An independent Scotland could face up to a decade of tough curbs on public spending as the newly formed seeks to get its finances under control, according the Sustainable Growth Commission report.
And the country’s deficit could thwart a quickfire return to the EU after independence as the anticipated debt-to-GDP ratio is estimated to be double that allowed by Brussels rules.
Scotland’s spending deficit - the difference between the cost of public services and taxes raised to fund them - currently stands at about £13.3 billion, or 8.3% of GDP, according to the Scottish Government’s own figures.
The Commission report today sets out a framework for tackling the deficit over the first “five to ten years” of independence.
“Whatever it inherits financially on day one of independence it is critical that the Scottish Government moves purposefully to establish credibility and stability in the public finances as it will, for the first time, be going directly to debt markets to seek funding,” the report states.
“As things stand this will require a clear strategy to get any inherited deficit to manageable levels, in an orderly fashion, over a period of time that is sensible. It will also require a clear policy for the on-going containment of debt. Getting this right is one of the core pillars of creating the success of the newly independent country and its economy and the living standards its citizens enjoy.”
It suggests that the 8.3% of debt to GDP ratio could be brought down to 5.9%, after changes to current UK spending plans are taken into account, such as reductions in defence spending.
But even this would be double the rate set out in EU public finance rules which state that a nation’s debt must be no more than 3% of GDP.
The report does not state whether an independent Scotland should rejoin the EU, although this is SNP policy.
But it adds: “Securing frictionless borders with the rest of the UK and EU should be a top strategic priority of the Scottish Government. Brexit places a material risk on Scotland’s access to export and import markets and the free movement of people, capital, goods and services and must therefore be resisted vigorously.”