The Institute for Fiscal Studies has warned that plans for Scottish independence would mean cuts to public spending and higher taxes than in England, but trade unions welcomed pledges on labour relations.

First Minister Nicola Sturgeon presented a paper at Bute House detailing the economic case for leaving the Union.

Proposals include rejoining the European Union, using Sterling initially before moving to a Scottish pound, and the creation of an infrastructure fund using oil and gas revenues.

David Phillips, an Associate Director at the Institute for Fiscal Studies said: “The Scottish Government’s new paper on post-independence economic plans makes all the right noises on how the public finances would be managed, emphasising achieving fiscal sustainability. But, it skirts around what achieving sustainability would likely require in the first decade of an independent Scotland: bigger tax rises or spending cuts than the UK government will have to pursue.

"This is because while high oil and gas prices means Scotland’s underlying budget deficit this year will be fairly close to that of the UK as a whole, this is likely to prove temporary: oil and gas prices are expected to fall back, and North Sea production is on a long-term downward trend. Scotland’s public finances are therefore expected to weaken relative to the rest of the UK again unless onshore economic growth could be boosted to grow revenues from income tax, VAT and the like.

"That’s not impossible and the Scottish Government has rightly highlighted the UK’s poor productivity performance, including relative to many of the small northern European countries that it is suggested Scotland could emulate.

"However, boosting productivity and growth is far from certain and would be easier said than done. Experience from recent weeks suggests the markets may not look favourably on fiscal plans built on the uncertain hope of a substantial future boost to growth.”

Sturgeon also set out plans for a fairer economy, something that was welcomed by the Scottish Trades Union Congress.

Read More: Independence ‘essential’ to build an economy that works for everyone - Nicola Sturgeon

However, they urged the First Minister to use powers Holyrood already has to improve conditions for workers.

The STUC said: "Any changes to the UK constitution must radically alter, for the better, the economic conditions workers are subject to. 

“There is much to welcome within this paper, including the end to wage discrimination, the repeal of the Trade Union Act, the focus on the importance of collective bargaining and the pledge to work with trade unions as social partners, not social pariahs.

"If taken at face value, the paper represents a positive, marked difference between Scottish and UK Government approaches to industrial relations.

“But workers cannot wait for jam tomorrow. Our People’s Plan for Action sets out nine key actions the Scottish Government can take right now to alleviate the cost-of-living emergency. If the Scottish Government is serious about valuing workers and altering our labour market, they can prove this – here and now - through actions, not words. "