The reality of the SNP’s impossible economic dream

A newly independent Scottish state would have to implement eye watering spending cuts or tax increases to stay afloat, according to new analysis.

If the new state were to balance the books using tax increases alone then Scotland’s three income tax bands, which are broadly equivalent to the basic rate in the rest of the UK, would have to go up by 26 pence in the pound, taking Scotland’s basic rate to 46 pence. Alternatively, the gap could be filled by raising VAT from 20 per cent to 49 per cent. Such massive tax rises would represent at least 10 per cent of Scotland’s GDP.

The analysis comes from a report by libertarian-leaning campaign group the TaxPayers’ Alliance (TPA), and was written by TPA chairman and ex-Treasury economist Mike Denham. It finds that Scotland’s fiscal deficit last year, at 8.6 per cent of GDP, was 14 times the euro area average and higher than any of the OECD’s 37 member countries.