Scottish independence: Chancellor Osborne makes post-Yes tax rise warning

George Osborne says Scotland will be in a better position to make the most of its oil reserves and perform economically if it remains part of the UK

The UK chancellor has said there would be "very significant" tax rises or cuts to public spending if a Scottish oil fund was set up post-independence.

George Osborne delivered the message as part of the latest UK government analysis on the possibility of an independent Scotland.

The paper said such a plan would mean taking £8bn out of a go-alone Scottish budget and diverting it into the fund.

The Scottish National Party has backed a Norwegian-style oil fund.

Since 1990, Norway has invested profits from its oil industry into coffers for the nation's future.

The fund now stands at about $720bn (£475bn) - 40% bigger than the value of the entire Norwegian economy - making it the world's largest sovereign wealth fund.

However, Mr Osborne said the creation of an oil fund was not straightforward.

The analysis paper, the fifth to be published by the coalition government, is titled: Scotland Analysis - Macroeconomic and fiscal performance.

Start Quote

If you were sitting in Norway listening to George Osborne you would laugh at him - I expect a lot of people in Scotland will today as well”

End Quote Nicola Sturgeon Deputy First Minister

It said: "An independent Scottish state could try to smooth its public finances and manage volatile and declining oil and gas revenues by establishing an oil fund.

"Implementing an oil fund in a similar way to Norway would imply very significant tax increases or cuts to public spending, over and above the plans that have been set by the UK government to repair the impact of the financial crisis."

The paper went on to say that independence would fundamentally transform the relationship between Scotland and the rest of the UK.

However, Deputy First Minister Nicola Sturgeon insisted it was right for an independent Scotland to "steward out oil resources".

The SNP MSP told the BBC: "If you were sitting in Norway listening to George Osborne you would laugh at him - I expect a lot of people in Scotland will today as well because they are a country of similar size to Scotland that is sitting right now on a £470bn oil fund for the future.

Start Quote

As an Englishman I passionately hope people in Scotland will vote to stay within the UK in just over a year's time”

End Quote George Osborne UK Chancellor

"That is what happens when you steward your oil resources properly."

The people of Scotland go to the polls on 18 September next year, when they will vote in a referendum on their country's future.

They will be asked the straight yes/no question: "Should Scotland be an independent country?"

Tory MP Mr Osborne also said that Scotland had benefited over the last 30 years from oil and gas industry tax revenues.

During an address to oil and gas industry delegates in Aberdeen, he said the best option was to reject Scottish independence and "work together across the whole of the UK".

Mr Osborne said: "The question of whether Scotland's future lies in the UK or without needs to be answered.

"As an Englishman I passionately hope people in Scotland will vote to stay within the UK in just over a year's time.

"This hope I know is shared by the great majority of people living not just in England, but Wales and Northern Ireland too. And the reason is that we are better together."

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