Scottish independence: Alex Salmond's plans to keep the pound are a 'sensible' option, say leading economists

Alex Salmond’s plans to keep the pound if next year’s Scottish referendum produces a vote in support of independence have been supported as “sensible” and an attractive option for the rest of the United Kingdom by a group of leading economists.

They said Scotland was big enough to have its own currency, but admitted a newly-separate nation would encounter “practical challenges” in establishing it.

The verdict came from the Fiscal Commission Working Group, appointed by the Scottish First Minister to examine the issues that a breakaway nation would have to face.

It coincided with legal advice obtained by the UK Government which concluded that an independent Scotland would be a "new state" under international law and need to renegotiate membership of the European Union and the United Nations.

The monumental challenges facing a newly independent Scotland are disclosed in a 57-page dossier published today that represents London's opening shot against separation. It also claimed that Scotland would have to wade through more than 14,000 treaties signed by the UK since the Act of Union 305 years ago.

The Fiscal Commission’s report said the strength of business links between Scotland and the rest of the UK was one reason for retaining the pound in a "sterling zone".

Its chair, Crawford Beveridge, said: "We're a very large part of the rest of the UK's trade. There's a great deal of flow between the rest of the UK and Scotland, in both directions.

"In an independent Scotland the earnings you would get from oil revenue and exports of whisky and other things would be useful for the sterling zone to have."

The UK Government’s legal advice on disentangling the Union was published days after Mr Salmond set out plans to declare independence in March 2016 in the event of a vote in autumn 2014 in favour of separation.

It claimed that if Scots vote to leave the UK in 2016, their country would have a similar legal status to South Sudan, which became the world's newest country when it obtained independence from Sudan in 2011, the report indicates.

The "overwhelming weight" of precedence points to Scotland being treated as a new state rather than a "continuing state", the Whitehall advice said. That would mean Scotland having to apply afresh for membership of a host of international bodies.

An independent Scotland's potential status within the EU has proved highly controversial. The SNP insists it would automatically join the bloc, while critics have claimed it would have to reapply for membership, which could well be blocked.

The new legal advice was drawn up by Professor James Crawford, of Cambridge University, and Professor Alan Boyle, of Edinburgh University, who are experts on international law.

"If Scotland became independent, only the remainder of the UK would automatically continue to exercise the same rights, obligations and powers under international law as the UK currently does," they say.

One Whitehall source pointed to the number of treaties to be examined as evidence of Mr Salmond setting out an unrealistic timetable for independence. "Some of the treaties are obviously obsolete, but they would need to go through all of them," the source said. "To take one example, if you wanted to sign a new extradition treaty with America it would take a long time with lots of meetings with lawyers – it would be a very complex process."

The paper is the first product of a drive by Whitehall to examine key policy areas to make the case to stay in the Union . Others include currency policy, taxation, welfare spending, defence and North Sea oil revenues.

David Cameron said ahead of the paper's launch: "The Scottish people still have many months to think about this decision and they are hungry for facts, evidence and expert opinion to help them make up their minds."

But Scotland's Deputy First Minister, Nicola Sturgeon, retorted: "This is an act of breath-taking arrogance by this Tory-led UK Government, which completely shatters their claim that Scotland is an equal partner within the existing UK – it will only serve to boost support for an independent Scotland." She said other eminent legal authorities had reached very different views about Scotland's status if it votes to pull out of the UK.

Scottish Independence: The questions Alex Salmond must answer

International Would Scotland open embassies abroad? Could it join the European Union and other international institutions immediately?

Welfare How would it cope with the demands of a rapidly ageing population?

Business and infrastructure What would be the effect on major firms operating across the UK? How would Scotland fund large transport projects?

Economic performance Would Scotland's economy fare better inside or outside the UK? Would it lose from having direct access to the rest of the UK for its goods? As a small country, would it be more vulnerable to economic turmoil globally?

Currency What currency would an independent Scotland adopt?

Debt and borrowing How much of the UK debt would Scotland inherit?

Tax and spending How would Scotland maintain its level of services outside the UK?

Banking What would happen to its financial services if Scotland went it alone? What would be the impact on Scottish-based life insurers and mortgage providers who do most of their business south of the border?

Defence What would Scotland's armed forces look like? What would happen to UK military bases, equipment and manpower in Scotland – and to Faslane, home to Britain's nuclear deterrent?

Borders Would border checks be carried out between Scotland and England? Would there be a Scottish passport?

Oil revenues How much of the oil money would flow to Edinburgh? Would Scotland be able to maintain services as revenues declined?

Culture and heritage What impact would Scottish independence have on the shared history of the UK? Would the Queen remain head of state? What would happen to the BBC?