THE annual GERS figures have become a key battleground in the independence debate with the pro-Union side insisting they show Scotland is “too poor” to be independent.
On the Yes side of the argument, supporters underline that the report analyses Scottish public finances as part of the Union and do not take account of additional powers the county would have if self-governing – most notably over immigration and the ability to increase income tax revenue through growing the population.
An aggressive pro-immigration strategy was a key recommendation in the SNP’s updated economic blueprint for independence, published last year. It called for a high-profile campaign to attract people from other parts of the UK and around the world to come, live and work in Scotland and help build the newly independent country.
Chaired by economist Andrew Wilson, the Sustainable Growth Commission took GERS as a starting point to assess what an independent Scotland’s public finances would look like following a successful Yes vote.
It worked on the basis that the public spending deficit would be 7.7% for 2018/19. So the announcement yesterday that it is down to 7% is a boost for the independence side.
The commission also pointed out that the deficit could be further reduced by 1.6% by setting aside UK spending decisions that wouldn’t apply to an independent Scotland, such as spending on Trident and the UK’s network of foreign embassies.
READ MORE: GERS figures make the case for Scottish independence stronger
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Commenting on the figures yesterday, Wilson wrote on Twitter: “The detail of the projections are very significantly improved on the Sustainable Growth Commission’s anticipated starting point. This means the prospects for making the deficit sustainable are substantially better at the present time. Very much so.”
Taking the new GERS figures and the stated savings into account could therefore mean that if a second independence referendum is held next year – as the First Minister has signalled – and the result is Yes, Scotland would head towards independence with a deficit of 5.4%.
Of course, there is one major uncertainty ahead in the coming weeks which could affect public finances considerably. Earlier this year the Scottish Government’s analysis reported a No-Deal Brexit – which Prime Minister Boris Johnson is open to on October 31 – could reduce Scottish GDP by 7%.
Finance Secretary Derek Mackay made reference to this threat when he unveiled the GERS report yesterday, warning that the UK leaving the EU without an agreement could hit Scottish tax revenues by approximately £2.5 billion a year.
He continued: “We could unlock our full potential with independence, allowing us to take the best decisions for Scotland. As we have always said, Scotland has a strong, and growing, economy and our future will be far brighter as an independent member of the EU.”
But would a deficit of 5.4% mean the EU would say off you trot, Scotland? David Phillips, associate director of the Institute for Fiscal Studies think tank, suggests rejection by the EU would be unlikely.
However, he does believe the new state would have to head to Brussels armed with a plan to bring its deficit down to 3%, as required under the EU’s Excessive Deficit Procedure rules. And that, he says, would mean some difficult decisions for he new state on tax and spending.
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