Election controversy of the week: Scotland’s black hole

If Scotland takes full charge of public spending, financed via its own tax-raising and borrowing powers, it will end up with a deficit, warns the IFS.

If Scotland takes full charge of public spending, financed via its own tax-raising and borrowing powers, it will end up with a deficit (an annual overspend) of £9.7bn in 2020, according to the Institute for Fiscal Studies (IFS), a respected think tank.

That's still an improvement on the current position (a drop in the deficit from 8.6% of GDP to 4.6% by 2019/2020), but it's a slower improvement than the rest of the UK, which goes from a 4% deficit to a 0.3% surplus in other words, finally starting to pay off the national debt in 2019/2020 under current plans.

The latest Scottish National Party (SNP) manifesto, published this week, suggests a more gradual transition towards fullfiscal autonomy than previously suggested.

SNP leader Nicola Sturgeon, who dismissed previous similar IFS forecasts as irrelevant, according to The Guardian, argued that the latest figures were "academic projections for a status-quo situation", saying that extra power for Scotland's parliament would allow a Scottish government to "grow our economy faster, get more people intojobs, get more people paying taxes".

However, as David Phillips of the IFS notes, even "delaying a move to full responsibility for a few years would not, on its own, deal with the fiscal gap".

The IFS acknowledges that "a big and sustained rebound in oil revenues or significantly higher growth" could help, but that to keep up with the UK's rate of deficit reduction, Scottish revenue per head would have to grow at "more than twice the rate forecast for the UK as a whole", notes the BBC.

In short, "full fiscal responsibility would likely entail substantial spending cuts or tax rises in Scotland".

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