THE North-East has nothing to fear from "devo max" for Scotland, Labour's leader north of the border has insisted.

Interviewed by The Northern Echo, Johann Lamont rejected suggestions that Scotland is poised to gain a huge economic advantage over its neighbouring region, in return for voting 'no' to independence.

Instead, Ms Lamont urged people in the North-East not to believe "propaganda" about extra powers and riches heading to Edinburgh, saying: "We shouldn't let people divide us."

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However, she risked controversy by rejecting a review of the much-criticised Barnett Formula, which delivers much higher public spending to Scotland than to the North of England.

Ms Lamont said: "I believe it has served us well. There is no desire to get rid of the Barnett Formula."

The Labour leader in Scotland spoke ahead of September's independence referendum, amid pro-Union nervousness that the 'No' vote's long-held poll lead is narrowing.

All the Westminster parties are putting together pledges of further devolution, to encourage Scottish voters to reject nationalism - often dubbed "devo max".

Under Labour's plans, the Scottish Parliament would control billions of pounds worth of income tax and welfare spending, even allowing it to axe the so-called 'bedroom tax'.

Holyrood has already won permission to issue "Braveheart bonds" for capital investment in roads, hospitals, schools and flood defences, with borrowing powers up from 500m to 2.2bn.

Meanwhile, the 30-year-old Barnett Formula gives Scotland 733 more per person than the much poorer North-East - a figure that has more than doubled from 361, in 2010-11.

In the North-East, both Labour and Conservative MPs have raised the alarm that a vast gap in muscle and resources is set to grow even wider.

But Ms Lamont hit back, saying: "Scotland has a fixed budget. Our choice is about how we spend it "I can understand people in the North-East hearing about the fantastic things going on in Scotland, but that other side of it is never spoken about.

"Scotland will not be getting more money, it will simply be accountable for raising more of its money. I hope that dispels some myths."

There was a problem of "asymmetrical devolution", but it was up to the North-East to resolve it, she added.

Critics of the Barnett Formula point out that it is based on an outdated measure of the relative population sizes of England and Scotland, rather than on "need".

But Ms Lamont said: "It does distribute funds according to need across the United Kingdom. It's not about the Barnett Formula - it's about the economic choices made, at a UK level, about public spending."

The interview followed a visit by Labour MPs Phil Wilson (Sedgefield) and Bridget Phillipson (Houghton and Sunderland South), to explore the implications of a 'Yes' vote.

Ms Lamont said: "The Scottish Nationalists like to present everyone in England as being like David Cameron, so it was refreshing to remind ourselves that there are also Labour people - with the same shared values and concerns."

Asked for a referendum prediction, she said: "We are fighting for every single vote, but I'm optimistic that hope will triumph over grievance."