Independence Day: Scotland would have faced '˜Â£10bn black hole'

On the day Scots would have woken in a sovereign state if the Yes camp had won the 2014 independence referendum, a series of new reports reignite the debate over the nation's constitutional future.

MSPs from all parties were piped out of Holyrood to  mark the end  of the session of Parliament. Picture: PA
MSPs from all parties were piped out of Holyrood to mark the end of the session of Parliament. Picture: PA

Published on what would have been “Independence Day” the studies warn that a £10 billion financial black hole would have awaited the fledgling nation had Scotland voted in favour of leaving the United Kingdom.

Scots would face being “worse off for generations to come” and tax increases or major spending cuts would be needed to address the budget deficit, a report commissioned by pro-union groups finds.

The findings came as Nicola Sturgeon hailed Scotland’s “political re-awakening” since the vote, with the SNP poised to sweep to a record victory in May’s Holyrood election and polls showing record support for independence.

But opponents say the economic case against leaving the UK is now damning. The three new reports published today warn that the country’s annual deficit – the
shortfall between public spend on services such as school and hospitals and the taxes raised to fund them – would be up to £10bn worse than the overall UK picture.

In a report commissioned by the Conservatives, economist Kevin Hague warns that the state of Scotland’s finances as the impact of the global oil price crash continues to bite would leave a shortfall of £9bn for 2016-17, the first full year of independence.

This equates to £1,700 per person every year, according to Mr Hague. It also concludes that independence will only happen “if the majority of Scots are willing to vote to become considerably worse off, quite possibly for generations to come”.

A separate report by the Europe Economics think tank, commissioned by the Scotland in Union campaign, says the additional cost of independence would be £10.4bn for Scotland in its first year.

It takes into account the cost of losing extra UK government cash through the Barnett funding formula, higher interest payments, the impact of currency exchanges, new border controls, EU rebate, UK renewable subsidies, maintaining free higher education and the setting up of new governmental departments.

Alastair Cameron, director of Scotland in Union, said: “This new and independent analysis of the financial costs of breaking away lays bare the challenges Scotland would have faced,and demonstrates Alex Salmond glossed over more than just oil revenues. We would all have paid a high price for his political obsession.”

The respected Institute for Fiscal Studies (IFS) think tank also warns today that Scotland’s deficit, relative to the rest of the UK, has grown by £2.4bn in 2016-17 to £12.2bn.

This is down to higher levels of public spending in Scotland and the recent oil and gas price crash. Over the next few years oil revenues are likely to actually cost the public purse as tax receipts are outweighed by decommissioning support.

“Given that the majority of these revenues would have come from operations in Scottish waters, the impact of these further declines on the Scottish deficit is proportionately much larger than that on the deficit of the UK as a whole,” said author David Phillips.

But the figures were last night played down by the Nationalist camp.

“It is no surprise to see those opposed to independence use their own research to talk Scotland down,” a spokesman for the SNP said. “But polling this week showed support for independence at a 15-year high and also revealed that more people believe independence will be good for our economy.”

The fourth session of the reconvened Scottish Parliament was formally dissolved yesterday, with the Conservatives and Labour also staging rallies in Edinburgh to launch their campaigns.

Nationalists had hoped this would have marked the start of campaigning for the first ever elections of an independent Scotland with the country formally declaring statehood today if the referendum result had gone their way in 2014.

Ms Sturgeon said the legacy of the referendum campaign has changed Scotland forever.

“That is the political reawakening that our nation has experienced,” she told SNP candidates for the Holyrood election. Scotland in 2016 is now a nation that is much more confident, much clearer in our sense of who we are and of course, we’re now a nation that demands a higher standard from those that seek to govern – and that is a good thing.”