Scottish Independence: Scotland Minister Alistair Carmichael Warns of Lost Pound on UK Exit
Scottish Independence: Scotland Minister Alistair Carmichael Warns of Lost Pound on UK Exit Reuters

Scotland's Secretary of State Alistair Carmichael has explicitly told voters that the country will lose the pound as its currency should they choose to break away from the UK in the September referendum.

Speaking in Britain's parliament, Carmichael issued the strongest rebuke to the Scottish National Party's (SNP) claims that it is almost certain that Scotland will keep Sterling, in the event of independence.

"Independence means leaving the United Kingdom's monetary union," Secretary of State for Scotland Alistair Carmichael told Britain's parliament.

"The only way for Scotland to be sure of keeping the UK pound as it is now is to stay in the United Kingdom ... No one should vote for an independent Scotland on the basis that they will get to keep the UK pound sterling."

The SNP, led by Alex Salmond, is pushing for a yes vote in the September independence referendum, but has continually told voters that it is likely that the country will retain the pound.

However, UK Chancellor George Osborne has already said that a British currency union is "nearly unworkable", while the chairman of the influential Parliamentary Commission on Banking Standards lended support to future complications.

"A British monetary union would need something dramatically tougher than euro zone rules," Tyrie said.

"So tough that on both sides of the border, if fully explained, I'm confident our respective electorates would not want it."

Meanwhile, Bank of England Governor Mark Carney warned that a currency union would deliver great risks and would not be a simple decision to allow an independent Scotland to keep the pound.

"In a monetary union between an independent Scotland and the rest of the UK the two parliaments would have to agree on whether fiscal rules were sufficient or whether similar risk-sharing mechanisms were necessary," said Carney last month.

"Fiscal stabilisation is particularly important in a currency union because it helps mitigate the loss of exchange rate flexibility.

"But being in a currency union can amplify fiscal stress for individual nations, limiting their ability to perform this valuable role just when it is most needed. So it makes sense to share fiscal risks across the whole currency area.

"A localised shock is less likely to stretch the fiscal position in a larger more diversified currency area, especially if it shifts demand between different parts of the area."