IFS: Independent Scotland ‘would face continued austerity’ under Growth Commission proposals

The SNP-backed proposals for an independent Scotland in the Growth Commission report would see the country continue a programme of austerity, a major economic thinktank has warned.

The Institute for Fiscal Studies (IFS) said public spending would grow less than GDP by 3 per cent over a decade, despite Nicola Sturgeon’s assertion the squeeze would end. 

The 354-page Growth Commission report was led by economist and former SNP MSP Andrew Wilson, alongside politicians, business leaders and academics in a bid to refresh the arguments for leaving the UK.

Nicola Sturgeon has argued the plans would avoid austerity because public spending would continue to rise in real terms, by around 0.5 per cent per year.

However David Phillips, IFS associate director, said there would be “upward pressure” on health and social care while foreign aid spending would have to keep pace with GDP.

“On their definition, we’re not currently in austerity in the UK but we clearly are as the state is substantially falling as a share of the economy,” he said in an interview with the Telegraph.

Of the Growth Commission’s proposals, he added: “It’s a continuation of austerity.

“If public spending growth is one per cent less than GDP growth, that’s austerity.

“Half a per cent growth in public spending will feel like the continuation of austerity for quite a few services.”

The Growth Commission assumes the economy would grow by 1.5 per cent a year, and details a proposed a five to ten-year timeframe to cut Scotland’s deficit to 3 per cent of its GDP.

Elsewhere, Philips questioned the decision to exclude an assessment on the negative economic impact from the leaving the UK, despite mentioning the cost of Brexit.

And he queried assumptions about debts Scotland would owe the UK after separating, while pointing out that the “Annual Solidarity Payment” cited in the report is based on the current historic low interest rates.

An SNP spokesman said: "The Sustainable Growth Commission report is absolutely explicit in its rejection of austerity and in its recommendation for real terms spending growth – including an economic stimulus package where necessary – a sharp contrast to the reality of Tory policies being imposed on Scotland.  

"What's more, the fiscal projections in the report are based upon very prudent assumptions on growth, whereas the wider report goes on to make constructive, credible proposals on how to boost growth beyond that level."