An independent Scotland would need to raise taxes, cut spending, or both, to create a sustainable economy over the next 50 years, according to an economic think tank.
Falling oil revenues and an ageing population would create tougher economic choices for an independent Scotland than the UK as a whole, the Institute for Fiscal Studies (IFS) said.
But Scotland could create an “optimal tax system” where some taxes are lower than the UK, an IFS paper entitled Fiscal Sustainability Of An Independent Scotland (PDF link) said.
Scottish nationalists say the paper highlights the opportunity to do things differently but unionists say the economic case for independence is now “in tatters”.
Scottish Finance Secretary John Swinney said: “The whole point of independence is to equip Scotland with the competitive powers we need to make the most of our vast natural resources and human talent and to follow a better path from the current Westminster system which stifles growth and which is responsible for the damaging economic decisions which this report, and its projections, are based on.”
But Deputy Prime Minister Nick Clegg said independence would “condemn Scotland to a long period of non-stop austerity and spending cuts”.
Chief Secretary to the Treasury Danny Alexander said: “Even on the most optimistic scenario, an independent Scotland would require cuts almost two-and-a-half times as deep than if they stayed in the UK. The Scottish Government has to confront this uncomfortable reality in their forthcoming White Paper.”