IFS Briefing Notes (BN135)

Scottish independence: the fiscal context

Date: 19 November 2012
Authors: Paul Johnson and David Phillips
DOI: 10.1920/bn.ifs.2012.00135
In making a decision over whether to seek independence from the rest of the UK, one of the many issues that the Scottish people will need to consider is the fiscal consequences. The question is not whether an independent Scotland could survive from a fiscal point of view but rather whether, in the short term and in the longer run, the current pattern of taxes and spending is sustainable and hence what choices an independent Scotland might have to make. Would an independent Scotland require higher taxes to finance current levels of spending (or, equivalently, would it need to reduce spending in order not to raise taxes)? Or would the Scots enjoy a fiscal dividend in the form of lower taxes or higher spending?

This is the first output of a new project at IFS, funded by the Economic and Social Research Council (ESRC), looking at some of the fiscal choices that might face Scotland should it choose independence following the 2014 referendum.

This work will be presented at a David Hume Institute seminar in Edinburgh on Monday 19 November.