ANY QUOTES USED MUST BE ATTRIBUTED TO MURNAGHAN, SKY NEWS

DERMOT MURNAGHAN: Well, Alex Salmond has upped the stakes the Scottish independence campaign. In a rousing speech yesterday the First Minister promised to raise the minimum wage, lower energy bills and renationalise Royal Mail. Let’s say a very good morning to Alistair Darling, the former Chancellor joins me from Edinburgh and Mr Darling, you will have heard Alex Salmond, the First Minister, quoting you yesterday saying that Scotland can survive as an independent country, is he quoting you selectively?

ALISTAIR DARLING: Well look, I have always made the position clear that Scotland, of course, like any country in the world can survive, could survive on its own, it’s just that it would come at a cost. Only last week the nationalists had to admit that its own civil servants have confirmed to them that Scotland has been running a deficit for a generation now, only one year in the last 20 has Scotland spent less than it earned. The problem we have got is that if you became independent, you lose all the opportunities that come by being part of a larger union and you take on risks which you don’t have to do at the moment so my argument is not that we couldn’t do it, it’s just that we shouldn’t do it, it’s not in our best interests.

DM: But you did say it could become an economic pariah, this issue of the debt burden if Scotland ….

ALISTAIR DARLING: No one has ever said that.

DM: Well how would you see it as dealing with the debt burden that is maybe assigned to it if independence did come about? Is there a potential it would have to default?

ALISTAIR DARLING: Well look at the position just not. Every year, bar one in the last 20, Scotland has spent more than it’s earned and the result of which, if you became independent, you’d have to cut your cloth according to your means. Take an example of what that would mean in relation to the North Sea – at the moment, thanks to a UK subsidy in relation to decommissioning, that has enabled exploration to continue. Now if Scotland became independent, that entire burden would fall on the population of five million, not sixty million, that’s just one example. If you look at the big economic debate, Alex Salmond said yesterday that at the end of November the Scottish government is going to publish a White Paper in which he says he will answer all the questions we’ve got outstanding at the moment. Well take one big question – what currency are we going to use? I really think it is very simplistic to simply assume that the rest of the UK would agree to join a Eurozone currency union where they would have to submit their budgets for approval by Scotland on tax, spending and borrowing, and of course the Scottish budget would have to be approved by the rest of the country – you can’t simplistically assume they would readily fall in behind such a plan. So what’s Plan B? Do we have our own currency with all the risks that entails, do we simply use sterling in the way that Panama uses the US dollar or are we forced into the euro? Now this is absolutely fundamental to Scotland’s future and if he can’t answer that question definitively, telling us what the fall-back position would be, then this White Paper will simply fall flat on its face, it will not be worth the paper it’s written on. It is fundamental what currency we use and he can’t answer that question at the moment.

DM: Mr Darling, that is a bit extreme, as sterling is configured at the moment as a kind of mini-eurozone, wouldn’t things just stay as they are?

ALISTAIR DARLING: No, they wouldn’t. At the moment we have a single currency, we have an economic union and we have a political union, that’s what you need to make the thing work but if you talk about breaking up the UK, Scotland decides to go its own way and yet go into a currency union, you don’t have to imagine what that would be. We have the eurozone on our doorstep which shows what happens when you have got different countries, independent countries choosing to share the same currency, they have to agree each other’s budgets, that’s what’s going on in the eurozone at the moment. To do that you’ve got to get all these independent countries to actually agree to submit the budgets for approval by the other countries, in other words to curtain their independence. It isn’t independence, it means you are entering a legally binding agreement where two sets of countries actually agree to submit their different budgets for approval. That is what a currency union is. Now Alex Salmond yesterday and this morning was trying to tell people, actually don’t worry, nothing is really going to change. Well a currency union changes everything, it is completely different from what we’ve got at the moment and it is no wonder that a lot of the nationalists themselves can see that’s not independence and that’s why some of them are arguing for their own currency, some of them are arguing that we simply use sterling in a way, as I say, that Panama uses the dollar but the people of Scotland are entitled to know what the position is going to be if we were to vote for independence. If there isn’t a currency union, and you cannot assume that the rest of the UK will simply fall into line with what Alex Salmond wants, if we don’t get that currency union what is the alternative? What’s Plan B? Now he has got a Plan B because no one but a fool would go into a negotiation if he hadn’t got a Plan B, so let’s hear it and we want to hear it in this White Paper because if we don’t hear it, then absolutely nothing he says will have any credibility whatsoever.

