Independence would mean ‘more not less’ austerity in the short term, IFS reports

Scottish independence would mean “more not less” austerity in the short term, a leading financial think tank has warned.

An independent Scotland “would have to count its pennies and pounds in at least its first decade of life”, Institute for Fiscal Studies (IFS) associate director David Phillips said in an evaluation of the SNP’s general election manifesto published in The Scotsman.

He notes that the spending policies in the manifesto are not costed, as they were in manifestos for the previous two general elections, and suggests that the SNP’s manifesto “isn’t really about a plan of action for five years of governing the UK”, but rather it is “about starting the process of leaving the UK in the next year”.

With the aging population and growth in demand for healthcare, social care and pensions, along with the need to reduce the deficit an independent Scotland would start with, as planned for in the party’s Sustainable Growth Commission, Phillips noted there would have to be cuts to other areas.

Phillips wrote: “As I argued last year, the SNP should be commended for tackling rather than ducking this issue – setting out a plan to reduce the budget deficit significantly over the course of a decade.

“This would involve holding down the growth in public spending to one per cent below growth in the economy, so if the economy were to grow by 1.5 per cent a year, total public spending could grow by only 0.5 per cent a year.

“The SNP has claimed that this would not be austerity as spending would be growing.

“But keeping spending growth to such a low level in the context of an ageing population pushing up demands for healthcare, social care and pensions would – unless these demands were not met – mean cuts to many other areas of public spending.

“So the Growth Commission’s plans would imply austerity for some parts of government.

“And pursuing the types of policies suggested in the SNP manifesto in an independent Scotland would mean either those cuts would have to be even bigger, or other taxes would have to be increased to pay for the proposed net giveaways.”

Phillips noted that what he was saying didn’t mean Scotland couldn’t afford to be independent or that in the longer term that the economy might not be stronger through independence, but that in the short term austerity would increase.

He said: “Of course, that does not mean Scotland could not afford to be independent, or even that in the longer term better governance and better policymaking as an independent country could mean a stronger economy and more to spend on public services.

“That is possible – although far from guaranteed.

“It just means that an independent Scotland would have to count its pennies and pounds in at least its first decade of life.

“It might therefore be understandable that the SNP manifesto does not draw quite the same attention to the price tag of its proposals as Labour and the Liberal Democrats, in particular, do.”

Responding the IFS comments, First Minister Nicola Sturgeon told The Scotsman she respected the IFS but thought there were aspects their analysis hadn’t taken account of.  

She said: “Firstly I think there is a question about applying a Westminster manifesto to an independent Scotland, not because these are not things we would want to do – we would – but because an independent Scotland would have a range of levers at our disposal to grow our economy faster that we don't have right now.”

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She added that the performance of the Scottish economy and the reduction of the deficit was “already going better now than the Growth Commission estimated would be the case in 2021”.

She added: “So the lesson here is that the more power Scotland has, the more of these levers of independence we have, the more we can seek to emulate the other similarly sized countries to Scotland that do so much better and grow our economy faster.

“And that's actually what the Growth Commission didn't factor in - that ability to grow our economy faster, which is really the essence of the economic case for independence.”

However, the IFS comments were seized on by opposition parties as boosting the case against independence.

Scottish Conservative finance spokesman Murdo Fraser said: “This is a humiliation for Nicola Sturgeon.

“Once again she’s out today trying to whip up the usual complaints against UK austerity.

“Yet the IFS has set out the cold facts – if ever she got her way, Scotland would be facing a decade long depression, with less money for the NHS, less money for nurses and the police, and more cuts to services.

“The IFS analysis has taken the legs out from the SNP’s case.”

Scottish Liberal Democrat leader Willie Rennie commented: "The IFS is unconvinced by the SNP's spending plans.

"Independence would not be positive for Scotland. It would mean at least a decade of new deep cuts at a time when we need to invest in education and boost mental health services to turn them around. 

"We've got to learn the lessons of Brexit, not pile more chaos on top. 

“Just like their Growth Commission, the SNP's own maths is painting a picture of a poorer Scotland with less money for our public services.”