Fiscal Challenges and Opportunities for an Independent Scotland

Abstract

This paper looks at some of the key fiscal questions related to Scottish independence, drawing on detailed analysis of household survey data, official data on public spending and revenues, and using a model of the UK and Scotland's public finances over the next half a century. We examine how and why public spending on, and revenues raised from, Scotland differ from the average across the UK, and how Scotland's fiscal position might be expected to evolve over the next 50 years under current policies.

Can an Ageing Scotland Afford Independence?

“…The choice of demographic assumptions is important and 2010-based projections are more negative for Scotland, which is discussed further in section 3.1. But despite the differences between our approaches our main conclusion is supported by Crawford and Tetlow (2014) “… our model suggests that, while population ageing will increase public spending quite substantially in both Scotland and the UK as a whole, the difference between the size of this effect in Scotland and the UK will be quite small .“…”

“…To analyse sensitivity to population projections we compare main results with simulations based on the low migration variant of the 2010-based ONS population projections. These are the same projections that were used by the Institute for Fiscal Studies in their recent report on the fiscal sustainability of an independent Scotland (Amior et al ., 2013) and by Crawford and Tetlow (2014). Figure 8 shows OADR for both regions for 2010-based low migration projections.…”

“…It is interesting to compare the results presented in this paper with the Institute for Fiscal Studies (IFS) report on the fiscal sustainability of an independent Scotland (Amior et al ., 2013) and Crawford and Tetlow (2014) because they address some of the same issues. Our conclusions differ somewhat for a number of reasons.…”