‘Independence will stimulate growth and cut £13bn deficit’

Scotland’s £13 billion national deficit could be brought under control within a few years of the country becoming independent, Finance Secretary Derek Mackay has said.

First Minister Nicola Sturgeon and Cabinet Secretary for Finance, Economy and Fair Work Derek Mackay. Picture: Jane Barlow/PA Wire
First Minister Nicola Sturgeon and Cabinet Secretary for Finance, Economy and Fair Work Derek Mackay. Picture: Jane Barlow/PA Wire

The SNP minister insisted that leaving the UK will prompt a boost in economic growth that will help address the black hole in the country’s finances without the need for austerity cuts.

Senior Nationalists are actively stepping up the push for a second independence referendum, with First Minister Nicola Sturgeon poised to set out her timetable for another vote in the coming weeks after impasse in the House of Commons over Brexit is resolved.

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But opponents have accused the SNP of “fantasy economics”.

Mr Mackay said he hoped delegates would back a motion at next month’s SNP party conference to change policy and commit to a new Scottish currency following independence after using sterling for a transition period.

The party’s recent Sustainable Growth Commission, on which Mr Mackay sat, proposed the new currency would only be adopted after the £13bn deficit – the annual gap between public spending and taxes raised to fund them – is halved. It estimated this could take between five and ten years.

Asked if this could be done sooner, Mr Mackay said yesterday: “Yes, and I can tell you why. After we published the Growth Commission report, our economy and the financial position was improving. With the powers of independence, yes we can stimulate economic growth, grow our economy, get that notional deficit down.”

Ms Sturgeon has said that the people of Scotland must be offered the choice on independence to provide a longer-term alternative to the chaos of Brexit.

The report by the Sustainable Growth Commission last year proposed curbs on public spending in the fledgling years of a new Scottish state in order to bring down the deficit.

Scotland’s current deficit is £13bn, which is 7.8 per cent of GDP, according to the official Scottish Government figures for 2017-18. The Sustainable Growth Commission estimates the deficit would be 6 per cent at the point of independence and wants to bring this figure down to 3 per cent in line with EU rules, which it estimates would take between five and ten years.

But the SNP insists independence would unshackle the economy and mean enhanced growth, resulting in additional tax revenues that would offset the need for austerity.

The economic case for independence was widely seen as a major weakness in the Yes campaign of 2014.

“We’ve got austerity in ­Scotland and in the UK because it was the choice of the Conservatives – it was a political choice and it’s no longer a necessity,” Mr Mackay said in an interview yesterday.

“We can grow our economy, we can grow our public services, we can grow our GDP faster than being part of the UK that is subduing and now endangering our economy.”

He added: “The threat to our economy is Brexit. What we’ve shown is when we look at the small advanced economies in the world to see what they’ve got that we’ve not and what makes them so successful, the answer was independence.

“We could reduce that notional deficit. That’s the deficit for being part of the United Kingdom – accelerate the economic growth. In terms of the currency, move to that independent currency when we’re able to do so by setting out the tests that would guide us there.”

An independent Scotland would not adopt the euro if it rejoins the EU, Mr Mackay insisted – despite this being Brussels policy for new member states. The SNP pointed to Sweden, which has yet to adopt the single currency after 25 years in the EU.

“It’s not compulsory to join the euro,” Mr Mackay said. “We have the ambition to have an independent Scottish currency and set out a plan to take us there.”

But pro-Union opponents said the SNP’s plans would be a “recipe for deeper and tougher austerity”.

Murdo Fraser, Scottish Conservative shadow finance secretary said: “This is fantasy economics from Derek Mackay and the SNP.

“The idea that Scotland’s £13bn deficit can be halved within a few years without austerity is absurd.

“That would either require unprecedented cuts to public services, higher taxes or more borrowing – or more likely a toxic mix of all three.”

Labour leader Richard Leonard said a recent report by the Institute for Fiscal Studies compared the plan for deficit reduction set out in the Sustainable Growth Commission report with Westminster Tory austerity of recent years.