists.”

Treasury select committee chair Andrew Tyrie said that Carney's figures indicated that an independent Scotland would require "huge reserves" of sterling.

The Tory MP went on: "The Governor noted that £15bn would be at the 'upper end of the range' that Scotland might reasonably inherit as reserves. Scotland would need a multiple of that. The comparisons with Denmark and Hong Kong in the Governor’s note say it all.

"Meeting the shortfall in reserves means that Scotland would, as the Governor also pointed out, face ‘real fiscal costs’.

"Scotland’s ability to borrow would be heavily restricted. Obtaining the reserves would mean much higher taxes or lower spending, or both, for years to come."