Cameron and Salmond to sign deal on Scottish independence referendum

David Cameron is to sign a historic deal with Alex Salmond to hold a legally watertight referendum on Scottish independence, signalling the start of a 100-week battle over the UK's constitutional future.

The prime minister will fly to Scotland on Monday to settle the terms of a Scotland-wide referendum, expected to be held in autumn 2014, by publishing a 35-clause long deal with the first minister that is already being dubbed the "Edinburgh agreement" by Salmond officials.

With disputes over legal limits to campaign spending still yet to be solved, Nicola Sturgeon, Scotland's deputy first minister, said on Sunday that the deal would allow all the key elements of the referendum to be "made in Scotland".

After months of negotiations, it would allow both sides to properly begin making the choices clear to voters. Speaking on BBC1, Sturgeon said "it will be for the Scottish parliament to decide the date, the question, the franchise, for the referendum".

Sturgeon signalled that a core message for the nationalists will be to portray their main opponents, the Scottish Labour party, as allies of the Tory government in London after Labour began questioning the costs to Scotland of free university tuition, free prescriptions and the council tax freeze.

"We will make it abundantly clear what people will be voting for if they vote 'yes'," she said on Sky News. "But of course the responsibility also lies with those advocating a 'no' vote to say what voting no would mean. As far as I can see it would mean the continued dismantling of our welfare state and the continued squandering of Scotland's resources."

Salmond, who launches the SNP's annual conference later this week, will claim that the vote will allow Scotland a once in a lifetime choice between freedom and stagnation. His opponents, buouyed by a slide in support for independence in recent polls, plan to unveil proposals for greater devolution as an alternative to leaving the UK.

Michael Moore, the Scottish secretary in the UK government, said the referendum was the most important question facing Scotland for 300 years. "I believe it will now allow us to put up in lights the big issues about the big debate [on] what is best for Scotland," Moore said on BBC 1's Sunday Politics.

"I believe that when we look at the economy, at defence, at our place in the world, on all these big issues people across Scotland will continue to support Scotland being in the United Kingdom.

"Independence is about Scotland leaving the UK, becoming a separate state, taking on all the burdens and risks that go with that and losing the benefits and opportunities that we have as part of the UK."

Under the deal, Westminster MPs will temporarily give the Scottish parliament the legal authority to hold the referendum, overseen by the UK Electoral Commission, but with a sunset clause which removes that power at the end of 2014.

UK government sources said they were not prepared to allow Salmond to postpone the referendum if opinion polls suggested he would lose.

Under UK referendum legislation, which is policed by the Electoral Commission, Holyrood will be allowed to extend the vote to 16 and 17-year-olds for the first time in a major vote. The Scottish parliament has already allowed them to vote in health board and crofting elections.

But there growing signs that Salmond's government will clash with the commission over campaign spending limits. A deal allowing Holyrood to set those limits was one of the last issues to be settled last week, but Salmond and the commission are at odds on how much can be spent.

His ministers fear that the commission's proposal to allow all registered parties to spend up to £1.5m during the last 16 weeks of the campaign, in addition to separate spending by each official referendum campaign based on their vote at the last Scottish elections, will give the three pro-UK parties of Labour, the Tories and Lib Dems a significant advantage.

Despite being given £2m in donations towards independence, Salmond wants to limit spending by each of the parties to £250,000 in the last four months of the campaign, with the official yes and no campaigns limited to £750,000 each.

Both sides claim they have achieved their main goals in the talks, but the honours are divided. Salmond has been forced to accept only a single, yes or no, question on Scottish independence and to agree to appoint the UK Electoral Commission to judge the fairness of the question, and to police spending and voting rules – a measure he heavily resisted last year.

Attempts by the first minister behind the scenes to build a powerful coalition between business leaders and civic organisations to add an electorally popular second option to the referendum, for much greater powers for the Scottish parliament within the UK, failed because it lacked support.

Salmond wanted this "devolution plus" option added to the referendum in case he lost on the independence vote.

The latest opinion polls suggest popular support for independence is sliding: a TNS BMRB poll last week said there was now a 25-point gap in favour of remaining in the UK. Senior SNP sources admit their private polling also shows staying in the UK is currently more popular.

Along with giving way on votes for 16 and 17-year-olds, Cameron has conceded that the poll will be held at a time of Salmond's choosing: autumn 2014 rather than next year, his original preference.

Alastair Darling, the former Labour chancellor who now leads the Better Together pro-UK campaign, said on Sunday he would have preferred the vote in autumn 2013 and objected to extending the franchise to 16 and 17-year-olds as a one off, rather than as a permanent measure.

The first minister wants the vote in 2014 largely because Scotland is hosting several high profile cultural and sporting events that year. Salmond also believes the UK government's spending cuts will be so unpopular by then, and the Tory-Lib Dem coalition so divided, it will strengthen Scottish support for independence.

Salmond will host a second "year of homecoming" and a clan gathering for expatriate Scots as the country marks the 700th anniversary of the famous Scottish victory over the English as the Battle of Bannockburn.

In the summer of 2014, Scotland will host the Commonwealth games and the Ryder Cup golf competition between Europe and the USA.