What are the implications of independence for public revenues and spending?

Roy, Graeme and Eiser, David; (2020) What are the implications of independence for public revenues and spending? In: Scotland's Next Decision. Centre for Constitutional Change, Edinburgh. (In Press)

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Abstract

The debate over Scotland's public finances will be at the heart of any future independence referendum. What scope would an independent Scotland have to make different choices over taxes and spending, and what constraints would it face? In 2014, the fiscal policy debate was often mired in an acrimonious argument over whether Scots would be 'better' or 'worse' off under independence. Since then, the framing of the debate has changed as a result of Brexit, the fall in oil and gas revenues, changes in the Scottish Government’s policy aspirations, and the Covid-19 pandemic. This chapter revisits the 2014 debates in the light of these changes. It argues that whilst the framing of the debate has evolved, the conclusions are similar. Scotland and the UK both face major fiscal challenges over the long-term, and there is no doubting that an independent Scotland would be financially viable. But an independent Scotland would face a more pronounced set of fiscal challenges and constraints in the short to medium term on account of its larger structural deficit and the challenges of transition. Whilst it is understandable to talk of aspirational policy objectives for a 'new Scotland', the practical reality of delivering fiscal sustainability cannot be ignored.