Independence IFS and buts

Posted on 18/11/2013 by


Think Tank report warns of spending cuts and tax hikes 

An independent Scotland would have to cut spending or increase taxes for its finances to be sustainable in the long-term, a leading think tank has warned. The Institute for Fiscal Studies (IFS) said Scotland would face a ‘fiscal gap’ of 1.9% of national income, more than double that of the rest of the UK (0.8%).

The report says that significant spending cuts or tax increases would be necessary to balance the books.

Better Together campaigners say the report leaves the economic argument for independence ‘in tatters’ but Scottish Finance Secretary John Swinney believes the report actually underlines the case for an independent Scotland.

The 69 page ‘Fiscal sustainability of an independent Scotland’ (attached below) concludes:

‘An independent Scotland would have the freedom to make its own decisions about spending priorities and the appropriate design of the tax system, but it would be constrained by the necessity to deliver a significant cut in spending and/or increase in tax revenues in order to put its public finances in a sustainable long-term position’.

Speaking after the publication of the report earlier today, Alistair Darling, leader of the pro-Union Better Together campaign, said: “This sober and impartial analysis by the IFS leaves the SNP’s economic case for independence in tatters. SNP ministers pretend that in an independent Scotland there would be more money to spend, but that notion has been comprehensively demolished by the analysis from this respected institution. Today’s report is clear that an independent Scotland would need big cuts to things like pensions, benefits and the NHS or a big increase in tax.”

Not so, say supporters of independence. Commenting on the IFS report, Mr Swinney said: “This report actually underlines the case for an independent Scotland with full control of its own economy and the ability to take decisions that can secure a stronger and more prosperous future for the country.

“It is no surprise that projections based on the UK’s economic position show a long-term deficit when the OBR state that the UK’s economic strategy is “unsustainable” and that the UK will run a fiscal deficit in each of the next 50 years.

“The IFS themselves admit their projections in this report are ‘inherently uncertain and could evolve differently if Scotland were independent rather than part of the UK; in addition they could be substantially effected by the policies chosen by the government of an independent Scotland’.

“The whole point of independence is to equip Scotland with the competitive powers we need to make the most of our vast natural resources and human talent and to follow a better path from the current Westminster system which stifles growth and which is responsible for the damaging economic decisions which this report – and its projections – are based on.

“Scotland has strong financial and economic foundations, and even without a single penny from oil and gas, both output and tax revenues per head in Scotland are virtually the same as for the UK.

“Next year’s independence referendum will give people in Scotland a choice between staying with a broken Westminster system that has created one of the biggest gaps between rich and poor in the western world, which concentrates far too many jobs in London and the South-East of England, has accumulated vast amounts of debt and which neglects manufacturing and trade – or using the full tools of independence to rebalance the economy, improve equality and support public services.

“Between 1977 and 2007, smaller independent European countries similar to Scotland grew their economies faster than ours, and if we had matched those rates that greater output would now be the equivalent of around £4.5 billion.

“Tomorrow the Scottish Government will publish detailed analysis of the economic security, growth and job opportunities that come with the powers of independence and by taking Scotland’s future into Scotland’s hands.”

IFS report