INDEPENDENCE could raise the cost of posting letters and lower the quality of service, the latest Coalition paper analysing the potential consequences of Scotland leaving the United Kingdom warns.

However, faced with more SNP claims of scaremongering, Vince Cable, the Business Secretary, who launched the fourth and latest UK Government paper, insisted it was based on empirical arguments and was "positive and optimistic in tone".

Focusing on business and trade, the paper highlights what Whitehall sees as the benefits of a UK single market covering business regulations, communications and transport.

The paper says Scots hauliers could be hit with extra road costs when driving in the rest of the UK because they might no longer benefit from measures to offset charges for domestic carriers.

On VAT, it raises questions about the future of exemptions. Items such as food and children's clothes are exempt from VAT under a deal negotiated by the UK with the EU.

If an independent Scotland were unable to negotiate the same agreement, VAT of a minimum of 5% would have to be charged on zero rated items.

"All of the current derogations would have to be renegotiated; they may well be deliverable," noted Mr Cable but he warned: "It raises an uncertainty because you would be starting from scratch having to negotiate that."

On the postal service, the paper sets out the background to the £7 billion letters market, namely that the Royal Mail delivers around 58 million items a day to 29m addresses across the UK; of these, 4.5m items a day are delivered in Scotland.

It says the UK Government provides a six days a week service, which goes beyond the EU minimum standard of a five days a week service.

The paper points out how the current system subsidises around 7000 non-commercial post offices, which are predominantly small and rural branches, to the tune of £210m. It notes; "A significant proportion of post offices in Scotland are non-commercial" but does not say how many.

"In the event of a vote for independence, an independent Scottish state would have to consider how to fund the significant non-commercial elements of their post office network if it wished to maintain the current level of service," says the Coalition paper.

"It would be unlikely to achieve the economies of scale of the current UK-wide network, which helps support the provision of services to remote areas."

The paper says "creating a border for mail" would have operational and commercial implications for UK postal operators and also impact the businesses and consumers that utilise their services on both sides of the border. "The free movement of post across the border could be subject to controls, potentially impacting on the cost and quality of service."

The paper says there might also be issues around the price of posting letters and parcels between the UK and an independent Scotland.

"If Scotland voted to leave the UK and negotiated entry into the EU, the continuing UK would need to re-categorise an independent Scottish state for postal purposes as if it were any other EU member state. Differences in pricing could create new difficulties and confusion for businesses and individuals when sending cross-border post," it adds.

In response, Fergus Ewing, the Scottish Government's Enterprise Minister, dismissed the "flawed report" as "simply a set of assertions by an organisation that is opposed to independence".

Independence, he argued, would allow the Scottish Government to do more to improve opportunities for business, such as targeting incentives to improve rates of research and development, ensuring broadband and mobile technology reached all parts of the country and maintaining a postal service that suited Scotland's needs.

Addressing the single market, Mr Ewing said: "Scotland is part of a single market of half a billion people across the EU where countries of similar size to Scotland have stronger economies, significantly higher exports and perform better in key areas such as research and development than Scotland does as part of the UK."