FALLING oil revenues would leave Scotland almost £5 billion worse off this year under the devo max constitutional arrangement proposed by the SNP, a leading think tank has warned.

The claim, from Fiscal Affairs Scotland, came as the Smith Commission prepared to hold its first all-party talks in Edinburgh today on devolving further powers to Holyrood.

In a study based on recent ­half-year oil revenue figures, the think tank urged the Commission to consider the impact of declining North Sea taxes on Scotland's finances, if the country gained full fiscal autonomy from the rest of the UK.

Under proposals put to the body by the SNP, Holyrood would become responsible for all taxation, including North Sea levies, and spending in Scotland.

The devo max plan would see the Scottish Government paying an annual sum to Westminster for shared UK functions such as defence and foreign policy.

However, Fiscal Affairs Scotland suggested these proposals would blow a multi-billion-pound black hole in the country's finances.

The think tank, formerly the Centre for Public Policy for Regions, calculated Scotland would be £12.9bn in the red this financial year, based on Office for Budget Responsibility oil forecasts.

Even using the Scottish ­Government's more optimistic prediction, Scotland would face a £10.6bn gap between the money it raised and what it spends.

The figures are between £2.6bn and £4.9bn higher than the deficit Scotland faces this year under the Barnett Formula, the existing mechanism for allocating the UK's resources.

The true extent of such an arrangement of devo max on Scotland's cash difficulties could be even worse, the study suggested.

According to the latest figures, oil and gas revenues amounted to £1.1bn for the first six months of 2014/15 placing in doubt the North Sea's ability to generate the £3.7bn predicted by the OBR for the financial year as a whole, still less the £6.1bn forecast by the Scottish Government.

The study said: "What this analysis illustrates is that movement away from the current Barnett arrangement to one which relies more on the retention of taxes generated in Scotland could put the existing level of Scotland's public spending at risk.

Economist John McLaren, the study's co-author, added: "The Smith Commission needs to take into account the potential impact of continuing relatively low levels of North Sea revenues on Scotland's budget."

Scottish Labour's deputy finance spokeswoman Jenny Marra MSP said: "The SNP's proposals to the Smith Commission would simply expose Scotland's finances to falling oil revenues and unmanageable fiscal shocks exactly as independence would have.

"The people of Scotland will not accept a party walking into the commission arguing for powers for powers sake, especially when it will result in Scotland being £5bn worse off."

Scottish Conservative MSP Alex Johnstone said: "The warnings made before the referendum on the impact of falling oil revenues on a separate Scottish economy still stand."

A Scottish Government s­pokesman said: "Scotland has generated more tax per head than the UK as a whole in each of the last 33 years."

Negotiators from the five H­olyrood parties will meet for two hours at the Green Investment Bank in Edinburgh at the start of talks to agree a new package of tax and welfare powers for Holyrood.

Speaking ahead of the meeting, Lord Smith of Kelvin said agreement could be reached.

He said: "Today's talks give the chance to sit down around the table together, find common ground and begin the process of delivering what the people of Scotland expect, a substantial and cohesive package of new powers which will strengthen the Scottish Parliament within the UK."