Independence paper ‘fails to explain fiscal rules’
Economists say the Scottish Government’s independence blueprint has fallen into the same trap as Liz Truss’s mini-budget by failing to explain how it would balance the books.
The economic prospectus for independence, published yesterday, recognises the need for fiscal discipline to give the markets confidence in its borrowing requirements in order to grow the economy.
But it fails to say how the government plans to satisfy this requirement, say economists at the Fraser of Allander Institute.
“If we’ve learned anything from the last few weeks, it shows that designing economic policy without grasping the realities of the public finances is not likely to be sustainable,” says the Strathclyde University based Institute in an analysis of the prospectus.
“One of the difficult questions that this paper does not address head-on is the likely starting fiscal position of an independent Scotland, and how the Scottish Government plan to meet the fiscal rules they discuss.
“It is said in the paper that it is not possible to know what this would be given wider uncertainty. However, we do know the levels of revenue and expenditure under the current constitutional arrangements. These figures are referenced in the paper.
“But the substantive issue – of how we would transition from current levels of revenue and spending to something more sustainable, in line with the desired fiscal rules – is not addressed.
“The uncertainties in the world economy right now simply make that challenge harder – but are not an excuse for not addressing this challenge.
“We hope that this will be addressed in a future paper – the First Minister has indicated there will be future papers on both pensions and trade, but this is certainly an issue that requires more discussion and scrutiny.”
The Institute says it is good to see the Scottish Government start to lay out more details about the economic case for independence, but notes a lack of key details.
“This paper answers some questions – but still leaves some of the most difficult questions unanswered,” it says.
“In discussing the approach to setting up this new state, many assumptions are made with, in some cases, limited discussion of the options if the UK Government don’t agree to certain items in any negotiation.
“The wishes of one side in a negotiation may not bear contact with reality – as we have seen through Brexit negotiations.
“Therefore, we are looking forward to seeing future papers which tackle these questions head on and in particular, tackle the questions around fiscal sustainability more fully.”