The financial powers of independence are needed to “transform” childcare in Scotland, according to a government report.
SNP plans under independence would provide 1,140 annual care hours, for one to four-year-olds, allowing more parents to return to work.
The government analysis said increasing female labour market activity rates by 6% would increase output by £2.2 billion and tax revenues by £700 million.
Increased revenues, coupled with a fall in welfare spending with more people in work, would allow further expansion of childcare under independence, the economic report said.
Under the present system a 1% rise in money raised by corporation tax, National Insurance, VAT and income tax, and a 1% saving in benefits would boost revenue by £350m, but only around £45m of this would accrue directly to the Scottish Government, according to the analysis.
Finance Secretary John Swinney said: “This paper lays bare the need for control of the major tax revenues if Scotland is to have the transformation in childcare we need.
“Without it, we can do everything possible and stretch every financial sinew, but the reality is a wholesale transformation to match the best in Europe only comes with independence.
“Increasing the number of people in work moves people out of welfare and into paying tax.
“That generates the extra government revenues we need to pay for the transformation of childcare.
“The paper reveals, however, the stark reality of devolution. Even with the new powers coming to Holyrood under the Scotland Act, the vast bulk of any increased revenues goes right to Westminster.”