Financial Questions Key For Poll

A crucial issue for voters as they prepare to go to the polls to decide Scotland's future has been the nation's finances.

Put simply: would Scotland be better off if it left the UK and became independent, or if it remained in the Union?

Politicians on opposing sides of the debate have, unsurprisingly, made competing claims.

First Minister and SNP leader Alex Salmond believes independence could leave people £1,000 a year better off.

Declaring it a "watershed moment'' in the referendum campaign, he said that improving the growth productivity rate, upping the employment rate and increasing Scotland's population could leave the nation £5 billion a year better off in 15 years' time.

He stated: "We project that over a 15-year period, the tax revenue addition is £5 billion - around £1,000 a head for every man, woman and child in Scotland.

"We describe that as the bonus of independence - the independence bonus.

"Not caused by an increase in taxes, but be an increase in productivity, an increase in the working age population and an increase in employment.''

But Chief Secretary to the Treasury Danny Alexander - who has played a prominent role in the battle to keep Scotland in the UK - branded that a "bogus bonus''.

Instead he said the Treasury's assessment was that remaining part of the Union would net people north of the border an annual £1,400 "UK dividend''.

The Liberal Democrat minister argued that leaving the UK would mean lower tax revenues for Scotland, combined with increased public spending.

"By staying together Scotland's future will be safer, with stronger finances and a more progressive society,'' Mr Alexander insisted.

"Because as a United Kingdom we can pool resources and share risks, it means a UK dividend of £1,400 a year for every man, woman and child in Scotland.

"That dividend is our share of a more prosperous future. It is the money that will pay for better public services and a fairer economy.''

Meanwhile, the Institute for Fiscal Studies has warned independence could leave Scotland needing to raise taxes, cut spending or both to build a sustainable economy.

In November, the think-tank said that falling oil revenues and an ageing population would create tougher economic choices than in the rest of the UK.

"To ensure long-run fiscal sustainability an independent Scotland would need to cut public spending and/or increase other tax revenues more than would be required across the UK as a whole,'' it claimed.

But rival think-tank Fiscal Affairs Scotland appears less certain of this position, stating in August that quitting the UK could either leave Scots just over £1,000 better off or approximately £1,300 a year worse off.

It insisted it could "not be certain'' how much cash an independent Scotland would spend and raise, because of uncertainties over North Sea oil revenues and what its share of the UK debt would be.

David Phillips, a senior research economist at the Institute for Fiscal Studies explained why the fiscal position of an independent Scotland has been key to the debate.

In Scotland's Decision, a new e-book published in the run-up to the referendum, he stated that the "health of the Government's finances determine how much can be spent on public services like schools, the NHS, welfare and pensions''.

The nation's financial situation is also crucial in determining if taxes can be cut or raised.

"Ultimately, it affects how much money individuals and families will have in their pockets and the quality and quantity of public services they can enjoy in the years ahead,'' he said.

When considering the "bottom line'', he stated: "It looks likely that the Scottish Government's finances will be squeezed in the years after 2016 whether the public votes Yes or No.

"If Scotland remains part of the UK, cuts to grants from Westminster are set to continue until 2018-19. If the vote is to leave the UK, an independent Scottish Government would likely have to make spending cuts or tax rises of its own just to balance the books.''

He went on to say independence would give Scotland "more freedom to pursue a different, and perhaps better, economic policy to undertake the radical, politically challenging reforms that could generate additional growth''.

But the expert added it was "much easier to saying things would be better'' than to ``develop and implement policies that would actually deliver that extra growth''.

Mr Phillips concluded: "Whether you believe Scotland's government's finances would be in a better state if Scotland votes for independence should depend on two things.

"First: do you think the Scottish Government could find new policies to deliver a sustained increase in economic growth? And second, would that additional growth mean higher tax receipts that will more than outweigh the long run decline in oil revenues?

"If so, then an independent Scotland might be able to continue with its relatively high public spending without much in the way of additional tax increases.

"If not, the Scottish Government's finances would likely be weaker if the result is Yes.''

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