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Academic says initial iScotland set-up would cost £200m

The initial cost of establishing an independent Scotland would be around £200 million, according to an academic.

London School of Economics (LSE) professor Patrick Dunleavy was commissioned to research the costs involved in a Yes vote.

His report does not attach a total price tag to setting up a new state because he said transition costs will depend "very heavily" on how both the UK and Scottish governments approach negotiations.

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He estimates that immediate set-up costs to duplicate core Westminster functions will be £200 million, but "hundreds of millions of pounds more" will be needed to build the government IT systems for a new state.

The Treasury has previously estimated this would cost £900 million, which Dunleavy said "does not seem implausible".

The academic said Scots may face up to a decade of transition following a Yes vote, paying a fee to continue to share some agencies such as the DVLA until 2022.

The government of an independent Scotland would require 27,000 civil servants across nine departments and an increase in the number of cabinet ministers to 15, he said.

The report was said to have been compiled following discussions with First Minister Alex Salmond, his deputy Nicola Sturgeon, Scottish Government economists and Treasury officials.

A Treasury paper recently put the set-up costs of an independent Scotland at £1.5 billion.

Mr Salmond accused Westminster of "trying to cook the books" when analysis released in advance of its publication had cited a possible cost of £2.7 billion - a figure Mr Dunleavy previously said was ''bizarrely inaccurate''.

The professor of political science and public policy at LSE said: "We can say with some confidence that Scotland's immediate set-up costs are likely to be constrained - we suggest around £200 million in one-off costs to create its own versions of a few but big and important existing UK department capabilities.

"The UK Treasury has suggested that Scotland could also face IT and new administration costs in taxation and benefits, of perhaps as much as £900 million. But these would be systems that come on line only in 2018 to 2021, and they would endure for many years.

"The two absolutely critical influences on Scotland's likely overall transition costs are the realism of Scottish Government planning for independence, which generally seems high.

"It does assume, however, that a moderate and rationalist approach will be taken by the Government in Westminster. The stance that London ministers would actually take in negotiations over the transition remains largely undefined."

A spokesman for Mr Salmond said: "The No campaign's arguments have been totally and utterly demolished, and we now need a retraction both from the Treasury and the No side.

"These are the figures on which they based their campaign. We now find they were exaggerated by a factor of 12.

"And the set-up costs, which professor Dunleavy estimates at £200 million, would be offset against the scope that he has pointed out for efficiencies from better delivery of services.

"The UK Government is responsible for creating uncertainty for refusing to negotiate. But once the votes are in, under the Edinburgh Agreement, that will change."

Scottish Liberal Democrat leader Willie Rennie said the report had put further pressure on the First Minister to "come clean" over independence set-up costs.

Mr Rennie said: "These eye-watering figures cannot be dismissed as inconsequential by Alex Salmond.

"People will find it difficult to understand why the nationalists want to spend billions of pounds on offices, quangos and administration rather than schools, hospitals and colleges. It shows why Alex Salmond refused to reveal how much the set-up costs would be but now we know the potential scale of the costs he can no longer avoid these serious questions.

"Alex Salmond is able to predict the financial benefit of the policies he likes within three decimal places. Yet the First Minister says he is incapable of providing an estimate of costs of the policies he doesn't like even by a quarter of a billion pounds either way. This report now puts further pressure on him to come clean."

Labour MP and shadow Scottish Secretary Margaret Curran told the BBC's Sunday Politics programme: "We've had John Swinney, we've had Nicola Sturgeon commit to say we would get some sense of costs and they haven't fulfilled that."

She told the show: "We are talking about millions of pounds in terms of setting up an independent state and that's just talking about tax and welfare."

SNP MSP Kenneth Gibson said: "Today's report proves what we already suspected - UK Treasury claims of set up costs of billions of pounds were plucked out of thin air in an attempt to peddle fear on independence.

"And it is Westminster that is standing in the way of progress with a 'hostile approach' that is providing the 'main uncertainty' over these issues.

"Danny Alexander's Treasury has been found out in its pathetic attempt to cook the books and mislead the public with claims of set-up costs 12 times higher than credible estimates.

"As polls show a Yes vote is closer than ever, it is clear the UK Government's panic grows by the day. But misleading the public is not the way to win their votes and Danny Alexander must apologise for these attempts to hoodwink the public in order to get what he wants."

Deputy First Minister Nicola Sturgeon said: "I welcome Prof Dunleavy's report as it totally vindicates the Scottish Government's position on how we can complete the governmental transition to a fully independent Scotland. It makes clear how the initial start-up costs would be much less than the UK Government have sought to claim.

"The report points out that much of the UK structure of government quangos and agencies is highly elaborate and long-lived and that the Scottish Government would not need all these bodies, while there is also good evidence that government IT systems in small states around the size of Scotland are generally cheaper and more effective than with the scale of the UK state.

"And while the report judges the realism of the Scottish Government's planning for independence to be generally high, it suggests that some of the demands for cost data made upon us at this stage would require "the prophetic powers of the Delphi oracle".

"The report also makes clear that the main cause of uncertainty around Scotland's transition to independence lies with a lack of UK Government planning so I urge UK Ministers, in line with the Edinburgh Agreement, to engage with us in sensible pre-referendum discussions. As we move closer to this exciting referendum on our country's future, the people of Scotland deserve nothing less."

A Treasury spokesman said: "Professor Dunleavy accepts there may be over a billion pounds in additional costs to Scotland at a time when the economy and our national finances are recovering.

"In addition, independent estimates show that setting up a new tax system is costing £750 million in New Zealand, and research from the Department of Work and Pensions says that a new welfare and pensions IT system alone would cost between £300 million and £400 million.

"The Scottish Government has refused to come clean with its own number on the cost of independence and only the UK Government is providing the facts."

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