Scottish Independence: report warns austerity looming outside the UK

Nicola Sturgeon wants to hold a second referendum next year
Nicola Sturgeon wants to hold a second referendum next year
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An independent Scotland would quickly amass "unsustainable levels" of debt and would need embark on a fresh wave of austerity, a new report has found.

The Oxford University Study warns that figures released this week setting out a £12.6 billion black hole in Scotland's public finances present a "major challenge" for the SNP's plans to leave the UK.

Read more: Scotland could prosper if independent, says Finance Secretary, as £12.6 billion financial 'black hole' emerges
The study by former Scotland Office economist Professor Jim Gallagher analysed the impact of the Government Expenditure and Revenue Scotland (GERS) report which was published by the Scottish Government yesterday.

It revealed that Scots enjoy public spending levels £1661 higher per head than the UK average - despite paying an average of £307 less in tax.

Professor Gallagher, a former adviser to ex-Labour Prime Minister Gordon Brown, states in a report entitled "Arithmetic and Independence" that Scotland would lose out on "fiscal transfers" which currently cushion the impact of the £12.6 billion gap between spending on public services like schools and hospitals and the taxes raised to fund them.

"Scotland’s fiscal position, set out in GERS, presents a major challenge for the independence movement," it warns.

Read more: GERS figures: What are they and why are they controversial?
The SNP's recent revised economic case for independence, the Sustainable Growth Commission, proposes to borrow "heavily" to make up for the immediate loss of UK fiscal transfers, and restrict the growth of public spending until the public finances are on a more sustainable position, he adds.

The GERS report revealed Scotland's deficit has come down to 7% as a share of GDP - but this is six times the UK rate.

The report adds: “Any more realistic look at the Commission’s approach, starting from Scotland’s actual fiscal position, swiftly shows that the newly independent country would quickly amass unsustainable levels of debt, and the cost of servicing it would require large cuts in public services."

Nicola Sturgeon is seeking to hold a second referendum on independence next year, but the latest findings were seized on by opponents.

Tory finance spokesman Murdo Fraser said: “In 2014, Alex Salmond promised oil would pay for separation. Now everyone knows that’s nonsense, Nicola Sturgeon’s replacement plan is to break the bank and borrow billions to try and cover the cost."

He added: “Five year on from the independence referendum, the SNP is still scamming voters with promises from the magic money tree. The cost for us all would be immense."