Spending warning for independent Scotland

An independent Scotland could face tough financial choices, according to the Institute for Fiscal Studies

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Independence could give Scotland "tremendous economic opportunities"

Independence could give Scotland "tremendous economic opportunities", while remaining part of the UK would "almost certainly" result in cuts to public spending, a new Scottish Government report has claimed.

The document sets out how SNP ministers believe Scotland could increase economic growth and boost jobs by leaving the United Kingdom.

However, it also warns that improving the economy would "take time", stressing that there are "no overnight solutions".

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Analysis: IFS report is a 'stark message' for SNP

Scotland would face tough economic choices if it was to vote 'yes' in next year's independence referendum, according to the Institute of Fiscal Studies (IFS).

The IFS said the country would have to cut public spending and, or, increase taxes if it wanted to remain financial sustainability for the next 50 years.

Our Political Editor, Peter MacMahon, sent this report from Holyrood:

'Optimal tax system' could be created in Scotland

Scotland has been warned that a 'yes' vote in the independence referendum could mean tougher economic choices in the future.

The Institute for Fiscal Studied (IFS) said the falling North Sea oil revenues and an ageing population would need the country to either raise taxes, cut spending, or both.

But independence could also give Scotland a chance to create an "optimal tax system" meaning some taxes could be lower than in the rest of the UK.

The IFS say a more equal society, less congested roads and cross-border competition could drive down high-end income tax rates, road and corporation taxes.

"TheScottish income distribution is more equal than the UK's, so the scope and need to redistribute through high rates of income tax would be less. There is less congestion on Scottish roads, so optimal motoring taxation would be lower.Independence could lead to tax competition and cross-border shopping, creating pressures to reduce taxes such as corporation tax and excise duties."

– The Institute for Fiscal Studied

'Taxes could rise in an independent Scotland'

An independent Scotland would face tougher economic choices than the UK as a whole, according to an economic think tank.

The Institute for Fiscal Studies (IFS) said, to ensure financial sustainability for the next 50 years, Scotland would have to cut public spending and, or, increase taxes.

The most optimistic scenario would see tax rise from the current rates of 29% for income tax and 28% for VAT, or the independent nation would need to cut public spending by 6%.

In previous years, money raised from North Sea oil has "more than made up" for Scotland's high public spending, but failing revenues mean Scotland could not rely on it in the future.

"Over the long term, revenues from the North Sea will probably decline and official population projections suggest that the average age of the Scottish population will increase more rapidly than for the UK as a whole, putting greater upward pressure on many areas of public spending. As a result, to ensure long-run fiscal sustainability, an independent Scotland would need to cut public spending and/or increase other tax revenues more than would be required across the UK as a whole."

– Gemma Tetlow, programme director, IFS

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