AN independent Scotland could cut taxes below the UK rate because of “different characteristics” between the economies north and south of the border, a new report today states.
READ THE FULL REPORT HERE (PDF)
But the prospect of North Sea oil running out in the a few decades and mounting public sector debt could eventually drive taxes up, according to think tank the Institute of Fiscal Studies.
And the recent SNP Government white paper on independence contains more “giveaways than takeaways”, the IFS claims in a paper published.
Scots could also retire earlier than people in other part of the UK, because pension costs are lower, a separate report by leading Scottish economist Professor David Bell says.
Both papers are part of a National Institute Economic Review document published today on Scottish independence.
“Many of the differences between the characteristics of Scotland and the UK suggest that Scotland should have a lower level of overall
taxation than is optimal for the UK,” IFS authors Rowena Crawford and Gemma Tatlow.
But the “long-run fiscal pressures” such as oil running dry could also “point to a higher level of taxation.”
The Scottish Government has insisted that oil could keep flowing until the near the end of the century and dispute claims by official Goverment spending watchdog the Office for Budget Responsibility (OBR).
The IFS says the rcent Scottish government White Paper set out a “very laudable set of objectives” for reforms to the tax and beneft system
of an independent Scotland, but was “short on detail about how this would be achieved.”
“The specifc policies that were proposed contained greater giveaways than they did takeaways,” it adds.
“Ultimately this balance would likely need to be addressed if an independent Scotland was to achieve fscal sustainability.”
An independent Scotland could also delay increases in the retirement age thanks to lower pension costs north of the border, a separate paper in the review adds.
The academics from Stirling University, led by Professor Bell, said such a policy could still be “costly to fund”.
But it warns that the Scottish Government’s “triple lock” guarantee for pensions in an independent Scotland would “eventually be unaffordable”.
The experts stated: “Our analysis has shown that the costs of the state pension would be lower in Scotland, due to Scotland’s lower life expectancy.
“This could, in theory, be used to reduce contributions or to delay increases in the state retirement age in Scotland, relative to the rest of the UK.”
The report said it was “between 6% and 8% cheaper to provide a pension to an individual given Scottish mortality experience than it is given UK mortality experience”, and added that it “may well be actuarially fair to defer the rise in the state pension age in Scotland due to its heavier mortality.”
Finance Secretary John Swinney said the review shows Scotland can be a “successful independent country.”.
“The analysis published today confirms that Scotland is in a stronger fiscal position than the rest of the UK right now and Scotland’s Future confirms we will be in a stronger position at the point of independence.
“On any calculation an independent Scotland will have lower levels of debt than the rest of the UK and the firm foundations we need to build a stronger and fairer economy.
“It is only with the full powers of independence that we will be able to properly use all the economic levers other countries in Europe take
for granted and grow the working population, increase productivity, boost exports and innovation and reindustrialise Scotland’s economy.”
• Scottish independence: SNP pension plan questioned