Indyref2: SNP sent fiscal deficit warning by Maurice Golden
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The report from the Institute for Fiscal Studies (IFS) has estimated Scotland’s budget deficit in 2020–21 has spiked at between 22 percent and 25 percent of national income – up from just 8.6 percent the previous year. The deficit is not as large as projected in the last IFS analysis in August and doesn’t reach the same levels as in Wales or Northern Ireland, but it is still higher than a forecast deficit of 16 percent of national income for the UK as a whole for the same year. The IFS warned Scotland’s “implicit budget deficit” will fall as public finance effects of the COVID-19 crisis recede.
But this is likely to remain “substantially higher” than for the UK as a whole unless oil revenues bounce back or there is a significant upturn in economic performance.
The think tank said this reflects the “higher levels of public spending per capita – largely for devolved public services – in Scotland, and slightly-lower than average levels of tax revenues per capita than for the UK as a whole”.
David Phillips, an associate director at the think tank, said: “The gap between Scotland and the UK as a whole is very similar [to the previous analysis] and is structural rather than cyclical.
“Even if the UK’s public finances were in balance we would expect Scotland’s deficit to be around six percent of national income.”
The report from the IFS goes onto estimate that Scotland’s deficit will shrink to under 10 percent in 2025-26.
Critics of Scottish independence have warned if a split with the UK was to happen, the huge deficit would have to be brought under control through strict austerity measures.
The think tank agreed, and warned: “The fiscal transfers made to Scotland, Wales and Northern Ireland (and indeed the North and Midlands and of England) are normal within a fiscal union – but would cease under independence or ‘full fiscal autonomy’.
“To offset the end of these fiscal transfers, some combination of tax rises or spending cuts would be needed, unless faster economic growth could be quickly delivered in an independence or full fiscal autonomy scenario.”
SNP finance secretary Kate Forbes has insisted the Scottish economy can rebound following the pandemic – as long as the right plan is in place.
But she launched a furious attack against the UK Government, accusing the Tories of making “deep cuts to Scotland” which risks destroying any progress made by the country’s Government.
The MSP for Skye, Lochaber and Badenoch said: “This latest update from the IFS shows that with the right plan in place, Scotland’s economy could grow faster.
“But deep Tory cuts to Scotland from Westminster risk destroying any progress made by the Scottish Government.”
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Scotland’s First Minister Ms Sturgeon has said the SNP will press ahead with a second referendum on Scottish independence – should her party succeed in securing a majority at the Scottish election next Thursday.
This is despite Prime Minister Boris Johnson repeatedly refusing to transfer the relevant powers to Holyrood to make a second vote happen, insisting the referendum in 2014 was a “once in a generation event”.
The SNP’s election manifesto states: “We are seeking your permission at this election for an independence referendum to be held after Covid – when the crisis has passed but in time for us to equip our Parliament with the full powers it needs to drive our long-term recovery from Covid.”
The manifesto also vows to scrap all charges at NHS dentists, double a Scotland-only welfare payment and provide children with free bicycles.
But Scottish Conservative Maurice Golden, the Shadow Cabinet Secretary for the Economy, Fair Work and Culture, warned: “This respected independent think tank lays bare the chilling economic reality of ripping Scotland out of the UK.
“The nationalists are willing to inflict untold damage on families and business. The SNP would no longer be able to afford policies such as free prescriptions and free tuition as Scotland would face spending cuts and tax rises the likes of which we have never experienced.
“When all focus should be on recovery and rebuilding, this is reckless beyond belief. Deep down, Sturgeon must know the devastation this would cause.”
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