AN independent Scotland that ran into financial difficulty might have to be bailed out by the rest of the UK, one of Britain's top economists has suggested.

Alternatively, Robert Rowthorn, Emeritus Professor of Economics at Cambridge University, also suggested a prosperous independent nation would not need outside help and would be a valuable trading partner for the rest of the UK.

In evidence to a House of Lords inquiry on the economic implications of Scottish independence for the UK – which is hoping to call First Minister Alex Salmond later in the year – the academic estimated an independent Scotland could face a national debt as high as £120 billion with annual interest payments of more than £5bn. In such circumstances, he told peers: "It would be rational for the Nationalists to seek to minimise Scotland's responsibility for the national debt."

Emphasising how much of an independent Scotland's financial future would rest on oil and gas revenue, Mr Rowthorn posited three scenarios – best case, worst case and intermediate case for 2015/16, potentially the first year of independence if Scots vote yes in the 2014 referendum.

The best-case scenario would lead to a fiscal surplus of £1.1bn or 0.7% of Scotland's GDP, and is based on a future Scottish Government taking no responsibility for Scotland's share of UK national debt (currently around £1 trillion); buoyant North Sea revenues; and having modest Nordic-style armed forces with no Trident submarines.

Scotland's fiscal deficit would be "manageable and the country would not require external support" and would prove to be a valuable trading partner for the rest of the UK.

The worst-case scenario would leave Scotland with a deficit of £9.4bn or 5.9% of GDP. It is based on Scotland taking its per capita share of UK national debt; Orkney and Shetland (with a 30% slice of North Sea revenue) remaining in the UK; and oil and gas prices lower than expected.

In these circumstances, Scotland might be "compelled to implement another round of austerity. In extremis, the UK might have to step in to help bail out Scotland just as it is currently helping to bail out Ireland".

The intermediate scenario would leave a newly independent Scotland with a fiscal deficit of £4bn or 2.4% of GDP. This scenario is based on it accepting a per capita share of national debt; buoyant hydrocarbon prices; and Orkney and Shetland being part of an independent Scotland.

Mr Rowthorn explained that, economically, much centred on the issue of oil and gas revenue. If revenues remained high, then the fiscal position would be fine but if they did not, then an independent Scotland could be in "a lot of trouble".

He noted how in the past 25 years oil prices had shown a great deal of volatility. Up to the early 2000s a barrel was $25, then it jumped to $150, dropped to $50, rose back up to $150 and was now around $100.

Mr Rowthorn told the Lords Economic Affairs Committee price uncertainty was "one of the strongest arguments against independence".

He said: "Independence could be a great success if oil remains very expensive for quite a long time. Though it must be said, if you look over the 25 to 30-year perspective oil revenues are going to decline almost whatever happens to the price of oil."

The economist said if an independent Scotland had a record for fiscal reliability like Denmark, then the markets would expect it to take action in troubled times and borrowing rates could be kept low. However, if oil and gas prices fell and "they experienced serious fiscal problems with maybe conflict at home – I'm not saying riots in the streets but some kind of political instability – then they would have to pay a lot higher interest rates".