Scots’ independence limited if they keep pound says Osborne

George Osborne suggested the formal currency union favoured by the Scottish Government could even result in an independent Scotland having to submit budgetary plans to Westminster for approval.

Scottish First Minister Alex Salmond accused him of “sabre-rattling”. The SNP leader went on to claim if there was a “resounding” vote for independence the Chancellor would “sing an entirely different tune”.

But Mr Osborne insisted ending the current political and economic union between Scotland and the rest of the UK would be “a very deep dive indeed in to uncharted waters”.

The Chancellor spoke out during a visit to Glasgow as a new Treasury report cast doubt over whether a formal agreement could be reached to establish a sterling currency union between an independent Scotland and the rest of the UK.

The Scottish Government has already set out plans to keep the pound by creating a “sterling zone” with the rest of the UK.

Mr Osborne questioned this arrangement saying: “Would a newly-independent Scottish state be prepared to accept significant limits on its economic sovereignty? To submit its budgetary plans to Westminster before Holyrood?”

The UK Government report claimed that “appropriate fiscal constraints would be needed in a formal currency union” more stringent than that between different euro states.