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Fiscal Commission advocates currency union with England after independence

BOTH the remainder of the UK and an independent Scotland would benefit from sharing the pound after a Yes vote, an expert group set up by the Scottish Government will say tomorrow.

In its first report, the Fiscal Commission, an offshoot of Alex Salmond's Council of Economic Advisers, casts doubt on Unionist claims that the Bank of England and Treasury might resist Scotland being in a currency union with sterling.

The Commission will also say independence would give Scotland the "maximum degree" of policy choices to boost economic growth through changes to corporation tax, excise duty, competition law, immigration and the welfare system.

The findings, the product of a year's work by four respected economists including Nobel winner Joseph Stiglitz, are an attempt to define the broad economic framework of a Scotland outside the UK.

Although the content is academic in tone, the timing of the publication is highly political, as it clashes with the first major report from the Coalition on the hazards of independence.

Looking ahead to the Fiscal Commission's report, its chair Crawford Beveridge said: "In our view, it would be in Scotland's interests to retain sterling immediately post-independence.

"It would benefit the rest of the UK to maintain a key trading partner as nearly 10% of the existing UK economy Scotland would remain one of the largest trading partners of the UK economy. Scotland's economy is strong enough and sufficiently aligned with the rest of the UK that a separate currency would not be necessary."

The careful reference to keeping the pound "immediately" after independence leaves open the possibility of a new Scottish currency or membership of the euro in the longer term.

The Coalition report will be issued on Monday morning by Liberal Democrat Scottish Secretary Michael Moore, Tory Scotland Office minister David Mundell, and the Advocate General Lord Wallace.

It is expected to raise doubts about the scale and complexity of the constitutional process involved in independence, with an emphasis on the vexed issue of Scotland entering the EU.

An SNP Government paper last week said Scotland could become fully independent by March 2016, just 17 months after a Yes vote in October 2014. Sceptics say this is too little time to unpick and recast centuries of shared laws and treaties, and suggest three years might be more realistic.

The UK paper, which at about 80 pages is five times as long as the SNP's, is expected to query this and other SNP claims over exiting the UK.

A Coalition source said the report would highlight the weakness of Scotland's negotiating position with the EU if it was to leave the UK, given the size of its population and economy, which would relegate the Scots to Europe's minor leagues.

"At these European summits, you see all the key players moving around, the French, the Germans and the British. But where are the Danish? They're nowhere. It's not that Denmark is not significant, but it's not as important as these other nations, simply because of its size."

DAVID Cameron last night said the strategy was to appeal to the "head and heart" of Scots voters, offering "facts, evidence and expert opinion", as well as reminders of the "unbreakable bonds between the people of these islands", such as the NHS, BBC, two world wars and the Olympics.

He questioned why people should be made to choose between Scotland or Britain when they could be part of both, adding: "Britain works. Britain works well. Why break it?"

Setting the scene for Monday's Coalition report launch, Cameron said he would "make the case for the UK with everything I've got."

He said had "no time for those who say there is no way Scotland could go it alone" in 2016.

"The real question is whether it should – whether Scotland is stronger, safer, richer and fairer within our United Kingdom or outside it."

He said there would be "difficult challenges to face and tough choices to make", but that would be so whether Scotland was in the UK or not. He said Scots already took key decisions under devolution, while enjoying the UK's security and international influence. "Scotland within the UK has a system of government that offers the best of both worlds," he added.

He accused Nationalists of jumping the gun by planning for an independent Scotland before a vote has been cast, and before they had laid out detailed arguments in support of separation. "It's like fast-forwarding to the closing credits before you've been allowed to see the movie.

Reacting to the remarks, Deputy First Minister Nicola Sturgeon called them "an entirely negative attack".

She said: "By placing himself at the head of the No campaign, David Cameron is simply reminding people that he heads a government that Scotland didn't vote for, and that independence is the only way to ensure that Scotland always gets the government it votes for."

But Sturgeon also appeared to row back on the position of Scotland and EU membership last night. Until now, she has insisted Scotland would negotiate its EU entry from within the EU ahead of independence, while still a part of the UK.

However, with European Commission President Jose Manuel Barroso repeatedly insisting negotations can only take place with individual states, she said she merely "expects" talks to be conducted within the EU.

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