Southern taxes fund Scots’ lifestyle, says IFS
HIGHER public spending in Scotland is being financed by taxpayers in the south of England, a think tank has said.
The Institute for Fiscal Studies (IFS) said that while redistributing cash was normal within a union, Scotland’s high deficit was unusual as it was driven by high spending levels rather than low revenues.
It warned that spending cuts or tax rises would be needed if it left the UK.
Murdo Fraser, finance spokesman for the Scottish Tories, said the SNP’S economic case for independence had “never been weaker” and that Nicola Sturgeon had “no answers” for how she would tackle the huge deficit.
“She presents a false picture of an independent Scotland when the reality with this deficit would be either hammering families with punishing tax rises or massive cuts to vital public services,” he said.
Scotland’s deficit increased to about 24 per cent last year as a result of the pandemic, the IFS said, compared with about 16 per cent for the UK as a whole.
The think tank said that a deficit of around £2,450 per person in Scotland was effectively financed by residents in the south of England, who on average each generate a fiscal surplus for the UK of about £2,000.
A series of papers from the IFS and Institute for Government have shown that public spending per head is significantly higher in Scotland than England, with free prescription charges, university tuition fees and personal care among perks available to Scots.
Ms Sturgeon, Scotland’s First Minister, has vowed to embark on another splurge if she wins next week’s Holyrood election, promising to end charges at NHS dentists, double a Scotland-only benefit payment for parents and offer free bikes, laptops and tablets to children.
However, she has come under increasing pressure to explain how public spending would be maintained if she wins independence, with a series of experts warning that her claim that Scotland’s deficit could be financed by borrowing is not credible.
Scotland’s deficit was 8.6 per cent before Covid hit, and it is not expected to fall below 9 per cent before 2026, according to the IFS projections. The UK’S deficit is expected to fall below 5 per cent next year.
David Phillips, an associate director at the IFS, said the gap in finances between Scotland and the UK was “structural rather than cyclical”.
“Even if the UK’S public finances were in balance we would expect Scotland’s deficit to be around 6 per cent of national income,” he said.
Ms Sturgeon is seeking a mandate to hold a new vote on independence by 2023. However, a poll published yesterday showed that support for leaving the UK had fallen to its lowest level in 18 months, with just 42 per cent of Scots backing independence and 49 per cent opposed.
Kate Forbes, the SNP finance secretary, said: “As the IFS has said, Scotland is a rich country, but we don’t yet have full control over those many resources.
“None of this means that Scotland cannot afford to be independent.”