The political row over Sir Kenneth Calman's examination of the future of devolution erupted last night with all sides of the debate claiming vindication from the report of a group of economists advising his commission.

Their report said any move to reform or move away from a Barnett formula-based block grant would pose problems, while alternatives such as assigning taxation revenues would also prove difficult.

The "devolution max" option of full fiscal autonomy could spell the end of the UK, while between these extremes there were no ideal solutions, said the report.

The expert group chaired by Professor Anton Muscatelli, principal of Heriot-Watt University, yesterday "laid out the landscape" for different ways Scotland could be funded in the future, explaining the pros and cons of each based on international experience drawn from Europe and the Commonwealth.

He said the three mechanisms - devolving taxation, assigning tax revenues or relying on a block grant - are all used in varying proportions around the world where states have autonomous regions.

"There is no single perfect solution and each mechanism has certain strengths and weaknesses," said Prof. Muscatelli. "Choosing the right combination of funding arrangements means serious and very profound choices have to be made.

"Any financing system involves trade-offs between desirable, but often conflicting, properties such as equity, autonomy, accountability, stability, transparency and efficiency."

The Muscatelli group raised questions over the stability of oil and gas revenues and the way in which decommissioning costs would impact on any transfer of these to Scotland, an issue they plan to report back on.

But in the firm absence at this stage of any firm conclusions or recommendations the result was a field day for all sides in the debate - including the SNP who refused to participate in the Calman process in the first place because its remit excluded consideration of independence.

Scottish Labour leader Iain Gray said: "This is a serious document that took Professor Muscatelli a year to produce and deserves serious consideration. However, certain points are immediately evident that undermine the SNP economic argument for independence, such as volatile oil and gas prices.

"Labour has always pointed out how irresponsible and high risk it would be to rely so heavily on one revenue source. The Muscatelli report also exposes SNP grievance politics regarding the union, ignoring the benefits it brings in such areas as services and public spending.

"Muscatelli also points out that the different revenue mechanisms suggested as alternatives have as many weakness as plus points. The importance is not change just for the sake of it, but how to improve devolution."

Tavish Scott, leader of the Liberal Democrats in Scotland said: "This report paves the way for the Steel Commission's recommendation that the Scottish Parliament should have significantly more powers.

"The UK Government published depressingly negative and unimaginative evidence last week. I am looking forward to Calman's interim report, which I hope will point us in the direction of a much more radical and ambitious home rule settlement for Scotland with strong tax powers. Labour and the Tories need to overcome their squeamishness about moving Scotland forward."

The SNP's Alasdair Allan said: "It's now clear that the UK Government is against any real financial responsibilities for Scotland, and it now appears that the Calman Commission is falling short of what is required and doesn't meet the challenges of the times.

"What the Scottish Parliament needs is responsibility for Scotland's resources as well as borrowing powers to allow it to respond to economic circumstances. It cannot do that within a fixed budget.

"The need for such powers is even more patently obvious in the current economic situation. Anything that merely allocates tax revenues would arguably aggravate the existing situation."

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