SCOTLAND “cannot afford” to stay in the Union any longer following an announcement the UK is bound for recession, pro-independence politicians have said.

With interest rates and inflation set to rise, both the SNP and Scottish Greens said it was clear Scotland must "escape Tory rule". 

The Bank of England’s (BoE) Monetary Policy Committee has announced interest rates will rise from 1.25% to 1.75% - the biggest single increase since 1995.

Meanwhile, the BoE has warned inflation could climb above 13% later this year if regulator Ofgem hikes the price cap on energy bills to around £3,450 - the highest level for more than 42 years.

It has also predicted the UK will fall into recession in the last three months of 2022 with the economy set to continue shrinking throughout 2023.

This would be the longest downturn since the 2008 financial crisis.

Ofgem has also announced the energy price cap, which limits how much energy companies can charge households, will now be updated quarterly as opposed to the current rate of twice a year, to keep up with rising costs. 

Kirsten Oswald MP, SNP depute Westminster leader, said the announcements will pile further misery on millions of households already strapped for cash and show why Scotland needs to release itself from the Union’s shackles.

She said: “These announcements spell disaster for the tens of millions of households who’ve already watched in horror as changes to the price cap have seen their bills rise by over 50%, with more massive rises expected in the coming months.

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“This double-whammy hit will only exacerbate the economic fears households have, with wages stagnating and the prices of goods and services rapidly across the board.

“It’s no coincidence the UK is one of the hardest hit countries in terms of energy bills - we’re facing a Tory-made cost of living crisis that the Conservatives have been too mired in sleaze and scandal to sort out.

“With these changes, we’ll see households struggle even more, with savings obliterated and incomes threatened by a looming recession. This will undoubtedly be a grim time for millions, we need real action and leadership.

“It begs the question what exactly will finally shame the Tories into action? So far it seems absolutely nothing, showing once again why Scotland desperately needs to escape Tory rule with the full powers of independence.”

The value of the pound dropped 0.05% lower against the US dollar at 1.211 shortly after the Bank of England’s rate rise was confirmed, having been 0.7% higher ahead of the announcement.

The pound also dropped 0.5% against the euro to 1.189.

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Ross Greer, Scottish Greens finance spokesperson, said Tory leadership candidates Liz Truss and Rishi Sunak cannot bring about the change that is needed and so Scotland must choose a “different and better path”.

He said: “The financial disaster we are living through has been driven by the total failure and incompetence of Boris Johnson and his Tory colleagues. How else do you explain Britain being in a position so much worse than comparable economies?

“The public service cuts, reckless approach to Brexit and economic vandalism of Downing Street have taken a wrecking ball to our economy. All across the UK families are being forced to choose between heating their home or eating, all while the super-rich and major corporations are getting even richer.

“Neither Liz Truss nor Rishi Sunak can bring the change that we so badly need. They have supported every single one of Johnson’s failures, whether it is his disastrous Brexit deal, his cruel cuts to Universal Credit or his refusal to invest in renewable energy and reduce our dependence on gas.

“Scotland has endured 12 painful years of Tory rule that we did not vote for. We cannot afford it anymore. With the powers of independence, we can take a different and better path and have a recovery that works for people and the planet.”

Derek Mitchell – the chief executive of Citizens Advice Scotland -called for “radical action” from the Government.

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“Soaring inflation means higher prices in the shops and costs on bills for people already struggling badly with the cost-of-living crisis,” Mitchell said.

“Some of the most vulnerable people across the UK this winter will face a choice between freezing and starving.

“That’s the reality and we should not pretend otherwise. People are likely to die this winter because of this crisis unless we see urgent and radical action from policymakers.”

Meanwhile, the Scottish Licensed Trade Association (SLTA) said that small businesses in its group could be driven out of business by the increase in interest rates. 

Colin Wilkinson, SLTA managing director, added: “Businesses have been feeling the squeeze since the pandemic hit two-and-a-half years ago and are already grappling with paying off debts incurred during Covid. This could be the final straw.”