New report confirms Scotland’s finances stronger than rest of UK

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  By Martin Kelly
 
A report by the Institute of Fiscal Studies (IFS) has confirmed that Scotland is in a stronger financial position than the UK as a whole.
 
According to the IFS, Scotland’s public finances have been stronger than the UK’s in every year from 2006-07 to 2010-11 with an average fiscal deficit lower than the UK’s since 2000.

The report from the London based body, compiled on the back of the latest GERS figures, has also concluded that an independent Scotland could have lower debt levels than the rest of the UK.

According to the report, Scotland’s GDP is currently higher than the rest of the UK and tax revenues generated north of the border are greater than the amount spent on public services.

The report said: “If you add in a geographic share of oil and gas revenues, then Scottish tax revenues would in recent years have been high enough to slightly more than offset the higher levels of public spending.”

The IFS added: “When you take account of North Sea oil, GDP per head is somewhat higher in Scotland than in the UK as a whole.

“So if UK debt were shared on a per capita basis then an independent Scotland might inherit a slightly smaller debt to GDP ratio than that faced by the UK.”

Welcoming the report, SNP Treasury spokesman Stewart Hosie MP claimed the figures, showing Scotland already fiscally better off than the UK, left anti-independence politicians with no case.

Accusing the No campaign of resorting to scaremongering, Mr Hosie said:

“Scotland can no longer be told it is too small or too poor to become an independent nation by the Tory and Labour anti-independence politicians.

“The IFS report confirms what the SNP have been saying for years – that Scotland is in a stronger financial position than the UK.

“It is clear from this report that the UK’s economy has been disastrously mismanaged and is continuing to struggle.  Westminster cuts to Scotland’s capital budget of nearly one third highlight the need for Scotland to take responsibility for all of the policy decisions which affect Scotland.”

“With a £1.5 trillion asset base in the North the Sea and a dedication to developing our economy – as can been seen by the Scottish Government’s commitment to the growing renewables industry – Scotland is excellently placed to move forward as an independent nation.

“An independent Scotland will be able to face the challenges of the modern world from a far stronger position than under government from London – and will be able to support growth, boost revenue and deliver public services to help build a fairer and more prosperous nation.”

In a BBC interview, Better Together Head Alistair Darling was pressed on past claims by Unionists that Scotland was subsidised by the rest of the UK, but Mr Darling denied ever having said so.

However on 9th November, in a well-publicised speech, the Labour MP claimed that the Scottish surplus was down to the current Barnet formula and that it “would die with independence.”

Speaking today, the former UK Chancellor seized on the concerns raised by the IFS report of the dangers of an over reliance on north sea oil and gas in the medium to long term.  The IFS warned that future governments in an independent Scotland would have to address problems caused by potential volatility in the price of oil.

Mr Darling claiming that “An economy paid for at the petrol pump is not what Scotland wants or needs.”

The Labour MP added: “The more worrying thing … is that oil prices are both volatile but also they make up a very large proportion of Scottish revenues, up to twenty per cent.

“And on top of that of course there are bound to be diminishing, that’s the nature of oil.”

Mr Darling also claimed that oil rich Norway’s economy was so successful because the country owned a large chunk of its oil reserves and could dictate extraction rates.  The anti-independence head also claimed that the vast Norwegian oil fund had been “decided thirty or forty years ago” – the fund was actually set up in 1990.

Speaking on Good Morning Scotland, First Minister Alex Salmond addressed the issues raised in the report and also claims by BBC Scotland reporter Hayley Miller who said that Scotland “would probably be viewed as quite high risk” which would increase debt servicing costs.

Mr Salmond said that interest rates were based on the amount you had to borrow and the collateral you had at your disposal. 

With the UK running a higher deficit, argued the First Minister, and Scotland with ten times the oil and gas collateral currently enjoyed by the UK, then it was unlikely that an independent Scotland would be viewed as a greater risk.

He said: “You evaluate borrowing rates based on the amounts you have to borrow, which currently would be less than that of the UK.”

“You also evaluate it in terms of your asset base going forward which of course would be hugely greater than that of the UK.”

First Minister interviewed on the IFS report