A PROMINENT professional services firm has cast doubt on the validity of figures released earlier this year that purported to show Scotland would struggle as an independent country.
In its latest State of the State report, Deloitte and the policy group Reform said Scottish Government policy had continued to diverge from the rest of the UK following the indyref and EU referendum, in its approach to public spending and public-sector reform.
Authors Mike Turley, from Deloitte, and Reform director Andrew Haldenby said Government Expenditure and Revenue Scotland (GERS) figures had shown Scotland’s deficit was double that of the UK’s overall deficit when measured as a share of GDP.
They said: “That has been caused by the global slump in oil prices, which mean Scotland’s share of North Sea oil revenues has plummeted from £9.6 billion in 2011-12 to just £60 million in 2015-16.".
“Commentators suggested that, under these conditions, Scotland would struggle to operate as an independent country. However, GERS data is produced for Scotland as part of the UK – it does not model scenarios for an independent Scotland in which the Scottish Government would be enabled to make its own fiscal choices.”
The indyref in 2014 accelerated further devolution to Scotland, said the report, and two years later the EU referendum marked “a second inflection point in Scotland’s relationship with the UK”.
The authors said Scotland “stood out” in that referendum result as the UK’s “most Europhile nation”.
“Unsurprisingly, the Scottish National Party Government moved swiftly to distance Scotland from the result and moot a second Scottish independence referendum that would see the country leave the UK, but remain within the EU,” they said.
“However, two potential barriers quickly became apparent.
“First, the EU is only able to negotiate departure with a member state – which is the UK – and second, the UK Parliament may need to pass legislation to allow for a second independence referendum.”
The pair added that, nonetheless, the Scottish Government had made the “bold” move to publish a consultative bill on a second independence referendum.
The report noted that a SNP government was returned in May after there had been commitments to public service investment and a resistance to Westminster’s austerity programme.
“Within weeks, the First Minister established a set of policy priorities that include substantial health and social care investment, a review of local government to redefine its role and changes to social security including an end to the ‘bedroom tax’,” said Turley and Haldenby.
“That programme for government was followed in the summer by the announcement of a capital spending programme of £100m, which is expected to be drawn from 2015-16 underspends.
“Projects will be assessed for the funding based on how quickly they can start, the number of jobs they will create and their wider effect on the supply chain.”
They said this year’s report saw the UK Government moving from an era of challenge surrounding the elimination of the budget deficit into one of parallel challenges as it moved towards Brexit.
“But if the government shifts its fiscal policy from austerity to investment, it still needs to recognise the importance of continuing transformation programmes across the public sector to realise their benefits,” they said.
The pair added it could take a strategy not unlike Scotland’s: “If the UK Government decides to recalibrate its fiscal policy towards investment, it may take a similar approach [to the Scottish Government].”
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