CHANCELLOR George Osborne's onslaught on independence was based on a lie, according to the Scottish Government, which has also mounted a strong defence of its oil revenue projections.

A major part of the Treasury analysis published to coincide with the Chancellor's visit to Scotland this week suggested the creation of a border between Scotland and England would damage the Scottish economy and cost 4% over 30 years.

But an annexe to the report admitted of its analysis: "It is likely to overestimate the effect of the creation of a border," prompting a furious response from the Scottish Government.

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Finance Secretary John Swinney's spokesman said: "This is an astonishing revelation. George Osborne is already a deeply discredited Chancellor, and this admission shows we now can't believe a word he says.

"The whole premise of the Treasury's argument is demolished by a single sentence buried in an obscure annexe at the back of the document. This has taken Project Fear to new depths."

The Treasury document was seen by Scottish civil servants at the same time it was released to the media, but fresh analysis in Edinburgh has opened up a divide with London as analysis over the arguments increasingly polarise the civil service.