Scottish independence

The debate on Scottish independence has been enlivened today by the publication of two separate reports on the outlook for the public finances of an independent Scotland, one from HM Treasury and one from the Scottish Government. These reports come to quite different conclusions about the likely strength of Scotland’s public finances as an independent country compared to continuing as part of the UK. In this observation we discuss why today’s analysis from the Scottish Government appears to paint such a different picture for Scotland to that of our own previous work, and the work published today by HM Treasury.

Today, the Scottish Government published the latest version of its annual Government Expenditure and Revenues Scotland (GERS) publication. For the first time in 5 years GERS suggests that Scotland's net fiscal balance, or budget deficit, was worse than that of the UK as a whole even when allocating North Sea revenues to Scotland on an illustrative geographic basis. Until now these revenues have been enough to more than outweigh the higher public spending per head in Scotland than in the rest of the UK. But not in 2012–13.

The latest public finance forecasts published by the Office for Budget Responsibility (OBR) in December presented a better outlook for the UK than had been suggested by their March forecast. This is good news for the UK and Scotland in the short-term but much of the improved short-term outlook comes at the expense of reduced scope for economic recovery after 2018–19. Also the one area of greater weakness in the OBR’s latest forecast – revenues from oil and gas production – has substantially more adverse consequences for Scotland’s fiscal position than for the UK as a whole. In short, the new forecasts do little to diminish the tough choices that will face Scotland (and, to a lesser extent, the UK) if it is to achieve long-run fiscal sustainability.

Two short analysis pieces on tax and welfare. This analysis is published by the BBC, who asked several experts to give a viewpoint on aspects of the Scottish government White Paper 'Scotland's Future'.

This paper was given at the IFS event 'The fiscal implications of an independent Scotland' on 18 November 2013

This paper was given at the IFS event 'The fiscal implications of an independent Scotland' on 18 November 2013

This paper was given at the IFS event 'The fiscal implications of an independent Scotland' on 18 November 2013

This paper was given at the IFS event 'The fiscal implications of an independent Scotland' on 18 November 2013

Paul Johnson and David Phillips in the Scotsman.

This presentation was given at the International Conference on the Economics of Constitutional Change on 19th September 2013.

Presentation given at an ESRC event on Scotland at Parliament on 12 June 2013

Paper given at the ESRC conference 'The Future of the UK and Scotland' 2-3 May 2013