Salmond's adviser warns on going solo

AN INDEPENDENT Scottish economy would be "awful" in the present financial climate, one of Alex Salmond's key economic advisers said last night.

In an embarrassing blow to the First Minister, Professor John Kay said Gordon Brown deserved credit for his handling of the financial crisis and said the Scottish economy was more at risk from the global downturn than the UK as a whole.

Kay, a member of the First Minister's Council of Economic Advisers, criticised the SNP's vision of an independent nation, saying he was not interested in "flag-waving, embassies and armies".

He suggested independence should be considered a "long-term" goal.

The SNP's reliance on revenue from North Sea oil, for so long the key component of the SNP's economic plan for independence, was also questioned by Kay, who expressed concern about falling fuel prices.

Kay, a fellow of St John's College, Oxford, and a visiting professor at the London School of Economics, is a member of an 11-strong team of eminent economists and business figures set up last year to advise Salmond on how to tackle Scotland's "systemic economic mediocrity".

He said: "If Scotland was independent at the moment, its finances would look pretty awful, but basically the UK's public finances now look terrible, and if you do boil down to the Scottish element of it, that looks worse.

"Getting on for half of corporation tax revenue has come from the financial services sector, and in Scotland the proportion is probably even larger. We can argue about what share of the oil revenue Scotland should get, but oil prices have fallen and I would expect that to continue."

Although members of the council do not necessarily share Salmond's political views, they tend to be broadly sympathetic to independence.

In the past, Kay has argued that separatism would make Scotland responsible for its economic destiny.

On the eve of Salmond's speech to the SNP Conference in Perth, Kay acknowledged that the UK Government was "taking and getting credit" and added: "I think that credit is justified."

On the break-up of the United Kingdom, Kay said he agreed that Scotland should have more self-government but suggested the economic situation meant that independence should be seen as a long-term ambition.

"As far as independence is concerned, I think we have to look at that much longer term and make arrangements so that Scotland has a more dynamic economy and Scots take responsibility for their own actions and stop moaning all the time," he said.

An SNP spokesman said: "The reality – as John Kay has said – is that the UK's finances are dire and deteriorating, with a deficit of £57bn and rising.

"The average oil price this year has been over $110 a barrel – which means that the UK Treasury is set to collect several billion more in Scottish oil revenues than the £10bn forecast at the time of the Budget."