Nicola Sturgeon has vowed to push for full fiscal autonomy for Scotland as soon as possible — despite a respected think-tank warning that the move would require swingeing spending cuts or heavy tax rises.
The Institute for Fiscal Studies (IFS) yesterday heavily undermined the first minister’s policy on further devolution based on an analysis of the 2013-14 Government Expenditure and Revenue Scotland (Gers) figures which allow the state of Scotland’s public finances to be compared with those of the UK as a whole.
Gers showed that Scotland generated £10,100 per head in taxes — £400 more than the UK average. However, spending was £12,500 per Scot, which is about £1,200 higher than in the UK overall.
The figures mean that, if Holyrood got full control over the economy, it would have to find a way to make up the £800 per head difference through higher tax, lower spending or more borrowing.
Gers shows that Scotland’s deficit is significantly higher than that of the UK — 8.1 per cent compared with 5.6 per cent. Last night the IFS warned that in two years’ time the Scottish figure could be double that of the UK as a whole.
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In its analysis, the IFS said: “Full fiscal autonomy would likely involve substantial spending cuts or tax rises in Scotland, unless oil revenues rebound and remain at consistently high levels, or credible policies to boost the growth of Scotland’s onshore economies and revenues can be developed.”
Despite the shortfall laid bare by Gers, Ms Sturgeon insisted that SNP MPs would use their “clout” in the next parliament to push for the maximum devolution of economic and fiscal powers to Holyrood “as soon as possible”.
She acknowledged that her political opponents would seize on the figures as supporting the case against full fiscal autonomy. However, she claimed that the numbers “tell us nothing at all about how Scotland would perform with greater economic and fiscal powers”. She said Scotland could have invested previous “relative surpluses” or taken different spending decisions.
She suggested that her government would fund the deficit through extra borrowing. And she said that the extra tax contributions from Scotland was “testament to the inherent strengths of the Scottish economy”.
The Gers report found that Scotland contributed 8.6 per cent of the UK’s tax revenues in 2013-14 but got 9.2 per cent of spending. The difference between day-to-day revenue and expenditure was £9.8 billion, or a deficit of 6.4 per cent of GDP.
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If capital spending on projects such as roads and hospitals is included, Scotland spent £12.4 billion more than it generated in taxes.
John McLaren, the economist at the Fiscal Affairs Scotland think-tank, said: “Like the UK, Scotland’s fiscal position remains heavily in the red in 2013-14. However, despite declining oil revenues, it has improved in comparison to 2012-013.”
Jim Murphy, the Scottish Labour leader, accused Ms Sturgeon of pursuing an “austerity max” agenda.