Uncertainty about Scotland's future in the United Kingdom is having a damaging effect on its economy, David Cameron has warned.
Chancellor George Osborne briefed the Cabinet 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.
The Government is expected to publish proposals within days, which could involve offering the Scottish Parliament a legally binding poll, to be held within 18 months, on the yes-or-no question of whether Scotland should remain part of the UK.
Mr Cameron declined to spell out the details of his plan, but said it 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.
Mr Cameron said: "We are not going to dictate on this. We have first of all got to resolve this legal uncertainty and then try to work with the Scottish Government and make sure there is a fair, clear and decisive outcome."
Scotland's Deputy First Minister Nicola Sturgeon denounced the move as "a blatant attempt to interfere in the decision that is really one for the Scottish Government in terms of the timing of the referendum and for the Scottish people in terms of the outcome".
She added: "We were elected on the basis of our commitment to have a referendum in the second half of this parliamentary term. This is about Westminster seeking to interfere."
A spokesman for Mr Salmond said that any attempt by Westminster politicians to dictate the terms or format of the referendum would only fuel demands for independence.
"The more the UK Government interferes with this process, then the stronger support for independence will become, and we've seen that trend under way since the election," said the spokesman.
"The days of Westminster determining what happens in Scotland are over.
"We'll bring forward our proposals, we'll stick to what we said we would do in the election."
Mr Cameron warned that delay in resolving the independence issue was damaging to Scotland's economy.
"If Alex Salmond wants a referendum on independence, why do we wait until 2014?" he asked.
"This is very damaging for Scotland because all the time businesses are asking 'Is Scotland going to stay part of the UK? Are they going to stay together? Should I invest?'
"We are beginning to see companies asking those questions so I think it is rational to put to the Scottish people, would it be better to have a more fair and decisive question put earlier?"
Scottish Labour leader Johann Lamont said: "We want the referendum to be held as quickly as possible and we want it to be run in Scotland."
If the Prime Minister's proposals "help there to be a quick, clear and decisive referendum result, we would welcome them", she added.
PA
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