Calendar An icon of a desk calendar. Cancel An icon of a circle with a diagonal line across. Caret An icon of a block arrow pointing to the right. Email An icon of a paper envelope. Facebook An icon of the Facebook "f" mark. Google An icon of the Google "G" mark. Linked In An icon of the Linked In "in" mark. Logout An icon representing logout. Profile An icon that resembles human head and shoulders. Telephone An icon of a traditional telephone receiver. Tick An icon of a tick mark. Is Public An icon of a human eye and eyelashes. Is Not Public An icon of a human eye and eyelashes with a diagonal line through it. Pause Icon A two-lined pause icon for stopping interactions. Quote Mark A opening quote mark. Quote Mark A closing quote mark. Arrow An icon of an arrow. Folder An icon of a paper folder. Breaking An icon of an exclamation mark on a circular background. Camera An icon of a digital camera. Caret An icon of a caret arrow. Clock An icon of a clock face. Close An icon of the an X shape. Close Icon An icon used to represent where to interact to collapse or dismiss a component Comment An icon of a speech bubble. Comments An icon of a speech bubble, denoting user comments. Ellipsis An icon of 3 horizontal dots. Envelope An icon of a paper envelope. Facebook An icon of a facebook f logo. Camera An icon of a digital camera. Home An icon of a house. Instagram An icon of the Instagram logo. LinkedIn An icon of the LinkedIn logo. Magnifying Glass An icon of a magnifying glass. Search Icon A magnifying glass icon that is used to represent the function of searching. Menu An icon of 3 horizontal lines. Hamburger Menu Icon An icon used to represent a collapsed menu. Next An icon of an arrow pointing to the right. Notice An explanation mark centred inside a circle. Previous An icon of an arrow pointing to the left. Rating An icon of a star. Tag An icon of a tag. Twitter An icon of the Twitter logo. Video Camera An icon of a video camera shape. Speech Bubble Icon A icon displaying a speech bubble WhatsApp An icon of the WhatsApp logo. Information An icon of an information logo. Plus A mathematical 'plus' symbol. Duration An icon indicating Time. Success Tick An icon of a green tick. Success Tick Timeout An icon of a greyed out success tick. Loading Spinner An icon of a loading spinner.

Economist warns independent Scotland would have to raise taxes or lower spending

BP North Sea impairment
The BP ETAP installation

An independent Scotland would have to hike taxes or cut spending and is likely to face political pressure to adopt the euro as the price of EU membership, a leading economist has said.

Paul Johnson, director of the Institute for Fiscal Studies, said public spending was more than £1,000 higher per person in Scotland than in the rest of the UK, despite tax revenue being similar.

He added that the fall in the price of oil had made Scotland’s financial position more difficult since the independence referendum in 2014.

Brexit had made the situation more complicated because if Scotland was inside the European Union single market and the rest of the UK was outside, trade with its largest partner could suffer.

Setting out why spending cuts or tax hikes may be required, Mr Johnson said: “Scotland looks very much like the rest of the UK in terms of its income per head, so we get just about as much tax per person from everyone in Scotland as we do in the rest of the UK.

“But spending in Scotland is more than £1,000 per person higher than spending in the rest of the UK.

“So what that means is that there is a big transfer of money from the rest of the UK to Scotland and, obviously, if Scotland were to become independent it would have to either reduce its spending by more than £1,000 per head or increase its taxes by more than £1,000 per head.”

The question of whether Scotland would be able to continue to use sterling was one of the major economic arguments during the 2014 referendum – and the UK’s departure from the EU could make that more unlikely.

He said: “It would clearly be more difficult to maintain the pound if the UK was outside the EU and Scotland was inside and the pressure on Scotland politically from the rest of the EU to join the euro would be significant.

“But in the end that would be a political, as much as an economic, choice.”

Mr Johnson told BBC Radio 4’s World At One: “Two things have changed since the last Scottish referendum. The first is that the Scottish fiscal situation has got worse, relative to that of the rest of the UK, because the oil price has gone down.

“And with spending per head more than £1,000 more in Scotland than it is in the rest of the UK that creates quite a significant fiscal problem going forward.

“Secondly, of course, the Brexit vote means that the UK looks like it is going to come out of the single market but if an independent Scotland were to be in the EU – within the single market – and the rest of the UK were to be out of it, then that helps Scotland in terms of its access to the rest of the European economies but potentially hinders it very badly in terms of its access to the UK market, depending on the political and economic agreement that was come to.”

Recommended for you


More from Energy Voice

Latest Posts