AN independent Scotland could face a decade of lost growth, according to the Centre for Economics and Business Research (CEBR), which warns that following a “yes” vote, the Scottish government could be forced to borrow billions of pounds from the International Monetary Fund (IMF) to finance its deficit.
The think tank will publish a briefing tomorrow asserting that an independent Scotland would need to issue about £9n worth of bonds to finance its deficit. It suggests such bonds would have to offer generous growth to attract investors, and concludes that the Scottish government is more likely to be forced to seek a bailout from the IMF and would be expected to repay the debt within five years, meaning severe cuts in public spending.
“Our maths suggest that the new government would have to issue about £9bn of new bonds, which would have to be sold at a substantial interest rate premium if they could be sold at all,” said CEBR executive chairman Douglas McWilliams.
“Scotland will end up in the hands of the IMF . . . which would insist on a programme to eliminate the deficit over three- five years, meaning serious cuts in public spending. It would face between a lost five years of growth and a lost decade.”
McWilliams said Scotland will face economic pressure even if it achieves fiscal independence, which is the most likely consequence of a “no” vote. “These fiscal issues would still have to be addressed,” he said. “Arguably achieving popular consent to austerity measures would be easier if Scotland were independent. Either way, the next five years at least look set to be some of the toughest economically that Scotland has faced since between the wars.”
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The CEBR estimates that the size of the Scottish deficit (as a percentage of GDP) last year was 9.9% compared with a UK deficit of 5.7%. Looking ahead to 2016-17, which would be the first full year of independence, it predicts that austerity measures and a modest rise in oil revenues should bring the deficit down to 6.4% of Scotland’s GDP (with the UK at 2.2%).
A spokesman for finance secretary John Swinney said: “Scotland is one of the wealthiest countries in the world, more prosperous per head than France, Japan and the UK itself — but we need the full economic powers of independence to make the most of our huge resources and to build a fairer society. Scotland has a healthier balance sheet and has contributed more revenues per head than the UK for every one of the last 33 years, so on the basis of this deeply flawed analysis, almost every country in the world, including the UK, would need assistance from the IMF.”
Caan says no to split
James Caan, a multi-millionaire entrepreneur and former investor on the BBC show Dragons’ Den, has declared against Scottish independence.
The 53-year-old said: “From a business perspective, my view is that there is security in numbers. Larger economies produce more stability and security. There is greater strength. Countries trying to spin off independently is going against the tide.”
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This weekend the billionaire businessman Jim McColl is writing to 675,000 undecided and “no” voters to urge them to vote “yes”.