The IFS also makes clear a breakaway Scotland would probably need to undertake some fiscal tightening.
“But to give a sense of possible scale,” the report says, “previous IFS research has found £2 billion of tax rises or spending cuts would be needed during 2016/17 and 2017/18 to match the UK Government’s plans. If a Scottish government also wanted to offset the decline in oil revenues by 2017/18 as forecast by the Office for Budget Responsibility, another £3.4bn would be needed.” This would mean an independent Scotland would begin life needing to find £5.9bn.
The report continues: “We estimate a one percentage point increase in all rates of income tax, or in the main rate of VAT, would raise around £430 million in Scotland,” and adds: “Making a substantial contribution to a possible fiscal tightening would require significant tax increases.”
Mr Adam calculated filling the fiscal gap by tax hikes alone would mean a rise of 13.7%.
Andy Lythgoe has used GERS figures to repeat Mr Adam’s calculations and done the same for the UK. The results are very interesting:
|Scotland Revenue incl. North Sea||£56,871m|
|Scotland Total Public Sector Expenditure||£64,457m|
|Fiscal Deficit as % of Revenue||13.34%|
|UK Total Public Sector Expenditure||£693,599m|
|UK Fiscal Deficit||-£120,963m|
|Fiscal Deficit as % of Revenue||21.12%|
An independent Scotland will thus only need to put up taxes by 14% in the same sense as the UK will need to put taxes by 21%.
In other words, an independent Scotland will be able to lower taxes by about 7% compared to the taxes we will incur if we remain in the UK.