Holyrood to get referendum powers
The Government is to set out plans to give Holyrood temporary powers for a legally binding referendum on Scottish independence as the row over the poll intensified.
Scottish Secretary Michael Moore will tell MPs the Coalition wants the vote to be held "sooner, rather than later" but he will not set a previously expected deadline of 18 months on the vote, Government sources have confirmed.
It follows warnings by David Cameron that uncertainty about Scotland's future in the United Kingdom is having a damaging effect on its economy.
Chancellor George Osborne briefed the Cabinet on Monday morning on the feedback he and the Prime Minister have received in private talks with major companies who said the prospect of a referendum on Scottish independence was having an impact on their decisions and may be deterring inward investment.
Mr Cameron insists the Government's plan would allow a "fair, legal and decisive" resolution to the uncertainty. But his intervention was greeted with anger by the Scottish National Party administration in Edinburgh, which accused London of trying to interfere in a matter which should be settled north of the border.
SNP leader Alex Salmond is understood to favour a referendum in 2014 - possibly on the 700th anniversary of the battle of Bannockburn - and wants to retain control over the wording of the question on the ballot paper. He has not ruled out including a third "devo-max" option, which would see Scotland stay in the UK but gain more power over its own affairs.
Mr Cameron denied trying to "dictate" the terms of the referendum from Westminster, and insisted it will be for people in Scotland to decide whether they stay in the Union. "I want the United Kingdom to stay together," the PM told Sky News. "It is a fantastically successful partnership. I think Scotland and England are better off in the United Kingdom.
"But we can't stand in the way of a part of the UK if it wants to ask the question 'Are we better off outside it?' We can't stand in the way of that, but what I think the Scottish people deserve is a fair, clear and decisive question. We have to have legal clarity over who is responsible for this decision. Is it the Westminster Parliament or is it the Scottish Parliament? We will be setting out the legal position and trying to find a way through."
The Scotland Act of 1998, which ushered in devolution, reserved constitutional matters for the Westminster Parliament, and it is thought that a referendum called by Holyrood could be open to legal challenge.
Advice received by ministers on the legal implications of a referendum will be published alongside the Government's proposals in the next few days.