Tax rises and cuts after independence says report
High cost: warnings in latest report on independence
An independent Scotland would be forced to impose big spending cuts and tax rises to balance the government’s books, with “lasting” effects on public finances, according to new research.
A study by The Institute for Government (IfG) says Scotland would have to make “difficult fiscal adjustments” as the deficit – the difference between what is spent and what is raised in taxes.
It would be worse than the 7.7% of GDP reported in 2018-19 – more than twice the 3% level mandated for those hoping to join the EU.
The latest research follows a report this week from the Institute for Fiscal Studies which estimates the gap between Scottish public spending and tax revenues rose to between 22% and 25% of the country’s gross domestic product (GDP) during the pandemic.
The IfG said the current level of deficit and maintaining the current level of public spending “would not be sustainable” if Scotland leaves the UK.
The report said: “There are many reasons why the people of Scotland or Wales might want to seek independence from the UK, or why the people of Northern Ireland might want to be part of a united Ireland.”
But it warns that the cost of independence would be that they “would no longer be able to benefit from the redistribution of resources that currently takes place across the UK”.
It adds: “The larger the deficit that they have is, the harder the case for independence becomes.”
Kate Forbes, Finance Secretary in the last Scottish government, said: “When it comes to the finances of independence, as the Institute for Fiscal Studies has said, Scotland is a rich country, however, we don’t yet have full control over those many resources.”
However, Shadow Scottish Secretary Ian Murray said the report laid bare the truth of independence
He said: “It would unleash austerity on a scale the Tories can only dream of. Scotland clearly benefits financially from being part of the UK. Covid has shown that more than ever.”
Scottish Conservative economy spokesman Maurice Golden said: “Nicola Sturgeon says she will hold another referendum within the first two years of the Scottish Parliament yet blithely admits having done no analysis of what that would mean.
“This respected independent think tank lays bare the chilling economic reality of ripping Scotland out of the UK. The Nationalists are willing to inflict untold damage on families and business.
“When all focus should be on recovery and rebuilding, this is reckless beyond belief. Deep down, Sturgeon must know the devastation this would cause.”
Scottish Liberal Democrat Treasury spokesperson Christine Jardine MP said: “This is the second report in recent days to warn that an independent Scotland would be under huge economic pressure.
“Over the past few days we’ve seen nationalists threaten to ditch the pound and claim that borders create jobs. They shouldn’t be trusted with a piggy bank, never mind the tens of billions in trade that Scotland does with the rest of the UK.”