Lord Reid: independence would see Scotland's public services subjected to greater cuts than under Thatcher

He went on to warn that if an independent Scotland was forced to use the pound without a currency union being agreed, the impact on services such as schools and hospitals could be "devastating".

Lord Reid, who also served as home secretary and defence secretary in Tony Blair's government, hit out at Scottish First Minister Alex Salmond, claiming he "speaks with the confidence of a man blinded by his own ambitions".

Lord Reid said: "We got rid of the divine right of kings several centuries ago - we're not about to replace it with the divine right of the first minister.

"I passionately believe that it's in the best interests of Scots to stay in the UK."

Lord Reid, who was speaking at Dalkeith Miners' Club in Midlothian, argued: "Far from offering a vision of a socially just Scotland, the reality is that an independent Scotland would risk cuts to public services worse than even anything imposed by Mrs Thatcher.

"You don't need to take my word for that. The experts at the impartial Institute for Fiscal Studies (IFS) have said a separate Scotland would face spending cuts worth £6 billion in the first few years after independence.

"That's £6 billion worth of cuts over and above anything taking place already. It doesn't take an expert to work out what that means for public services in Scotland.

"Leaving the UK would mean schools and hospitals in Scotland would be at risk.

"Instead of investing in our public services as we can today with devolution, we would need to cut the number of doctors, nurses and teachers with independence.

"Those cuts are what would be required just by leaving the UK."

With Labour, the Tories and the Liberal Democrats all having ruled out a currency union to allow an independent Scotland to use the pound, Lord Reid went on to warn of the possible consequences of using sterling without any formal deal.

"We know that a currency union between a separate Scotland and the continuing UK wouldn't happen," he said.

But he claimed "heavy hints" had been dropped that the nationalists' Plan B could be "using the pound without a formal currency union".

Lord Reid branded this "absolute madness", saying: "It would mean no central bank, no insurance policy for when things go wrong, like the banking crisis of 2008. It would also mean no control over interest rates.

"The effect of this would be higher costs for families and businesses in Scotland."

He continued: "The biggest effect would be felt in public spending in Scotland.

"Countries using the currency of a foreign nation need to run a big fiscal surplus. That means big spending cuts.

"If an independent Scotland used the pound without a formal currency union with the rest of the UK, the impact on our public services would be devastating.

"Our schools and hospitals would suffer the most. The affordability of the state pension would be called into question. And the support afforded to those who have fallen on hard times would weaken."

Being part of the UK has given Scotland greater financial stability and greater economic strength along with more personal opportunity and better social justice, Lord Reid argued.

He went on to stress: "Being part of the UK has not diminished our Scottishness. On the contrary, it provides a platform for us to reach out to the wider world in our Scottish expertise, values and reputation.

"When Scottish men and women working for Scottish-based British companies succeed, it doesn't just strengthen the British economy, it strengthens our economy here in Scotland.

"When Scottish scientists, doctors, inventors, engineers, academics and the rest travel the world with British institutions, it doesn't reduce the reputation of Scottish education, it increases it.

"When Scottish sportsmen and women, from Allan Wells to Liz McColgan to Chris Hoy, stand on the winners' podium holding Olympic medals as part of Team GB, they don't abandon their Scottishness or their country's reputation - Scotland's name is celebrated alongside Britain's.

"When Alex Ferguson led an English team to victory in the European Cup, did anyone doubt that he was Scottish, just because he was leading an English team? Scottish leadership was being proclaimed."

While he said Labour had brought in measures to help make the country fairer - such as the minimum wage, the Race Relations Act and the creation of the NHS and the welfare state - he said the SNP were "interested in only one thing - breaking up Britain" and "dividing the very forces that provided the fairness".

He hit out at the SNP's attempts to persuade Labour supporters to vote Yes in the referendum, saying: "They want to use Labour voters when it suits their own purpose, their own, single cause - separation."

Lord Reid warned: "Beware Nationalists bearing gifts, because they want to be all things to all people."

But former Scottish Labour Party chairman Bob Thomson, who is now a leading member of Labour for Independence, hit back, saying: "As a Labour Party member, I could not disagree more with Lord John Reid."

He added: "Increasing numbers of Labour members and supporters are realising that an independent Scottish Parliament offers a much better way of making sure that the wealth of Scotland works for all the people of Scotland than an out-of-touch Westminster ever has.

"That's why polling shows that more than 200,000 Labour supporters are already planning to vote Yes on September 18.

"Instead of being on the receiving end of Tory governments Scotland didn't vote for, a rebalancing of economic power in these islands away from the over-dominance of London - and an independent Scotland delivering a progressive policy programme - would be of benefit both north and south of the border.

"Labour voters are also seeing that the powers offered by the No campaign parties don't go far enough in being able to transform Holyrood from a parliament able to mitigate harmful UK Government policies to one that can create a fairer, prosperous and more just society.

"That's why I and Labour movement figures such as Sir Charles Gray, Eleanor McLaughlin, Alex Mosson, Carol Fox, John Mulvey and countless others are voting Yes in September to see a meaningful package of powers transferred to an independent Scottish Parliament - so that we can deliver policies based on real Labour values here in Scotland."

A spokesman for Scottish Health Secretary Alex Neil also hit back at the Labour peer, saying: "Lord Reid is on the same side as Margaret Thatcher's party in the debate on Scotland's future - and Labour are paying a very heavy price for that alliance with the Tories, as hundreds of thousands of Labour supporters turn to a Yes vote.

"Labour voters are doing that in their droves because they know the only way to fully protect Scotland's NHS from Tory Westminster cuts is to vote Yes.

"It is the poorest and most disadvantaged in Scotland who have most to gain from a Yes vote, because an independent Scotland will mean a fairer, more just and more prosperous society."