Scotland’s a bigger economic basket case than Greece
SCOTLAND’S public spending deficit is higher than Greece’s and tackling it would mean doubling the basic rate of income tax or VAT, campaigners have warned.
Research shows the Scottish deficit is now at 9.5 per cent of GDP – the highest rate of the European Union nations and double the rate of the UK as a whole.
Scottish First Minister Nicola Sturgeon wants Scotland to rejoin the EU following the Brexit vote, but a report claims that its economy would struggle to meet the stringent entry criteria.
The Taxpayers’ Alliance said that its deficit would have to be plugged to a more sustainable level by either massive cuts in public spending or hiking taxes, particularly if Scotland became independent.
Scotland ran up a fiscal deficit of £14.8billion in 2015-16 – and has run a deficit every year since devolution in 1999. To force it down to 3 per cent of GDP, as the EU demands under its stability and growth pact, Scotland would have to increase the basic rate of income tax from 20p to 39p or double VAT to 40 per cent. Or the Scottish government could instead embark on massive spending cuts of £3billion a year to meet the EU’s deficit criteria.
This would be the equivalent of all defence spending, public order and safety or transport – or slashing health spending by 82 per cent.
Greece, which has a budget deficit of 7.2 per cent, has had to be bailed out by the EU following years of overspending by its government, with harsh austerity measures and public services slashed to bring down costs.
The Taxpayers’ Alliance said in its report, Scotland’s Over-Spending Problem, that if its public spending was in line with England its chronic deficit problem would be largely eliminated, but Scots have an extra 20 per cent spent on them per head than the English.
John O’Connell, chief executive of the TaxPayers’ Alliance, said: ‘Scottish taxpayers face a huge deficit that must be tackled. Public spending promises made today will be paid for by tomorrow’s taxpayers, which means higher taxes and more debt for our children and grandchildren. Politicians in Holyrood must do the responsible thing and commit to getting the public finances under control.’
The pressure group said: ‘It is living well beyond its means. Scotland’s higher levels of public spend- ing are made possible only by the subsidy from English taxpayers.’
It also warned that increasing taxes to cut the deficit would have a ‘deeply damaging impact’.
It said: ‘An independent Scotland jacking up taxes could expect to see a haemorrhage of GDP and jobs. Tax revenues could even fall, which means the only option to balance the books would be to cut spending.’
Last month, Theresa May underlined how Scotland’s best economic bet was to stick with the
‘It is living well beyond its means’
UK. The Prime Minister said: ‘The fall in oil prices demonstrates just how crucial that relationship is financially: Scotland was able to weather that downturn because of the UK’s broad shoulders.
‘Tax revenues from the North Sea collapsed, but funding for Scottish public services remained unscathed. That is how our union works: we share each other’s successes when times are good, and shoulder each other’s burdens when times are tough.’
The report will be unwelcome reading for Miss Sturgeon, as she opens the SNP’s conference in Glasgow today. Official figures also showed that Scotland’s economy grew at a slower pace compared to the previous three months.
Kezia Dugdale, Scottish Labour leader, said: ‘It’s time for Nicola Sturgeon and the SNP to take ownership of a decade of SNP government, which is littered with broken promises, budget cuts, and backwards steps.’
WITH a deficit now higher than Greece and twice the rate of the UK as a whole, if Scotland were an independent country it would be the poorest in Europe. As a result of the oil price collapse and its refusal to implement spending cuts, Scotland is solvent only because of the huge subsidies it receives from English taxpayers. That’s why it’s essential that the SNP (which has gone very quiet on demands for a second referendum) should not be allowed to conspire with Labour to defeat Brexit.