Ed Balls Pledges To Quit If Labour Let Independent Scotland Keep The Pound

Shadow Chancellor of the Exchequer Ed Balls speaks to the British Chamber of Commerce Annual Conference in London.
Shadow Chancellor of the Exchequer Ed Balls speaks to the British Chamber of Commerce Annual Conference in London.
Stefan Rousseau/PA Wire

Ed Balls has indicated that he could resign as chancellor if a future Labour government proposed joining a currency union with an independent Scotland - something he said the shadow cabinet was "100%" opposed to.

The shadow chancellor earlier this year joined Conservative and Liberal Democrat counterparts in ruling out Scotland keeping the pound if the independence referendum ends in a Yes vote in September.

Speaking to the House of Commons Scottish Affairs Committee, Balls said that the commitment could go into the Labour manifesto for next year's general election if Scotland votes for separation - though he stressed his hopes that, by that point, the issue would have been neutralised by a No vote.

Allowing an independent Scotland to keep the pound would amount to a euro-style currency union between sovereign states, he said. And he told the cross-party committee that currency union with Scotland would fail all five of the tests set for UK membership of the euro when he was advising Gordon Brown at the Treasury a decade ago.

"I could never recommend it," said Balls. "It wouldn't happen, shouldn't happen and won't happen if there is a Labour government."

Asked if he would resign if a future Labour prime minister decided to offer currency union to Scotland, Mr Balls said: "I could not imagine being part of the start of that negotiation, let alone the end."

First Minister Alex Salmond's claims that politicians in the remaining UK would back down on the pound following a vote for independence were "a false prospectus", said Balls.

"When Alex Salmond says 'We can keep the pound, it's our pound, they are bluffing', that's a nonsense," said the shadow chancellor. "It's not a claim he can make. It's a false prospectus.

"In all good conscience, from the point of view of my party, that is a negotiation we couldn't even begin. It would just be a non-starter."

Balls spelt out his objections to a shared pound: "The reason why we've had a successful currency union since 1707 is because we've had a commitment to its permanence - a political commitment to the sharing and pooling of risk, in particular through an income tax system which spreads across the United Kingdom; an absolute commitment to fiscal union, to the fact that our overall budget is something we manage together and a fall in tax revenues affecting one part of the UK is a burden borne by all of us; and that we have a banking union that we regulate and supervise but also deal with crises in our banking sector in a common way across the United Kingdom.

"The point of the vote in September is that if the Yes campaign were to win, all four of those things would end. The commitment to permanence in the political union would end, as would the fiscal union, the banking union and the pooling of risk through income tax."

Balls said that his opposition to Britain joining the euro was founded on the absence of these four prerequisites among the countries in the euro area.

He added: "The thing I find very difficult in this debate is to understand how people can advocate that we take away the permanent political commitment, take away the fiscal tax and transfer system, remove political commitment to fiscal and banking union, and having done that think that we could conceivably then carry on sharing a single currency.

"The conclusion I draw is that once you take away the fundamental underpinnings of a single currency - which is what would happen with a Yes vote in September - in those circumstances to attempt to continue with a single currency would be to make all the mistakes and worse that were made in the euro area in the early years.

"I don't think it would be either in the interests of the Scottish economy or of the rest of the United Kingdom. I could never recommend it. It wouldn't happen, shouldn't happen and won't happen if there is a Labour government."