Wales would be hit by massive tax rises if became independent from Britain, Peter Hain has warned.

The Welsh secretary claimed English taxpayers would stop subsidising Wales if it ceased to be a part of the UK.

He used a speech to students in Cardiff to attack Plaid Cymru as "backward-looking".

Hain argued that separatists have failed to tell voters that a break from the UK would bring soaring taxes, interest rates and inflation in order to match funding for public services which is 18 per cent higher than in England.

"The truth is that richer English taxpayers are helping finance programmes to tackle much higher levels of Welsh ill-health and deprivation," Hain said.

"Independence would deny Wales the ability to benefit from the record British public investment and spending now flowing into our communities.

"There is an historic gap between what is spent and what is raised in tax in Wales.

"In an independent Wales that gap would have to be funded from higher Welsh taxation and higher Welsh borrowing leading to higher Welsh interest rates and higher Welsh inflation," he said.

Hain's speech is a response to an intervention from Plaid Cymru leader Ieuan Wyn Jones, who this week called for the Welsh assembly to be made into a full parliament with powers to set taxes and pass primary legislation.

"They are out of touch what Welsh people feel about their identity. They fail to understand the people of Wales are not only proud to be Welsh, but proud to be British as well," Hain warned.