ALEX Salmond's flagship policy of having a £1 billion a year oil fund in an independent Scotland came under fire last night after MPs were told it would have to be paid for by £1 billion in public spending cuts, efficiency savings or higher taxes.

The suggestion from economist Professor Jo Armstrong of Glasgow University was made as she gave evidence to the House of Commons Energy Committee, which is looking into the potential impact of an independent Scotland on the UK energy industry.

Giving evidence, Ms Armstrong told MPs: "The numbers in Scotland would suggest £1bn for a fund means £1bn in cuts or efficiency savings or raising taxes elsewhere."

Her comments were swiftly seized upon by Tim Yeo, the committee's Conservative chairman, who told The Herald: "It's clear in my mind from the figures that the implication from Alex Salmond that somehow there's all this oil wealth stolen from England, which can be used for an oil fund, there is no basis for that at all. There's never been that surplus."

He added that if the aspiration of an oil fund became a reality, it would "lead to cuts in programmes and that would be quite painful".

Labour backbencher John Robertson, a member of the committee, demanded the First Minister give evidence to explain the SNP's "El Dorado oil fund".

"This is yet more proof that the SNP and Alex Salmond live in a fantasy world and dream up ideas for an independent Scotland without thinking them through first," declared the MP for Glasgow North West.

The First Minister has given great weight to the idea of a Norwegian-style oil fund, where annual proceeds would be invested for the benefit of future generations. In a speech to the London School of Economics, he said: "Just £1bn a year ... invested over 20 years would create a fund worth almost £30bn."

He referred to how it would be set up "once fiscal conditions allow" and would promote economic responsibility and stability.

Yesterday, giving evidence before the committee, Fergus Ewing, the Scottish Energy Minister, emphasised the qualification even more strongly, saying: "It's wrong to characterise this £1bn ... as a cast-iron commitment, it was not."