THE debate around Scottish independence has been “ill served” by GERS, according to a new report proposing an alternative means of calculating the economic position.
The figures are published by the Scottish Government every year, but are contested due to the method used to work out the country’s fortunes.
Established before devolution by the Tory government, GERS was initially used to show how much public money Scotland received from the rest of the UK and has since been used by both sides of the independence debate to prove its case. However, its accuracy has been questioned due to the complexities of identifying aspects of tax revenues and expenditure.
Common Weal’s Beyond GERS report says “the challenges to Scotland’s finances should not be understated” but the newly-sovereign state could “expect to see significant savings” in several areas as a result of its withdrawal from the rest of the UK, improving its predicted deficit.
This includes a saving of up to £1.7 billion a year in debt interest repayments through debt and asset negotiations.
It states: “Even using modest fiscal multiplier estimates as well as very conservative estimates regarding the impact of closing the tax gap as well as reduced debt interest repayments through prudent restructuring, Scotland’s deficit can be reduced by several billion pounds per year.
“It is possible that simply the act of independence could bring Scotland’s fiscal situation to ‘deficit parity’ with the UK, as long as the establishment of new Scottish state institutions is done with competence and prudence.
“That this situation can be brought about even without a discussion about increasing tax revenue as a percentage of GDP or by relying on revenues from volatile and diminishing resources such as oil shows the fundamental economic strength in which Scotland would begin life as a new country.”
Professor Mike Danson of Heriot Watt University called the work “sound and methodical”, adding that it is “far superior to the pre-programmed responses of opposition parties and commentators who cannot read beyond the headline or seek to question assumptions that would not apply to an independent Scotland”.
He went on: “By adopting best practice, a non-partisan picture of a much healthier Scottish budget is revealed.
“The evidence-based conclusions are of a Scottish budget in a position of parity with the UK’s on independence day, with no inferior and damning deficit to address. This would offer the opportunity to develop and grow the economy and society from a position of relative strength, rather than facing the burden of crippling deficits and debts.
“With the complementary powers and freedoms regained through independence, this flexibility and potential to move towards more fundamental restructuring of the tax, expenditure and debt systems would support changes in the economy and income distribution which would improve the budget position further.”
The Scottish Government said: “Scotland is already the most prosperous part of the UK outside of London and the South East. And we’ve got the people, the natural resources, the research base and the international reputation to achieve greater success as an independent nation. The fundamentals of our economy remain strong, with our GDP continuing to grow over the past year and 40,000 more people in employment compared to the pre-recession high.
“With independence, our economic policy would be tailored precisely to our own needs. We could curb our contribution to the billions the UK Government is choosing to spend on the Trident successor programme and instead invest our efforts in reducing inequality, boosting our economic growth and, in turn, strengthen Scotland’s finances and the funding available for public services.”
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