Independent Scotland would face long-run fiscal problems

Ben Southwood
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AN INDEPENDENT Scotland would face a bigger long-run fiscal adjustment than the rest of the UK, a prominent think-tank forecast yesterday.

Scotland would face a very similar budget situation to the rest of the UK in the short run, according to the Institute for Fiscal Studies, as tax revenues per head are close to the UK average, while oil and gas pulls in enough to balance out the £1,200 extra Scotland spends per resident under First Minister Alex Salmond.

But in the long-run the adjustment would be bigger, as production from the North Sea cash cow falls, the think-tank predicts. Oil and gas revenues made up more than a fifth of Scottish revenue in 2008-9 but just 15 per cent in 2010-11 – after dipping down to 12 per cent in the 2009-10 tax year.