Independent Scotland would face significant funding gap, report finds

Scotland’s public purse faces a major shortfall should it leave the UK by the middle of this decade – and would need to impose tax rises or spending cuts of nearly £1,800 per person, according to new analysis.

A combination of lower-than-expected tax revenues, Brexit, and the coronavirus pandemic have widened the nation’s budget deficit, according to the report from the Financial Times.

The publication has stated that the erosion of Scotland’s coffers since the independence referendum in 2014 suggests it will face a persistent deficit of almost 10 per cent of gross domestic product – and cutting this down to a “manageable” 3 per cent would require annual tax increases or spending reductions equivalent to £1,765 per person, based on the party’s previous assumptions.

Scotland’s fiscal position has been found to have sizeably deteriorated since the independence referendum in 2014. Picture: Andy Buchanan/AFP via Getty Images.

The SNP is seeking to gain a majority in next month’s Scottish election and leverage this to secure a second independence referendum, with First Minister Nicola Sturgeon recently saying such a vote could be held while the nation is still recovering from the impact of the coronavirus pandemic.

Thomas Sampson, associate professor at the London School of Economics, said Ireland showed that prosperity and independence from the UK was possible in the long term for Scotland, “but in the short to medium term, there would be a whole host of problems”.

The FT report follows new data from the Institute for Fiscal Studies (IFS) finding that funding per person has come in 30 per cent higher in Scotland than in England.

David Phillips, IFS associate director, has said: “Of course Scotland is a wealthy country, it can afford to be independent. It’s just a question of cutting the cloth to match the size of its purse.”

The SNP was quoted as saying: “Pre-Covid, Scotland’s tax revenues were estimated to cover all devolved spending on day-to-day public services — such as the NHS and schools — as well as all spending on pensions and all social security.

“The whole point of independence is to give the Scottish parliament all the economic levers it needs to grow our economy and to make the public spending choices best suited to Scotland’s interests.”

Accountancy giant KPMG said recently that the Scottish economy could completely regain ground lost during the Covid-19 pandemic within the next two years.

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