EXPERTS CONFIRM SNP SIGNED UP TO AUSTERITY WORSE THAN THE TORIES

The SNPs manifesto fell apart today after the Institute for Fiscal Studies (IFS) exposed the

impact of full fiscal responsibility within the UK.

In a devastating report, the impartial and independent experts at the IFS said that by the end

of the decade the gap in Scotlands finances because of full fiscal responsibility is due to grow

to 9.7 billion a year. The IFS conclude that full fiscal responsibility would likely entail

substantial spending cuts or tax rises in Scotland.

The report shows the SNPs claims on fiscal autonomy to be untrue. Here, we quote the

experts conclusions on the SNPs claims.

SNP CLAIM ONE: WE DONT NEED TO WORRY ABOUT THE ADDITIONAL AUSTERITY

CAUSED BY FISCAL AUTONOMY BECAUSE IT WOULD TAKE YEARS TO IMPLEMENT

Nicola Sturgeon: That would take several years to implement and Scotlands fiscal position at

the point that we became financially autonomous would depend on our economic

performance between now and then.1

Nicola Sturgeon: The other thing about fiscal autonomy of course is that while yes I support

it, it would take several years to fully implement.2

Nicola Sturgeon: Well, the 7.6bn is a complete red herring, I mean thats a figure that the IFS

has put forward for Scotlands fiscal position this year, it would take no account of the fiscal

agreement and framework that would have to be negotiated Scotlands fiscal position is

improving, full fiscal autonomy even if we could agree on it this year, would take several years

to fully implement.3

The IFS make it clear that the SNPs suggestion that delaying Full Fiscal Autonomy will help

deal with the extra gap created does not bear scrutiny:

Delaying a move to full responsibility for a few years would not on its own deal with

the fiscal gap though. Indeed, if anything, given current spending and revenue

forecasts, the gap would likely grow rather than shrink over the next few years. It

would remain the case that full fiscal responsibility would likely entail substantial

spending cuts or tax rises in Scotland. While a big and sustained rebound in oil

revenues or significantly higher growth in Scotland could mitigate this, there can be

no presumption that either would occur.

1 Nicola Sturgeon, Andrew Marr Show, BBC1, Sunday 19 April 2015. 2 Nicola Sturgeon, Five Live Phone In. 14 April 2015. 3 Nicola Sturgeon, 13 April 2015.

It is important to remember that the gap created in Scotlands finances by Full Fiscal

Autonomy is in addition to the current Tory austerity plans. These are extra cuts or tax rises. If

made up only through cuts they would be more than double Tory austerity to date.

The IFS project the amount of additional austerity needed as a result of Full Fiscal Autonomy

grows to 9.7 billion by 19-20. This is larger than Fiscal Affairs Scotland (8.7bn) or the

Treasury (8.4bn) forecast the gap to be by the end of the Parliament:

Net fiscal

balance

201314 2014-15 2015-16 201617 201718 2018-19 2019-20

% of GDP

Scotland -8.1% -8.6% -8.6% -6.8% -5.4% -4.6% -4.6%

UK -5.6% -5.0% -4.0% -2.0% -0.6% +0.2% +0.3%

Difference -2.5% -3.7% -4.6% -4.8% -4.8% -4.8% -4.9%

Cash-

terms

difference

-3.8bn -5.9bn -7.6bn -8.2bn -8.5bn -8.9bn -9.7bn

SNP CLAIM TWO: WE CAN GROW OUR WAY OUT OF THE ADDITIONAL AUSTERITY CAUSED

BY FULL FISCAL AUTONOMY

Nicola Sturgeon: Fiscal autonomy is about giving us the power to grow our economy faster,

to create more jobs and to grow our revenuesthe way out of deficit is to grow your economy

and the more powers you have over your economy the faster and better you are able achieve

that.4

Nicola Sturgeon: You take control to try to grow your economy and get your finances into

much better shape.5

Stewart Hosie: We want as many powers as possible and the powers we would like to see

quickly are those in order to create jobs, to grow the economy, to make Scotland fairer,

effectively the devolution of tax and employment powers, the devolution of welfare powers.6

The IFS make clear that the SNP cannot credibly claim to grow their way out of the additional

austerity. Just to stand still Scotland would have to grow at double the rate of the UK as a

whole:

It also provides information to assess how much faster growth would have to be to

close the gap. To close the gap by 201920, for instance, Scottish revenues per person

would need to grow by more than twice as much as forecast for the UK as a whole

4.5% in real terms per year between 201314 and 201920.

Even closing the gap over a longer ten or fifteen year horizon would require a step-

change in Scottish economic performance, and revenue generation. Such a change is

not impossible, but is much easier to promise than it is to deliver.

And the IFS also point out that the policies the SNP claim would grow the economy are largely

tax cuts which would increase the fiscal gap, rather than close it:

As we have highlighted before, the types of policies previously outlined by the SNP

as potential ways to boost growth, such as cuts to corporation tax and air passenger

duty, and increases in childcare spending, would, at least in the short to medium run,

cost the government money, and widen rather than shrink the fiscal gap, even if they

did boost growth.

Based on figures from the impartial Scottish Parliament Information Centre, the growth

required to close the fiscal gap would require:

More than double the IMFs predicted growth for Advanced Economies (2.4%)

Higher than the IMF growth rate for Emerging Market and Developing Economies in

2016 (4.7%)

4 Nicola Sturgeon, Good Morning Scotland, Radio Scotland, 31 March 2015. 5 Nicola Sturgeon, BBC Debate, 8th April, 2015. 6 Stewart Hosie, Sunday Politics, 20th April, 2015.

SNP CLAIM THREE: 15 BILLION MORE IN ONSHORE TAXES BY THE END OF THE

PARLIAMENT WOULD CLOSE THE GAP

Nicola Sturgeon: But our onshore revenue as a country, and non-oil revenues, are estimated

to be 15 billion higher than they are just now.7

Nicola Sturgeon: By the end of this decade [oil revenues] are projected, assuming the oil

price stays broadly as it is just now, to be about 3bn lower than they are at the moment but

our non-oil revenues, our revenues onshore that have got nothing to do with oil, they are

projected to increase by 15bn over the same period, so five times the estimated decline in oil

revenues and having more powers over our economy, our fiscal decisions.8

Stewart Hosie: If Scotlands expected to have 15bn of extra revenues by the end of the

parliament, thats clearly twice the gap theyre suggesting we have at the moment.9

The IFS are clear that Nicola Sturgeons argument that 15bn additional onshore revenues

over the period cannot close the gap because their figures assume a similar amount of

onshore tax growth:

The figures assume Scottish onshore revenues per person will grow at 1.9% per year

in real terms between 201314 and 201920 the same rate of growth that the OBR

forecasts for the UK as a whole. In cash terms, growth in onshore revenues is

projected at 14 billion, very similar to the 15 billion growth the SNP have cited,

based on similar projections by Fiscal Affairs Scotland.

This also makes an utter nonsense of Stewart Hosie, SNP Deputy Leader and Treasury

Spokespersons claim that the 15 billion of onshore revenues was more than double what

was needed to close the gap. The SNP must have known this was misleading when making

the claim.

The full IFS report can be read here: http://bit.ly/1K1Ccla

7 Interview with the Economist 10th April 2015. http://www.economist.com/news/britain/21648188-full-transcript-our-interview-snp-leader-which-she-discussed-her-partys-recent-surge 8 Nicola Sturgeon, 5 Live Phone in 15th April, 2015. 9 Interview with Stewart Hosie, Sunday Politics, 19th April.