Scottish independence: Report sparks debate over Scotland's future

oil-rig.jpg
Report seized on by Nationalists and Unionists to prove case for
and against independence

Scottish independence: Report sparks debate over Scotland's future

A report to be presented in Edinburgh today will highlight how Scotland has better finances than the UK while it also speculates that under independence, Scotland's public services - if Scotland's economy continues in its current pre-independence course - would be more difficult to finance when the nation's oil and gas revenues are eventually depleted.

The report, from the London-based right wing think-tank the Institute of Fiscal Studies (IFS), in its first detailed analysis of the possibilities of independence, confirms that with its oil and gas revenue Scotland would have no problem covering its public spending committments in the short term.

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However the think-tank pointed to generous social policies which would be difficult to finance "over the long run" because of diminishing North Sea income.

David Phillips, one of report's authors, said: "Independence would provide Scotland with an opportunity to set its own fiscal course. In common with all countries it would face constraints and would have to make sometimes uncomfortable choices.

"In the short run its higher public spending than the UK average could be covered by oil and gas revenues if these are assigned on a geographic basis.

"In the longer run the loss of these revenues would lead to tougher choices than those faced by the UK as a whole."

Darling v Swinney

The report sparked a row over the prospects of independence with former Chancellor Alistair Darling, in office when the UK's financial crisis hit in 2008, and now chief of the pro-Union Better Together campaign, said it showed an 'oil-dependent' Scotland would be "exposed". 

Mr Darling's point is forwarded as evidence that Scotland's economy is intrinsicly uncompetitive and so Scots would require subsidies from London to maintain current living standards and economic activity.

SNP Finance Minister, John Swinney, responded arguing that the country would face future challenges from a healthier financial position compared to the rest of the UK.

The SNP pointed to findings within the report 'Scottish Independence - The Fiscal Context' and highlighted the following aspects:

  • UK has cut the Scottish Budget by 8.6% (revenue) and 32.1% (Capital) in real terms P.7
  • That Scottish GDP (incl. Geographic oil share) of £27,732 per person – 117% of UK average (for 2010/11) P.9
  • Scottish onshore taxes were HIGHER (as a share of GDP) than the UK average at 37.9% of GDP v 37.5% of GDP  P.13
  • Scotland’s 30 year average position of better than the UK – Figures 8 and 9 (Current Account and Net fiscal position)  P.18
  • Five year position better than UK incl. 2 current account surpluses vs five UK deficits  - Table 1 P.19
  • We are likely to have a LOWER debt to GDP ratio on Independence  P.25

Union economy: British banks "uninvestable"

The presentation of the IFS report comes after the case for remaining within the Union was struck another blow today as a major investor group warned that British financial institutions are becoming "uninvestable".

The Association of British insurers warned Westminster MPs that as a consequence of opaque accounting, regulatory upheaval and political interference, shares in British banks were becoming increasingly exposed to risk and shrinking returns.

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commented 2012-11-19 20:09:23 +0000 · Flag
I think it is important to want to point out that this IFS report was funded by the UK Government: a grant from the ESRC (Economic and Social Research Council) using money from the Department for Business, Innovation and Skills (BIS).
published this page in News 2012-11-19 17:08:56 +0000