The Institute for Fiscal Studies (IFS) has warned that plans for Scottish independence could mean cuts to public spending and higher taxes than in England.

The economic prospectus unveiled by First Minister Nicola Sturgeon yesterday included plans to move to a separate Scottish pound as soon as practical, to apply to re-join the EU, and to boost immigration to grow the workforce and tackle skills shortages.

On the public finances, the Scottish Government says it would be committed to “sound public finances”, ensuring this through “fiscal rules informed by international best practice”, placing a limit on borrowing for day-to-day spending, and debt.

Responding to the paper, the IFS said that it is true that the future path of the UK and Scotland’s public finances is currently "even more uncertain than usual".

However, it added: "Nevertheless, Scotland’s much higher levels of public spending and slightly lower levels of onshore tax revenues mean that it is highly likely an independent Scotland would need to make bigger cuts to public spending or bigger increases to taxes in the first decade following independence than the rest of the UK would need to.

"In the longer-term, the sustainability of Scotland’s public finances – and its potential to reverse some of the spending cuts or tax rises – would depend on whether aims for faster productivity and economic growth were delivered."

David Phillips, an Associate Director at the Institute for Fiscal Studies said: “The Scottish Government’s new paper on post-independence economic plans makes all the right noises on how the public finances would be managed, emphasising achieving fiscal sustainability. But, it skirts around what achieving sustainability would likely require in the first decade of an independent Scotland: bigger tax rises or spending cuts than the UK government will have to pursue.

"This is because while high oil and gas prices means Scotland’s underlying budget deficit this year will be fairly close to that of the UK as a whole, this is likely to prove temporary: oil and gas prices are expected to fall back, and North Sea production is on a long-term downward trend.

"Scotland’s public finances are therefore expected to weaken relative to the rest of the UK again unless onshore economic growth could be boosted to grow revenues from income tax, VAT and the like.

"That’s not impossible and the Scottish Government has rightly highlighted the UK’s poor productivity performance, including relative to many of the small northern European countries that it is suggested Scotland could emulate.

"However, boosting productivity and growth is far from certain and would be easier said than done. Experience from recent weeks suggests the markets may not look favourably on fiscal plans built on the uncertain hope of a substantial future boost to growth.”

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