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Scottish independence: Report warns of £5.9bn cuts

Report warns of �5.9 billion cuts in the first two years of independence. Picture: Ian Rutherford

Report warns of �5.9 billion cuts in the first two years of independence. Picture: Ian Rutherford

  • by TOM PETERKIN
 

SPENDING on some public services could be slashed by almost a third after independence, according to an economic report forecasting that Scotland could see cuts of £5.9 billion over the first two years after a Yes vote.

Research by the Institute of Fiscal Studies (IFS) found that an independent Scotland would face about £2.5bn spending cuts or tax rises over 2016-17 and 2018-19 if Scottish ministers followed the spending course set out by the UK government.

The IFS suggested that the debt inherited by a Scottish Government would make it difficult for Scotland to plot a different fiscal course than the cuts in public spending pencilled in by the UK government over the next few years.

The UK government has forecast cuts to public service spending totalling 1.6 per cent of GDP in 2016-17 and 2017-18 – and in Scotland that would be the equivalent of £2.5bn.

On top of that, the IFS report suggested that under declines in North Sea oil revenues forecast by the Office for Budget Responsibility, Scotland’s budget deficit could be 2.2 per cent further into the red than the UK as a whole in 2017-18.

The report said that to fill this hole would require a further £3.4bn of tax rises or spending cuts on top of the £2.5bn that would be required to follow UK spending plans.

The report published today, with just under a year before Scotland goes to the polls, found the sum of the two figures (£5.9bn) would amount to a 15 per cent cut on 2011-12 spending levels assuming defence spending was cut in line with SNP policy.

The authors added: “If the Scottish Government wanted to protect health and education spending, the cuts to other non-protected services would be close to one-third.”

Analysis of Scottish public spending found that it was about 11 per cent higher per person in Scotland than in the UK as a whole in 2011-12, the latest year for which official statistics are available. Within this, spending on benefits and tax credits was only a little higher in Scotland, but spending per person on public services was almost 17 per cent above the UK average.

Across the UK as a whole, spending on health, education, public order, defence and international services made up 70 per cent of all public service spending.

In Scotland, however, these made up only 62 per cent of spending.

According to the report, this reflected the fact that spending on these five areas was only 3.2 per cent higher per person in Scotland than in the UK as a whole, while public service spending as a whole was 16.6 per cent higher per person in Scotland.

When other services were considered, spending on them was 49 per cent higher in Scotland than in the UK.

When broken down further, the report revealed that spending on enterprise and development was over three times as high per person in Scotland as for the UK as a whole. Spending on agriculture, forestry and fisheries, and housing and community amenities, was around double that for the UK.

Spending on transport was 56.5 per cent above the UK average, a figure driven by high spending on roads and large subsidies to rail services and to ferry and air services serving the Highlands and Islands.

David Phillips, a senior research economist at the IFS and an author of the report, said: “Spending on public services is substantially higher per person in Scotland than in the UK as a whole.

“This is driven by higher spending on many areas like transport, housing, economic development and social services. The Scottish Government has used the existing powers under devolution to set different priorities for spending in Scotland.

“Looking ahead, independence would give Scotland the power to set spending on those areas that are currently the responsibility of the UK government like defence and foreign aid.

“These are areas on which the UK is a relatively high spender and there could be scope for Scotland to make substantial cuts to these areas. However, it is unlikely that cuts here would allow Scotland to avoid cuts elsewhere, unless it were to increase taxes substantially.”

He added: “Indeed, given the OBR’s forecasts for declining North Sea revenues, even with cuts to defence and aid spending, an independent Scotland may need to cut spending on other services or raise taxes by more than if it remained part of the UK.”

Last night, a Scottish Government spokesman said: “Scotland more than pays its own way at the moment, and can more than afford to be a successful independent country, as the official figures show. We have contributed more tax per head than the rest of the UK for every one of the last 32 years to 2011-12, while spending on welfare and pensions is more affordable in Scotland compared to the UK.”

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