Scotland warned: mind the fiscal gap
I’m in Edinburgh for the launch of the Institute for Fiscal Studies (IFS) report on the fiscal challenges facing an independent Scotland. It’s long-term crystal ball-gazing – a study spawned by a bigger, earlier look at UK prospects over the next 50 years.
The fundamental conclusion of the report is that because of its lower birth rate, lower immigration, declining levels of oil revenue over time and its higher per citizen state spending, Scotland faces a bigger “fiscal gap” than the UK as a whole. It suggests that on top of the austerity measures already outlined, an independent Scotland would need to raise £6bn in today’s terms each year starting in the 2020s, either through extra tax, spending cuts or a combination of the two.
That’s more than four times the size of the equivalent “fiscal gap” for the whole of the UK – 0.8 per cent of GDP.
This is a particularly potent event in the independence referendum because so much is coming down to the numbers and affordability of independence (the SNP government publishes its prospectus, or white paper, for independence next week). But it’s especially potent because the “Yes” campaign has been making a lot of promises about better state provision if Scotland goes independent.
The Better Together campaign will seize on this as proof that Alex Salmond‘s promises don’t add up.
The “Yes” campaign is publishing some of its own proposals for business taxes tomorrow and can be expected to say that the IFS is too gloomy about oil revenues and not taking into account how better economic management in an independent Scotland could turn things round.
The undecided
I spent some time yesterday in Paisley talking to one set of voters that both campaigns are particularly obsessing about. Focus grouping by both campaigns suggests that lower middle class and skilled working class males (C1s and C2s in the jargon) living in the central belt of Scotland are particularly susceptible to pro-independence messages and could turn into “yes” supporters at the last moment.
It’s a big hope for the “Yes” campaign and a big worry for the “No” team. These are workers who may feel the last Labour government didn’t deliver them many benefits over a long spell in government. Many of them reached early adulthood when Margaret Thatcher was in No.10 and their warmth for the union has been dented if not yet killed.
They may already have dabbled in an SNP vote in Holyrood elections even though they come from traditional Labour supporting families. They may feel, as the SNP leader and deputy leader are saying repeatedly, that if you used to believe in the union because it gave you cherished institutions like the NHS and the welfare state, the best way to preserve those might now be to vote for independence as “Westminster” is closing them down.
This cohort of voters, the “Yes” campaign worries, might give Alex Salmond’s offer a serious look and next September think: “what the hell, it can’t be any worse, I’ve got little to lose, let’s give it a try.” Amongst St Mirren supporters at the Sunday match against Ross County, you certainly find a lot of undecided voters, and some talk that matches the worst of Better Together’s fears.
Senior figures on the “No” campaign think this campaign could be won by a hammering margin of 70/30 but could also get to a nail-biting 45/55. The latter would mean another referendum in a short while, independence continuing to dominate Scottish political life and early and massive demands for full-scale devolution.
It would feel to the “No” side like a defeat.
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