Cameron urges Scots to stay in UK by offering more

EDINBURGH (Reuters) - Prime Minister David Cameron delivered an impassioned plea to the Scots on Thursday in defence of the United Kingdom, enticing Scotland to reject independence with an offer to devolve more power to Edinburgh.

Scotland's nationalist government, which already controls some spending from its own parliament in Edinburgh, wants to hold a referendum in late 2014 on full independence that could spell an end to a 300-year-old union with England.

Cameron took his case for keeping the United Kingdom together to Scotland's picturesque capital, arguing in a speech laced with sentimental historical references that Scotland was better off as part of the union.

"The union helps to make Scotland stronger, safer, richer and fairer," he told business leaders, speaking against a backdrop dominated by Edinburgh's stunning castle, perched on a craggy volcano and sporting both the Union Jack and Scottish colours.

"Of course, Scotland could govern itself. So could England, but we do it so much better together," he said.

He warned Scotland would face an uncertain economic future alone - a contentious argument favoured by London's politicians who are keen to protect the union.

Cameron met Scotland's First Minister Alex Salmond, leader of the pro-independence Scottish National Party, to thrash out the timing and form of the referendum, but little was agreed.

Both men refused to budge on whether voters should be given Cameron's preference of just one straight question on independence or Salmond's desire for a second option of further devolution of powers from London.

Salmond, a tenacious political operator, appeared to have won a tactical advantage by hosting Cameron on his home ground while Cameron had to make the long journey from London.

As Salmond shook hands with Cameron, the event gave every appearance of talks between the leaders of two independent countries, but opinion polls suggest a big change of heart is needed for Scots to vote in numbers to go it alone.

SCEPTICAL VOTERS

On a blustery, bright winter's day in Edinburgh's winding cobbled streets, city workers and shoppers were largely sceptical about the nationalists' cause.

"A few of my friends support Scotland becoming independent but I think that is just to show their patriotism," said Dan McCormack, a 26-year-old customer services assistant at the Bank of Scotland, arguing that the SNP needed to do a lot more to convince voters of the economic viability of independence.

"I think independence would be wrong because the Scottish economy wouldn't survive on its own."

Cameron dangled the carrot that, if Scots rejected independence, he would look at what further powers could be devolved from London to Edinburgh, without giving any details.

That effort to outflank Salmond received a stinging rebuttal from the nationalist leader, who said Conservative governments had misled Scotland in the past with promises of greater powers.

"Fool me once, shame on you. Fool me twice, shame on me," he told reporters after the meeting. "I don't think Scotland will be fooled twice.

"If it's on the table, I think the people of Scotland would want to see what it is. Where's the detail? Where's the beef?"

Analysts saw the meeting as little more than jostling for position, given that there is still much time left to run before either the "yes" or "no" campaigns really get going.

"Neither will give much credence to what the other says, both see themselves involved in this rather complex game, a bit like a chess game," said Eric Shaw, senior lecturer in politics at Stirling University.

Nonetheless, Cameron's trip to Edinburgh to speak personally to the Scots, who have no great love for him or his politics, is a strong sign of how concerned London is about the referendum.

The government will hope the offer of a further devolution of powers to Scotland could convince swing voters of the merits of staying in the union.

Scotland already has its own legal system and devolved responsibility for domestic matters such as health, education and emergency services.

Polls suggest between 30 and 40 percent of Scots support independence. The SNP hopes it can increase that by 2014, when national pride may be boosted by the 700th anniversary of the Battle of Bannockburn, a famous victory over the English.

About 40 demonstrators against government spending cuts sat down outside St. Andrew's House, where Cameron and Salmond were meeting, to protest, chanting "Cameron isn't welcome here" and forcing Cameron to enter the building through a rear entrance.

Cameron wants the referendum held earlier than 2014 to avoid what he says is damaging uncertainty for the Scottish economy.

All major British parties want to keep the union intact, but Cameron faces a dilemma over how to handle the pro-union campaign because his Conservative Party is unpopular north of the border, where it has just one member of parliament.

Some battle lines have already been drawn, with the SNP demanding 90 percent of Britain's North Sea oil revenues for Scotland while also arguing that the Bank of England should rescue distressed banks in an independent Scotland.

British taxpayers stumped up billions to save the Royal Bank of Scotland from collapse during the 2008 crisis.

An independent Scotland would have to choose whether to keep using the British pound while having no influence on British monetary policy or to seek to join the euro.

(Additional reporting by Adrian Croft and Avril Ormsby in London and Ian MacKenzie in Edinburgh; Editing by Myra MacDonald)