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Could maintaining the Royal Mail hit Scots in the pocket?

The Scottish Government opposed the privatisation of Royal Mail last year and has pledged to renationalise the Scottish service if the country votes in favour of independence.

By doing so it promises the Scottish people that the mail service they receive will be the same or even better than the one they currently receive. They haven't disclosed and don't appear to know the costs of enacting this promise.

Scotland is more sparsely populated than much of the rest of the UK - the country accounts for around one tenth of the British population and one third of its land mass and it is therefore more expensive to deliver mail there.

Economist Stephen Gibson calculates the Scottish part of Royal Mail loses around £200m a year. Credit: ITV News

Royal Mail as a group is profitable.

The company doesn't break down the performance of the Scottish part of the business but it is clear and generally accepted that a "Royal Mail Scotland" is loss-making.

The scale of potential losses is harder to assess.

We asked Stephen Gibson, a former Chief Economist with Postcomm who now works for SLG Economics, to estimate both the cost of renationalising the Scottish service and the scale of changes that would be required to make it profitable.

In summary, he values the "Royal Mail Scotland" at around £200 million and thinks it loses around the same amount of money each year.

We put these figures to the company, they declined to comment, saying only that independence is a matter for the Scottish people.

The government still owns a 30% stake in Royal Mail and the Business Secretary, Vince Cable, has confirmed to ITV News that Scotland, like other more rural parts of the UK, is subsidised by more profitable parts of Royal Mail Group.

He told me the subsidy in Scotland was worth "hundreds of millions of pounds" every year.

The SNP's Mike Weir claimed Mr Gibson's figures were 'not credible'. Credit: ITV News

Stephen Gibson estimates that for a "Royal Mail Scotland" just to break even would require an across-the-board increase in prices of between 20% and 30% (or savings on an equivalent scale).

The Scottish National Party told us it would guarantee the universal service in Scotland, protect jobs and pay and has ruled out any stamp rises.

The party's postal services spokesman Mike Weir MP told me that in the event of independence Scottish taxpayers would have to subsidise the service.

Mr Weir said Stephen Gibson's figures were "not credible" although he couldn't provide us with credible ones of his own.

He admitted he didn't know the cost of either renationalisation or the degree to which the Scottish service would require propping up by the taxpayer.

"Only Royal Mail knows the figures and they won't share them with us", he explained.

If Stephen Gibson's figures are accurate they would imply that the average Scottish household (there are 2.5m in Scotland) will end up spending £70 on postage every year, post-independence. Ofcom calculates the average family in Britain today spends £30.

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