After last week’s debacle of a UK Budget, what might the first Budget of an independent Scotland have looked like?
Would the first “free” Scottish Government have inherited a post oil-collapse apocalypse or would the state of our public finances have been manageable? While Scotland’s fiscal deficit is forecast to be over £13 billion in 2016-17, plans are in place at the UK level to reduce this to £9bn by 2019-20. This underlying £9bn deficit might be diminished further by cutting spending by £3bn, for example by slashing the defence budget; raising taxes by £3bn, for example via a 3p increase in Income Tax and removing most of the current VAT exemptions. This would still leave a total deficit of around £3bn a year, roughly in line with what is spent on capital goods.
Such changes do not end in a painless transition by any means, even the defence cuts mean jobs lost and some localised hardship.
A new Scotland would emerge, but one which does not look that different from some other EU countries and probably without a dramatic change in lifestyle. The SNP’s tax proposals this week proposed a minor change from the UK Budget. In other words, the proposed Scottish Income Tax system is exactly the same as that which was in place for the UK up to 15 March. This would not have been an option under independence.
Indeed, the challenges faced by the chancellor in the UK Budget would have been a walk in the park compared to what John Swinney would have faced in the first post-independence Scottish Budget.
Professor John McLaren, Political Economist, scottishtrends.co.uk