Can a go-it-alone Scotland make ends meet?

But amid the passion engendered by the constitutional question the fundamental issue of whether Scotland could survive financially as an independent nation is often overlooked.

Nationalists make a virtue of optimism. Scotland would be as prosperous as her near neighbours Ireland, Norway or even Iceland, they say.

Supporters of the UK make pessimism their watchword. Scotland would, they say, be an economic basket case without the "union dividend".

So where does the truth lie? Like much else in the debate over independence, it is hard to be definitive.

A nation within a larger state, itself within the European Union, has never before broken away to become a separate country. There are no precedents, and few hard facts.

However, there is at least a base from which to work, in the form of the Government Expenditure and Revenue in Scotland report (GERS), published by the Executive yesterday.

Although the Scottish National Party challenge the assumptions in GERS, most economists and experts on spending accept that it at least provides a basis on which to work.

GERS says that Scotland spends 11 billion more than is brought in by taxes levied north of the Border. Expenditure reduces to 6 billion if all of the tax revenue from oil and gas is assigned to Scotland.

This suggests if Scotland were to separate from the rest of the United Kingdom, First Minister Alex Salmond would be faced with a gap between what was currently being spent and his income.

However, the issue is complicated by the uncertainty of the process that would lead to independence. No-one knows, for example, how the assets and the debts of the former United Kingdom would be divided up.

So it is impossible to say how much of the UK's debt an independent Scotland would be saddled with. Or, for that matter, whether Scotland's new political leaders would negotiate hard, to secure a large share of what they would claim was their nation's inheritance from the union it was about to leave.

And then there is the immediate impact of the policies of an incoming government, presumably led by the Nationalists who plan to cut corporation tax whilst maintaining public spending.

Even the SNP has not claimed that independence is easy. But a look at the main issues involved in the financing of an independent Scotland reveal just how difficult it could be.

OTHER KEY ISSUES

WATCHDOGS: Would London-based UK regulation authorities like Ofgem and the Financial Services Authority be replicated north of the border?

The expert says: Dr Alex Wright, lecturer in politics, University of Dundee, said: "Scotland could set up its own regulatory body or bodies. However it is up to the government in question whether this increases the burden on businesses through creating further regulations or cuts red tape."

The Nationalists say: Alex Neil, SNP enterprise spokesman, said: "A new regulation body for all the industries would be set up for Scotland that replaces the current bodies based in London."

The Unionists say: Duncan McNeil, Labour MSP, said: "It would cost an absolute fortune to set up new agencies, plus different regulations and repetition would disrupt business."

NATIONAL LOTTERY: Could Scotland run its own national lottery for charitable causes?

The expert says: Lottery organiser Camelot said: "More people play with bigger jackpots therefore generating more money for good causes, so the trend is towards more international lotteries.

The Nationalists say: Alex Neil, SNP spokesman, said : "The Nationalists may introduce a Scottish national lottery but people would still be able to play in British and international games."

The Unionists say: Jamie McGrigor, Tory culture spokesman, said: "Scots already have access to a number of locally run lotteries which raise money for good causes. The UK national lottery raises a lot more money by using a bigger population."

Dividing up of assets could lead to the messiest divorce in history and a move into uncharted market waters

BORROWING

SCOTLAND would have had to borrow 11.2 billion in 2004-5 - 12 per cent of Scottish GDP - to cover the gap between spending and tax revenues, excluding North Sea receipts, if it were an independent nation.

That is the conclusion of the GERS review, which shows that even if all the oil and gas revenue were included, the net borrowing would be 6 billion.

THE EXPERT SAYS: Maurice Fitzpatrick, a tax manager at Grant Thornton accountants, disputes the claim that Scotland would be burdened by debt. His calculations show that with tax revenue from the North Sea now at about 10 billion, at least 8 billion of that would come to Scotland. Allowing for Scotland borrowing say 3 billion - in line with other countries' levels - he concludes it is neither in deficit nor surplus.

THE NATIONALISTS SAY: Stewart Hosie MP, the SNP's Treasury spokesman, says: "Independent analysts and UK government parliamentary answers confirm that Scotland has been in surplus in the past, we are in surplus today."

THE UNIONISTS SAY: Derek Brownlee, the Tory finance spokesman: "It is possible any borrowing by an independent Scotland would be more expensive than at present, as Scotland would have no track record for markets to assess."

SPENDING

In 2004-5, total spending in Scotland was 47.6 billion, according to GERS. Of that, "identifiable" spending, defined as money that is spent specifically by residents north of the Border, is 38.6 billion. Non-identifiable spending, such as defence, is 6.2 billion. The Nationalists have not spelled out their spending plans, but are committed to maintaining public spending.

THE EXPERT SAYS: Professor David Bell, of Stirling University, says the main problem for the SNP is the non-identifiable spending.

"What we do not know is what the SNP would spend on areas like defence."

THE NATIONALISTS SAY: John Swinney, the SNP Holyrood finance spokesman: "Spending choices would be down to the independent Scottish government. An SNP government would protect spending in our public services and instead cut spending on things like nuclear weapons."

THE UNIONISTS SAY: Lord Foulkes, vice-chairman of Labour's Holyrood election campaign, says: "Billions and billions of pounds would be required to pay for reckless SNP spending pledges paid for by higher taxes and lower government spending, on top of the existing deficit."

ASSETS

Dividing up the assets of the UK would be one of the most difficult tasks for politicians. In 2005-6 the UK government's assets were valued at 27 per cent of GDP - some 333 billion.

However, such calculations are not clear-cut: For example, how do you put a market price on, say, the Parachute Regiment or the River Thames?

THE EXPERT SAYS: Professor Brian Ashcroft, the director of policy at the Fraser of Allander Institute: "There could be some benefits to Scotland, but much would depend on negotiations on the break-up of the UK."

THE NATIONALISTS SAY: Mr Hosie says: "Scotland would be entitled to receipts of between 4.7 billion and 8.5 billion as part of the independence settlement."

THE UNIONISTS SAY: Mr Brownlee says: "Think of the messiest celebrity divorce and multiply it by a million. This would take years to resolve, meantime, our competitor nations would surge ahead."

TAX

Tax policies of an independent Scotland would be crucial to the country's economic success.

To maintain the current spending levels, an independent government would need to raise about 50 billion at today's prices from a mixture of income tax, VAT, corporation and local government taxation. The SNP is committed to the current levels of income tax, but would cut corporation tax to boost demand.

THE EXPERT SAYS: Prof Ashcroft says the Nationalists' plans to cut corporation tax pose a problem. "If they cut business taxes like those under European rules, it will have to be across the board, including on the North Sea, which will obviously hit the amount of money they take in."

THE NATIONALISTS SAY: Mr Swinney: "The range of taxes [in an independent Scotland] would be the same as Britain, although we would look to lower corporate tax to provide a boost to the economy and encourage growth."

THE UNIONISTS SAY: Lord Foulkes: "According to official figures, there is a 6 billion gap between what Scotland earns and spends. That money would need to be found somewhere - from a combination of higher taxes, lower spending and high borrowing."

EUROPE

If an independent Scotland became a member of the EU, it is unlikely to be a net beneficiary.

THE EXPERT SAYS: Dr Graham Timmins, of Stirling University, says that Scotland, with its oil wealth, would almost certainly pay into EU coffers.

THE NATIONALISTS SAY: Alyn Smith, SNP MEP: "Scotland would be in a much better position than the UK to benefit from European funding."

THE UNIONISTS SAY: Malcolm Bruce, Lib Dem MP, says: "The EU requires borrowing to be contained within 3 per cent of GDP, leaving Scotland no room for manoeuvre."