Treasury finds £1.6bn funding gap in Scottish independence plans

19 Dec 2013 | 07:22
Carmen Reichman
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Danny Alexander

Scottish taxpayers will have to pay out £1.6bn a year to fund initiatives set out in the white paper on the country's independence which have not yet been allocated cash, according to Treasury figures.

In its analysis of the independence plans, the Treasury has highlighted at least three of the paper's proposed policy commitments, including cutting corporation tax by three percentage points, have not been backed by funding.

This means Scottish taxpayers would have to foot an annual bill which is equivalent to the combined budget of the Police Scotland and the Scottish Fire and Rescue Service, chief secretary to the Treasury Danny Alexander (pictured) said.

IFAs have previously highlighted their concerns about Scottish independence, including there being an 'invisible border', different taxation and the need to increase fees should Scotland break its union with England.

Alexander said: "I am today publishing analysis that shows the Scottish government would need to find £1.6bn a year in higher taxes or spending cuts to fund just some of the additional commitments set out in the white paper. This is equivalent to the combined annual budgets of Police Scotland and the Scottish Fire and Rescue Service.

"The reality is that the white paper shows nothing about how they would pay for these commitments. The Scottish government cannot claim it is going to spend what it will not have."

The unfunded measures, which will take effect after 24 March 2016, should voters back Scotland's independence in the referendum next year, also included providing 1,140 hours per year of childcare to all children from one year old to school age and cutting Air Passenger Duty (APD) by 50%.

It is also not clear where the money will come from to pay for the cost of lowering the pension age, increasing the national insurance employment allowance and returning Royal Mail in Scotland to public ownership, because of "insufficient detail put forward in the white paper".

Alexander said the analysis of the white paper, which was "consistent with the Autumn Statement 2013 forecasts and HMT Budget methodology" would add to the "fiscal challenge facing an independent Scotland", which, according to research from the Institute of Fiscal Studies, could bring an increase in basic rate income tax of eight percentage points, or £1,000 per basic rate tax payer.

Under the SNP's proposals in its white paper, an independent Scotland would "implement an improved and streamlined consumer protection and regulatory regime" for the financial services industry.

It would also overhaul its tax system, including reducing corporation tax by up to three percentage points, which the paper states "is essential to redress the unbalanced nature of the UK economy".

Categories: Economics / Markets

Topics: ScotlandUk

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