29/03/2014 10:51 GMT | Updated 29/03/2014 10:59 GMT

Scottish Independence Currency Union Dismissed By George Osborne After 'Damaging Comments'

George Osborne has dismissed the idea of a currency union with an independent Scotland as the UK Government moved to distance itself from damaging comments made by an anonymous minister suggesting that the pound would be shared in the event of a Yes vote.

In a joint statement with Liberal Democrat Treasury Chief Secretary Danny Alexander, the Chancellor insisted independence would mean "walking out of the UK pound".

An identical statement was also issued by No 10 as the coalition Government sought to limit the impact of the unnamed minister's comments on the politically sensitive issue.

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The minister told The Guardian that "of course" there would be a decision to share the pound, indicating that a deal could be done with Scotland in exchange for the UK's nuclear submarine fleet remaining at Faslane.

All three main parties at Westminster have officially ruled out sharing sterling with an independent Scotland and made it a key plank of the No campaign, but the minister told newspaper: "There would be a highly complex set of negotiations after a Yes vote with many moving pieces. The UK wants to keep Trident nuclear weapons at Faslane and the Scottish Government wants a currency union - you can see the outlines of a deal."

The Guardian reported that the minister is at the heart of the pro-union campaign and had acknowledged that opposition to sharing the pound was a vital part of the strategy ahead of the September 18 referendum.

The minister said: "You simply cannot imagine Westminster abandoning the people of Scotland. Saying no to a currency union is obviously a vital part of the No campaign. But everything would change in the negotiations if there were a Yes vote."

But Osborne and Alexander insisted: "There will not be a currency union in the event of independence. The only way to keep the UK pound is to stay in the UK. Walking out of the UK means walking out of the UK pound.

"A currency union will not work because it would not be in Scotland's interests and would not be in the UK's interests.

"Scotland would have no control over mortgage rates, and would be binding its hands on tax and funding for vital public services.

"The Scottish Government are proposing to divorce the rest of the UK but want to keep the joint bank account and credit card.

"The UK would not put its taxpayers at risk of bailing out a foreign country and its banks. Parliament wouldn't pass it, and the people wouldn't accept it.

"Any suggestion to the contrary is wrong."

Scottish Secretary Alistair Carmichael said: "An anonymous, off the record quote does not change the stark reality on the currency.

"The UK Government has listened to the views of the governor of the Bank of England and the independent advice of the Permanent Secretary to the Treasury that a currency would be damaging for all the United Kingdom.

"That's why a currency union simply will not happen.

"The Scottish Government should remove the uncertainty on the currency by coming forward with a plan B."

The minister's comments were seized on by Deputy First Minister Nicola Sturgeon, who said they gave a big boost to the Yes campaign.

She said: "This was supposed to be the No campaign's trump card, but as the polls show it has backfired badly - the gap between Yes and No has halved since November, and most Scots simply do not believe the bluff and bluster we had from George Osborne, Ed Balls and Danny Alexander.

"Now that the card has been withdrawn, it gives an even bigger boost to the Yes campaign. And it can only add to the sense of crisis which is engulfing the No campaign.

"The reality is that a currency union is every bit as much in the interests of the rest of the UK as an independent Scotland, and that is why Westminster will agree to one. Scotland is the rest of the UK's second biggest trading partner, and not sharing sterling would cost businesses south of the border an extra £500 million in transaction costs."

She added: "The leader of the No campaign, Alistair Darling, said that a shared sterling area between an independent Scotland and the rest of the UK is 'desirable' and 'logical' - and now the UK Government appears to have U-turned and actually agrees with that sensible position."

The Scottish Government's White Paper on independence, published last November, says a shared currency is in the ''economic interests'' of Scotland and the rest of the UK.

Almost half of voters north of the border think that Osborne's pledge to rule out a formal currency union with an independent Scotland is a bluff, according to a poll published this week.

A YouGov poll for The Times newspaper suggests 45% of Scots do not believe the Chancellor's threat is real, compared with 40% who think he means what he says.

Speaking at the Scottish Liberal Democrats conference in Aberdeen, Carmichael dismissed the comments as "an irritation" and "speculation or musing" by an individual.

He said: "Whoever this is, I would suggest it is not somebody who is at the heart of Government thinking on this, and if they wish to approach me and discuss it I will happily do so.

"It is an irritation, and it is not helpful. But frankly I think this time next week everyone will have forgotten about it.

"Whoever it is, if it is anybody, it is an individual. It's not either party (the Lib Dems or Tories) that is briefing it.

"At most it has been some speculation, musing by an individual."

Scottish Lib Dem leader Willie Rennie criticised Sturgeon for treating the development "like a game".

He said: "This is serious, it's the future of our country, and she's comparing it with a card game.

"It is not in the interests of the United Kingdom or an independent Scotland to have a shared currency if we choose to go independent."

The SNP must explain the alternative, he insisted.

"The UK Government are clear and the opposition parties are clear," he said.

"This is an irritation, I think the reality is the risk is quite considerable if we just accept what the SNP say.

"This is not a game. This is about the future of our country. They have an obligation to set out what they will now do since the currency is no longer an option."