Chancellor George Osborne has issued a warning that Scotland would be worse off if it broke away from the United Kingdom.

Mr Osborne, who chairs the Cabinet's Scotland committee, refused to say whether an independent Scotland would be allowed to retain the pound.

The chancellor made clear, however, that Scotland would have to take on its share of the national debt and he questioned whether it would be able to bail out its banks in the event of a financial collapse.

Asked in an ITN interview if Scotland can afford to go it alone, Mr Osborne said: “Ultimately the people of Scotland have got to decide their own future but they deserve a referendum that’s fair and clear and legal.

"We’ve set out plans to allow Scotland to do that this week and I think that by making that clear we focus on the real issue which is it good for the people of Scotland to leave the UK and is it good for the UK that Scotland leaves?

"I think profoundly it would not be good for Scotland or for the UK and it wouldn’t be good for the people of Scotland in terms of the health of the Scottish economy.”

"I don’t think Scotland would be as prosperous as it would be as part of the UK. I think there are businesses that are nervous about investing in Scotland when they don’t know about its constitutional future.

"I think if you look at the scale of the national debt for example that Scotland would have to take if it became independent.

"If you look at the fact it has an important banking industry as we know and you ask yourself ‘would Scotland alone have been able to bail out the Royal Bank of Scotland or Halifax Bank of Scotland’? You ask these questions and you begin to see actually Scotland is better off in terms of jobs and prosperity being part of the UK and by the way, the rest of the UK is better off with Scotland as well.”

Mr Osborne's comments came after First Minister Alex Salmond declared an independent Scotland would not be prepared to share the UK Government's exposure to RBS's toxic assets.

Responding to the suggestion David Cameron's involvement in the planning of an independence referendum would only irritate Scottish voters, the chancellor said: “I think the Prime Minister of the UK has an important job to do in saying what is legal, fair and right for the people of Scotland when it comes to a referendum.

"It has forced Alex Salmond to start to spell out plans that he doesn’t want to spell out, it has forced him to come clean about when he thinks a referendum should be held. It has forced Alex Salmond actually to spell out it would be better to have a simple yes/ no question on whether Scotland should be part of the UK.

"So I think at last we are taking the fight to the separatists, it’s across all political parties, across the whole of the society of Scotland, across all Scottish business and society. It’s across the Scottish workforce.

"Those who do not want to see this country pulled apart are now putting their arguments together and what’s interesting is you see when you put some pressure on the SNP you can quite quickly put them on the back foot.”

Speaking on the issue of whether or not Scotland would have to join the Euro or be allowed to continue to use the pound, Mr Osborne stated: “Alex Salmond has himself said he’d want Scotland to join the Euro and you have to ask yourself is that the currency you want to be joining at the moment? That’s a question that the Scottish people are going to have to ask themselves.”

“All these issues are going to be fleshed out now and flushed out. The SNP is going to have to explain what its plans are for the currency of Scotland, what its plans are for the defence of Scotland when it doesn’t have the protection of the UK, what its plans are for the Scottish economy when its not part of a larger economy and able to benefit from UK companies like AstraZeneca.

"These are things the SNP has to explain to the Scottish people. They’ve been hiding behind the process and hiding behind the procedural arguments and this is the week when we move beyond those procedural arguments, we’ve settled what we think needs to be done and they’ve got to explain to the Scottish people how they could possibly be better off outside the UK.

“Alex Salmond has said Scotland should join the Euro that means giving up the pound, joining the Euro, that is not the currency I’d be wanting to join at a time like this.”

Commenting on the chancellor's interview, a spokesperson for Finance Secretary John Swinney said: “The more a Tory Chancellor tries to lay down the law to Scotland, the stronger support for independence will become.

"George Osborne said nothing at all, and the currency position is crystal clear – an independent Scotland will retain sterling, and there is absolutely no provision requiring Scotland to join the euro.

"The issue of the euro would be decided by a referendum of the people of Scotland, and only when the economic circumstances were right – until such a point, an independent Scotland will retain sterling as at present.”