Public Services Could Be Cut By A Third

Spending on some public services could be cut by close to a third under independence, according to a report by economic researchers.

One scenario could see cuts of £5.9 billion in 2016-17 and 2017-18, researchers said. 

If spending on health and education is protected, other services could be cut by almost one third compared with current spending levels. 

The findings are contained in a new report by the Institute for Fiscal Studies (IFS) that looks at spending on public services and taxation in the context of the 2014 referendum. 

The research found that an independent Scotland would face about £2.5 billion cuts for 2016/17 and 2018/19 if its government were to follow the course currently set out by the UK Government. 

The country could also face an additional £3.4 billion budget black hole, under current Office for Budget Responsibility (OBR) projections regarding North Sea oil revenues. 

Such a £5.9 billion total fiscal consolidation would amount to a cut of around 15%, based on 2011-12 levels of public service spending, the research found. 

The report states that if spending on defence and overseas aid followed the spending lines set out by the current SNP administration, and if health and education were protected, then cuts to other non-protected areas could amount to close to a third. 

Researchers noted that under a different set of circumstances - where North Sea oil revenues turn out to be substantially higher than those forecast by the OBR - Scotland could, in contrast, find itself in a stronger fiscal position than the rest of the UK in the post-independence years. 

In this case, an independent Scotland would, in principle, be able to cut spending or increase taxes by less than if it remained part of the UK, the researchers said. 

David Phillips, a senior research economist at the IFS and an author of the report, said: ``Spending on public services is substantially higher per person in Scotland than in the UK as a whole. This is driven by higher spending on many areas like transport, housing, economic development and social services. The Scottish government has used the existing powers under devolution to set different priorities for spending in Scotland,`` 

``Looking ahead, independence would give Scotland the power to set spending on those areas that are currently the responsibility of the UK government like defence and foreign aid. 

``These are areas on which the UK is a relatively high spender and there could be scope for Scotland to make substantial cuts to these areas. However, it is unlikely that cuts here would allow Scotland to avoid cuts elsewhere, unless it were to increase taxes substantially. 

``Indeed, given the OBR's forecasts for declining North Sea revenues, even with cuts to defence and aid spending, an independent Scotland may need to cut spending on other services or raise taxes by more than if it remained part of the UK.'' 

The IFS found that total public spending was about 11% higher per person in Scotland than in the UK as a whole in 2011-12, the latest year for which official statistics are available. 

Within this, spending on benefits and tax credits was only a little higher in Scotland, but spending per person on public services was almost 17% above the UK average. 

Spending on health, education, public order, defence and international services was only 3.2% higher per person in Scotland than in the UK as a whole, while spending on other services was 49% greater. 

Spending in areas such as enterprise and development, agriculture, forestry and fisheries, housing and community amenities, and social services was significantly higher.

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