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Gavin McCrone: indy would be costly...but No vote will mean no more devo

Scottish independence would be costly and would lead to "major upheaval with uncertain consequences", according to a former senior government adviser.

Gavin McCrone, former chief economic adviser to the Scottish Office who also led the industry and development departments of the Scottish Government, has written a new book weighing up the economics of independence.

Mr McCrone, whose advice that North Sea oil could transform an independent Scotland's fortunes was suppressed by the UK Government in the mid-1970s, writes that 2014 is not the best time for independence in the wake of a recession, with high public debt and an unsustainable budget deficit.

But he warns that promises of further devolution are likely to be shelved by the UK Government if Scotland votes no.

A no vote also risks severing Scotland's vital ties with Europe and a flight of foreign investors if the UK then votes to leave the EU in the Conservatives' in/out referendum.

The Scottish Government's plan to circumvent the normal EU accession process "might be possible" in the event of independence with the goodwill of the other member states, but countries with secessionist movements like Spain could veto it.

Negotiating opt-outs of the euro and Schengen free travel zone "might also be reasonable", but there is "no prospect of Scotland being able to retain a share of the UK budget rebate", he said.

The SNP-administration's "sterling-zone" plan would cause instability and leave fiscal policy in the hands of London, but a separate currency could see Scottish banks relocate south, he argued.

He said: "Scotland is a relatively well-off country and could perfectly well be independent.

"But that does not mean that the process of separation would be easy or painless. It would be a major upheaval with uncertain consequences."

He added: "The difficult circumstances of the recession, with unsustainable budget deficits and high public debt, does not make (2014) the best time to choose."

He said the Scottish Government financial plan is based on "assumptions" such as a geographical share of oil and a population, rather than GDP, share of UK debt, all of which are subject to negotiation.

"Negotiations between the UK and other countries over their share of the continental shelf have not always been straightforward. Sometimes they are protracted may lead to arbitration."

He said UK Government's austerity drive has been necessary, even if the balance it has struck is debatable, as has its controversial welfare reforms but both are likely to be key sources of UK "hostility" by the time of the referendum.

He welcomed SNP plans for an oil fund, arguing this was a "missed opportunity" by previous UK governments, but said "in the immediate future Scotland would be unable to afford it".

"Public expenditure will then have to be paid for from non-oil tax revenue, which would be insufficient to cover it," he said.

"Despite many assertions that Scottish control of economic levers would result in higher economic growth to pay for this, no one has really explained how this would be achieved. Without it, cuts in expenditure would be necessary."

He added: "While I think it would be sensible for an independent Scotland to remain with sterling, at least initially, it might prove difficult in the long run; and, to gain freedom to follow its own policies, it may be necessary for Scotland to have its own currency."

But he warned: "If there was to be a separate currency, some (banks) whose main client base was not in Scotland, such a Standard Life, might wonder if they would be better to base their activities south of the border."

On EU membership, he wrote: "Membership of the EU is very important for Scotland because so many inward investment companies have chosen it as a base from which to serve the European market. If Scotland was outside the EU, it would be more difficult to attract inward investment and, depending on what agreement was reached on access to the single market, some of those already in Scotland may leave.

He added: "If, therefore, it seems increasingly likely that the UK will leave the EU, the logical consequence could be an increase in support for independence.

He also said an independent Scotland "probably could not afford" to pay the subsidies required for development of renewable energy, and questioned whether the rest of the UK would continue to pay for it.

He concluded: "After Ireland became independent in 1922 it was a long time - at least a generation - before policies were adopted that began to bring the country to the high level of prosperity it was able to achieve and, despite the severe effect of the financial crisis, still has. I would not expect that to happen in Scotland but it would take some time."

He added: "If independence is rejected, however, there is is a real danger that politicians at Westminster and officials in Whitehall may think they can put away the files and not worry about Scotland anymore.

"Proposals for increased devolution might then be shelved. That is quite a likely outcome but it would be a huge mistake.

"It would probably mean the next time there was a big surge in support for independence in Scotland maybe, in 10 or 20 years time, it would carry the day."

He said the UK is increasingly dominated, both politically and economically, by London and proposes a range of devolution and wealth distribution measures.

"It is time to alter the balance for the sake of all parts of the United Kingdom," he said.

Rob Gibson the SNP MSP, who sits on the Referendum Bill Committee, said: "As a former UK Government economic adviser, Gavin McCrone's view that Scotland is a well-off country that could perfectly well be independent is very welcome.

"He is also right to highlight the dangers of a No vote - including the economic damage of Westminster dragging us out of Europe and the single market of half a billion people, the likelihood that no more powers for Scotland would be forthcoming, and the ever increasing London-centric approach of the Westminster system.

"The referendum next September is a golden opportunity for the people of Scotland to vote Yes and gain the benefits of independence, enabling Scots to build a fairer and more prosperous country."

But Anas Sarwar MP, deputy leader of Scottish Labour, said: "Gavin McCrone has added his voice to the growing chorus of commentators and experts who recognise that the SNP's plan to break up Britain carries substantial risk and has not been thought through.

"His critical assessment of the SNP's proposals should give pause for thought to senior nationalists. Instead, he will be ignored and the nationalist case will continue to change to meet the latest challenge or poll findings. McCrone recognises that the proposals to break up Britain are half-baked and aren't in Scotland's interests."

A Scotland Office spokesman said: "Walking away from the UK would be an irreversible decision with uncertain consequences - there is no doubt it would involve major changes to the daily lives of people in Scotland.

"The Scottish Government can offer no guarantees on important issues such as what the currency would be, the membership of major organisations or the prosperity of an economy far more exposed to the volatility of oil revenues than that of the UK."

Scottish Independence: Weighing Up The Economics, by Gavin McCrone, is due for release on August 1.

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