Turbulent tax take would hit split Scotland

THE SCOTTISH government’s vision of post-independence spending is poorly balanced, and volatile oil revenues would make the country’s deficit unsustainable, according to the Institute for Fiscal Studies (IFS).

Researchers for the IFS, which acts as a public spending watchdog, says financial commitments included in the Scottish government’s white paper are twice as high as proposed tax hikes and spending reductions.

The blueprint’s new liabilities would cost the government another £1.2bn per year, potentially even more over the long term. Revenue raised or saved would only be between £500m and £735m.

Researchers also demonstrated the effect of a major drop in North Sea revenues between 2011-12, when £11.3bn was raised, and 2012-13, when the Treasury collected £6.6bn.

“Volatility in this revenue stream becomes economically much more significant to Scotland than it is for the UK as a whole,” said Gemma Tetlow and David Phillips of the IFS.

The unpredictable revenues mean Scotland’s fiscal position was better than the UK’s in 2011-12, but in 2012-13 it would have been worse, with a deficit of 8.3 per cent of GDP as opposed to 7.3 per cent in the UK.