DM: Let me ask you, Mr Darling, what do you feel about the prospect of putting those points and I know many, many more across in a live debate with Mr Salmond? He of course says he still wants to debate the whole thing with David Cameron but if that doesn’t happen it is going to be you and a lot of that is about presentation and approach and we know Mr Salmond’s , he is a bit of a political showman, so to speak and you are noted more for your more analytical approach. Would you relish that prospect?

ALISTAIR DARLING: Well of course it would be astonishing if we don’t have a television debate or a series of debates on what is the biggest question that Scotland has faced in 300 years. Earlier this week he backtracked and said he would have a debate with me, this morning he backtracked again so he is clearly hedging his bets a wee bit but never mind competing s, it’s the substance that actually works. This is a debate that is about the heart and it is also about the head, both things, both of these are absolutely essential to this debate but let’s come back to where we are, as I said. Fundamentally, people in Scotland understand, the majority of people understand that yes, we are proud to be Scots, we are proud of our country but we know there is something bigger, there are opportunities that come from the UK, we don’t have to take on the risks of uncertainty on currency, the fact that our pensions would have to funded in full, all the risks that would come with independence, we don’t have to do that. We can have the best of both worlds at this moment and that’s something that I think the majority people are increasingly fixed on and I hope we have a debate about it between now and next September but if we don’t, I think people will still make their minds up on that combination of what they know in their head is best for Scotland and they know in their hearts what is best for Scotland.

DM: So the best of both worlds at the moment, we could say that about the overall picture for UK growth with all the forecasts being pushed upwards. You and I have spoken a lot since you left office and since the huge financial crisis and you have been calling upon the Chancellor to change direction, to not overdo it on the austerity but it seems that Plan A has worked hasn’t it, Mr Darling?

ALISTAIR DARLING: Well look, the figures we’ve had in the last few months are encouraging but I think for anyone to say that’s it, break out the flags, get out the champagne, we’re through it, they would be very, very foolish indeed. Our economy is still growing at a very slow rate, it is supposed to be growing at 3% this year but it is actually growing at substantially less than that. There are concerns about what’s happening in the housing market, the possibility of a housing bubble at the moment, we still have problems in the eurozone. All downturns, all recessions come to an end at some point, this one is running considerably slower. The question, the big question in front of us now of course is if we get recovery, and recovery will come at that stage, how do we ensure that everybody benefits from it and not just a few.

DM: Can I just ask you, Mr Darling, I’ve got your Labour colleague Mary Creagh coming on the programme in a few minutes time, the Shadow Transport Secretary and I obviously want to talk to her about the High Speed Rail line number two, HS2. Now you’ve warned about it, about the cost of it, we know that she’s considering it she says so what would you advise her to take on board about HS2?

ALISTAIR DARLING: Well yes, I have changed my mind and I’m afraid that every day that goes on reinforces my belief that the government needs to have a long hard look at this project again. You mentioned earlier that I said that the present Chancellor should have a look again at what we’re doing, investing in the transport infrastructure is an important part of our future. If you are going to spend £50 billion then I think you need to look carefully at where you spend it on. My fear is that HS2 is going to suck money out of the resources that we need to improve the existing railways we’ve got, the East Coast Mainland for example, the London commuter trains and so on. Also I think you need to have a long hard look at what’s needed to improve the rail and other transport links between cities in this country outside the south-east. My worry is that this project is so big it will simply suck out resources and you may gain in one part of the country but you’ll lose elsewhere and I think that every day goes on just makes it look that the arguments that the arguments the government is putting forward don’t seem to stand up. When the Transport Secretary said actually high speed isn’t the issue, well what is HS2 when there’s no high speed about it? I really think this is something that needs to be looked at, I understand that while Mary is new she’ll want to be cautious about it before she reaches her judgement but I think there is an opportunity here and I think everyone, government and opposition, because this will stand several parliaments, decisions by several different political parties, we need to get it right and I don't think we’ve got it right at the moment.

DM: Okay, great to talk to you Mr Darling, thank you very much indeed for sparing the time. Alistair Darling there, live from Edinburgh.

ALISTAIR DARLING: Thank you very much indeed for having me.