Scottish independence: Cable says RBS would have to move to London

Business secretary Vince Cable answers questions on the possible impact of Scottish independence. Photograph: Pa

Vince Cable has insisted it is "almost certain" that an independent Scotland would need its own currency and warned that Royal Bank of Scotland would move to London in the wake of a breakaway.

The business secretary told a committee of MPs that the problems setting up a viable sterling currency union between Scotland and the UK were so significant that Alex Salmond, the Scottish first minister, would need a Plan B to use a new or different currency.

Cable's warnings follow recent interventions from Mark Carney, the governor of the Bank of England, the chancellor George Osborne, andBob Dudley, the chief executive of oil group BP, on the difficulties of agreeing a new currency union should Scotland vote for independence in September, which has buoyed the no campaign and UK ministers.

"The plan B is a fully separate currency," Cable told a House of Commons Business, Innovations and Skills committee hearing intoScottish independence, as he signalled a hardening of the UK government's stance on the proposal.

"The logic of what the governor and other people have spelled out is that the problems of a currency union with an independent Scotland are so difficult, so tricky, that it would almost certainly prove to be in Scotland's interests - and indeed the rest of the UK - that Scotland did have its own currency."

He continued: "The basic arguments about the problems about operating a monetary union suggest that Scotland would finish with its own currency, with all the advantages and disadvantages attached to it."

Cable also told the committee that he believed Edinburgh-based RBS, a pillar of Scotland's financial establishment, could decide to shift its headquarters to London if there was a yes vote in the referendum, because only the UK economy would be large enough to protect it.

"If you were managing RBS, I think you would almost certainly want to be in a domicile where your bank is protected against the risk of collapse," he said. "They already have a substantial amount of their management in London and I would have thought, inevitably, they would become a London bank which would be symbolically quite important."

However, by 2016 – the expected year Scotland would declare independence after a yes vote in the referendum, RBS is likely to be privately owned and no longer under state control, giving the bank's board far greater independence on business decisions. RBS has repeatedly said it has no view on the independence issue.

"On the issue of independence we are politically neutral," said an RBS spokesman. "We don't support political parties or political movements. We will respond to what voters decide and governments agree."

The Scottish National Party said it would be "absurd" for the UK to damage its trading links with an independent Scotland by failing to maintain a monetary union. A spokesman for John Swinney, the Scottish finance secretary, said: ""The pound is as much Scotland's as it is the rest of the UK's, and the [Scottish government's] fiscal commission working group, with experts including two Nobel Laureates, have concluded that it's in the interests of both Scotland and the UK to continue to retain sterling in a formal monetary union."

On Tuesday, Osborne again insisted that a currency union was highly unlikely, saying that "I don't think a workable currency can be created." BP's Dudley spoke this week of "concern" over Scotland's monetary future.

Last week Carney said that the lessons of the euro crisis had shown that sterling pact would require stringent and mutually-agreed policies to control the fiscal policies of both governments – a catch-up category covering taxation levels, state debt and government borrowing.

It would also require UK taxpayers and ministers to underwrite Scotland's debts and the debts of Scottish banks like RBS and HBOS, both of were hours from collapse in 2008. Scotland's finance sector is estimated to 12 times larger than the Scottish economy.

Carney also said a currency union could succeed and would have significant advantages for the Scottish and UK economies because they were closely aligned and interdependent.

That echoes the position of the Scottish government, whose economic advisers have repeatedly recommended a sterling pact. Other economists insist that the terms of a currency union would be so onerous on Scotland it would no longer be fiscally independent.

Arguing that a sterling union is overwhelmingly in the UK's interests, Salmond vigorously disputes claims that such a deal would be unworkable, citing the tens of billions of pounds of cross border trade, and the significance of North Sea oil and gas reserves to the wider UK economy.

But there remains a deep divide over how great the UK government and Bank of England's influence would be on Scotland's taxation policy and its overall spending – a central issue in any future talks.

Salmond has insisted it would be minimal: UK ministers believe that control would need to be considerable to meet the Carney tests, although they have yet to spell out what they would demand of an independent Scotland to avoid pre-negotiating on independence.

Scottish ministers and the independence campaign point to recent opinion polls which show a large majority of UK and Scottish voters support a currency union, contradicting UK ministerial claims that English and Welsh voters would resist a pact.

One survey by Panelbase in December found 71% of voters in the rest of the UK agreed that Scotland should continue to use the pound.

The Scottish Social Attitudes Survey found 79% of Scots wanted to use the pound after independence, although only 57% said it was likely to. More than 20% thought Scotland would likely end up with the euro, and 16% a new currency.

But there remains a major divide over how great the UK government and Bank of England's influence would be on Scotland's taxation policy and its overall spending – a central issue in any future talks.

Salmond has insisted it would be minimal: UK ministers believe that control would need to be considerable to meet the Carney tests, although they have yet to spell out what they would demand of an independent Scotland to avoid pre-negotiating on independence.

Dudley became the most senior UK business leader to openly voice doubts about the currency union on Tuesday, saying it was a "major uncertainty" and "a question mark" for BP, along with Scotland's future membership of the EU.