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Independence warning over oil and banks

A REPORT comparing the economy of an independent Scotland to Greece has been dismissed Scottish ministers, who claim the figures used are incorrect.

Analysts at Fathom Consulting said Scotland would have to own full share of oil assets, remove bank liabilities and also create its own currency.

It also warned spending cuts would be necessary.

Yesterday Better Together seized on the report, former Scottish Government economist Florian Baier and former Bank of England economist Erik Britton .

The pro-Union group claimed: "A new report . . . has said separation could lead to big cuts in public spending, the loss of the UK pound and the loss of Scotland's banking sector."

The Fathom report said: "An independent Scotland with its own currency, a small share of the UK's banking assets and a geographic share of its oil revenues which implemented a mix of tight fiscal and loose monetary policy from the outset could survive and indeed thrive.

"Other small economies with their own currencies manage to do so - particularly those blessed with substantial natural resources and the discipline to manage those resources sensibly."

But the report added that any other settlement with respect to the distribution of oil revenues or bank assets could make it impossible for Scotland to borrow, forcing the government into a severe tightening of fiscal policy and Scotland into recession.

It said: "Scotland would face a situation worse than the one that has been facing Greece for the last few years."

Mr Britton and Mr Gabay, a co-founder of Fathom, both worked for the Bank of England, with the latter going on to work with JP Morgan, but Mr Baier was not recognised as having been a significant figure at the Scottish Government.

A spokesman for First Minister said: "These claims about the size of Scotland's banking and financial sector are wrong.

"The reality is financial services account for a lower share of our overall economy at around 7% than they do for the UK as a whole.

"Independence will create the opportunity for Scotland to pursue a more productive, resilient and fairer economic model that delivered long-term sustainability and economic opportunity for all."

On behalf of Better Together, Scottish Labour MP Ian Murray said: "It's embarrassing for Salmond that one of his own former advisers has exposed the nationalists' lack of economic credibility.

"This latest expert intervention makes it clear that leaving the UK would put jobs and the money we have to spend on schools at hospitals at risk. That's a risk we simply don't have to take."

The exchanges came as Westminster's Scottish Affairs Committee under Labour's Ian Davidson published a report agreeing the ruling out of a formal currency union by Conservative, Liberal Democrat and Labour leaders was unequivocal.

He said: "The Scottish Government tries to give the impression that a currency union is still a possibility. It is not. This parrot is dead."

The report calls on the Scottish Government to publish a Plan B. A spokesman for Mr Salmond branded the report lame and insisted the pound was "as much Scotland's as it is England, Wales and Northern Ireland's".

Better Together also seized on a report by Professor Joseph Stiglitz, one of Alex Salmond's top advisers, which was highly critical of the impact of the way Ireland had cut corporation tax. Labour leader Johann Lamont called this embarrassing for Mr Salmond, who advocates such a policy.

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