SNP plans to move to full fiscal autonomy for Scotland over a number of years would not address the “fiscal gap”, with projections suggesting it would increase rather than shrink over the next few years, the Institute for Fiscal Studies (IFS) has said.
New analysis by the IFS projects that the gap between Scotland’s finances and the rest of the UK will grow from £7.6 billion in 2015/16 to £9.7 billion in 2019/20.
The SNP previously rejected the £7.6 billion figure, which was seized upon by the party’s political opponents as a “black hole” in Scotland’s finances.
It said Scotland could use additional economic powers to grow its economy and plug any gap, while arguing that the IFS figure was a one-year “snapshot”, and full fiscal autonomy would be brought in over a transition period.
The SNP manifesto states that “the transition to full fiscal responsibility – and agreement of the detailed fiscal framework that would underpin it – would take a number of years”.
But the IFS analysis says that to close the fiscal gap by 2019/20, Scottish revenues per person would need to grow by more than twice as much as forecast for the UK as a whole.
Even closing the gap over 10 or 15 years would require a “step-change” in Scottish economic performance, the analysis claimed.
David Phillips, of the IFS, wrote: “In the shorter term, the priority (of the SNP) is a package of substantial further devolution of tax and spending powers that stops some way short of full responsibility.
“The hope seems to be that any fiscal gap opening up as a result of full fiscal responsibility would therefore be delayed by invoking the ‘no detriment’ principles for a package that stops short of full fiscal responsibility.
“Delaying a move to full responsibility for a few years would not on its own deal with the fiscal gap though.
“Indeed, if anything, given current spending and revenue forecasts, the gap would likely grow rather than shrink over the next few years.
“It would remain the case that full fiscal responsibility would likely entail substantial spending cuts or tax rises in Scotland.
“While a big and sustained rebound in oil revenues or significantly higher growth in Scotland could mitigate this, there can be no presumption that either would occur.”
Scottish Labour deputy leader Kezia Dugdale said: “The experts at the IFS have confirmed what Labour said yesterday – the SNP’s manifesto means they have signed up to massive spending cuts that would make even the Tories blush.
“Each of the SNP’s claims has been demolished by the IFS.The SNP say we could delay implementing their own plan and that would make things better. The IFS say this isn’t true and would only make things worse.
“The SNP say we could grow our way out of the extra austerity caused by full fiscal responsibility. The IFS say we’d need heroic levels of growth for this to be even vaguely true.
“And the SNP say we’d have billions of pounds more in onshore taxes to close the gap in Scotland’s finances. The IFS say they’ve already counted that and we’d still be nearly £10 billion a year in the red.”
She said the SNP should publish its own analysis of the consequences of full fiscal autonomy if it rejected the IFS figures.
Scottish Conservative enterprise spokesman Murdo Fraser said: “The SNP is in full retreat on full fiscal autonomy – they have even tried to change its name to full fiscal responsibility, so embarrassed are they by it.
“The latest SNP stance on this changes by the hour and by the day, they still seem to want it but not for years.As the IFS has pointed out, full fiscal autonomy would create a black hole in our public finances – which would keep getting deeper.
“Whether this is a policy for now, tomorrow or five years from now, it would be a disaster for business and taxpayers.”