Scotland will have a £9.7bn black hole under SNP plans for fiscal autonomy, says IFS

Guy Bentley
Follow Guy
IFS says SNP figures don't stack up (Source: Getty)

The SNP suffered a blow to its fiscal credibility this morning, after the Institute for Fiscal Studies (IFS) forecast a £9.7bn black hole in Scotland's finances by the year 2020 if it achieves fiscal autonomy.

The independent think tank released the research note the day after Nicola Sturgeon launched her manifesto promising an end to austerity and more powers for Scotland. The SNP is campaigning to win devolution of "powers over employment policy, including the minimum wage, welfare, business taxes, national insurance and equality policy".

This is a significantly more radical set of policies than those put forward by the Smith Commission, the body set up after Scotland voted to stick with the UK in 2014. If Scotland achieves full fiscal autonomy, the Scottish government will bear the brunt of balancing its own budget, which is when the IFS expects the shortfall to kick in.

The SNP had shrugged off the IFS's previous figure, which showed a £7.6bn funding gap in 2015-16 under the party's policies. The updated figure shows the gap growing in the future.

"The gap between Scotland’s deficit and that of the UK as a whole would, if anything, grow somewhat larger in the years ahead, reaching £9.7bn in 2019–20 (equivalent to £8.9bn in today’s prices)," said the IFS's David Phillips.

"The figure for 2015–16, therefore, does not seem misleadingly pessimistic given current revenue and spending forecasts," he added.

To make up the gap, revenue per person in Scotland would need to grow more than twice as fast than is currently forecast for the UK as a whole. The more likely scenario, however, is that Scotland would face years of heavy tax rises or deep spending cuts.

But the SNP's Kenny Gibson said the his party's plans meant Scotland was in a solid position to take on fiscal autonomy:

These figures - showing Scotland’s deficit almost halving as a share of GDP by the end of the decade, without factoring in the measures we propose to boost the economy - underline that Scotland has robust finances.

Related articles