Economics of Independence

Business for Scotland comments on rehashed IFS report on Scotland

IFS rehashing old reports with old mistakes.

IFS rehashing old reports with old mistakes.

Today’s Institute of Fiscal Studies report on the fiscal implications of Scottish independence fails to take into account the impact of independence on Scotland’s economy. As with many Westminster centric think tanks they lack ambition for and an in depth understanding of Scotland’s economy.

The report understates the central purpose of Scottish independence – that bespoke business and economic policies for Scotland implemented and managed from Scotland will grow Scotland’s economy, while reducing the costs of Westminster.

The IFS claim that on a projection of current decisions – the majority of which are determined at Westminster – Scotland would face sizeable fiscal challenges. However, an independent Scotland would make different and better decisions because the policies that make London and the South East wealthier are the same ones that make Scotland poorer, slow our economic growth and increase the costs of government.

– This is a rehash of last year’s report which identified that Scotland pays far more tax per person than the UK average and is therefore is in a strong economic position.

– The evidence demonstrates that Scotland is one of the world’s wealthiest nations. Scotland’s Gross Domestic Product is 14th highest is the developed world compared to the UK at 18th.

– The economic powers of independence present numerous opportunities to improve Scotland’s position. Control over taxation, labour rights, immigration policy, industrial policy and international promotion can improve Scotland’s economic prospects.

– Even the IFS report recognised that a positive immigration system for Scotland can improve Scotland’s fiscal position by over £65 billion in future decades.

– The IFS report relies on offshore revenue predictions from the UK Government Office for Budgetary Responsibility. Alistair Darling, Chair of the No Campaign, described the OBR as “part of the Conservative Party”. Their politically motivated projections present a more negative picture of Scotland’s economy than the record investment in offshore services suggest.

– Scotland faces a choice between two economies. With a Yes vote Scotland will gain the opportunity to reshape and improve the economy, to implement bespoke policies to encourage growth and entrepreneurialism rather than the one size fits all policies handed down from Westminster.  With a No vote Scotland will continue to depend on Westminster thinking, with the resulting stagnation predicted by the Institute of Fiscal Studies.

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About the author

Gordon MacIntyre-Kemp

Gordon MacIntyre-Kemp is the Founder and Chief Executive of Business for Scotland. Before becoming CEO of Business for Scotland Gordon ran a business strategy and social media, sales & marketing consultancy.

With a degree in business, marketing and economics, Gordon has worked as an economic development planning professional, and in marketing roles specialising in pricing modelling and promotional evaluation for global companies (including P&G).

Gordon benefits (not suffers) from dyslexia, and is a proponent of the emerging New Economics School. Gordon contributes articles to Business for Scotland, The National and Believe in Scotland.


  • The IFS basically say – despite Scotland having a lower deficit and borrowing rate in each of last 34 years – somehow we are about to implode after Independence and come out of deficit after the UK.

    Projections going forward are only as good as the figures and assumptions you put into the calculations. The IFS make the following mistakes in their projections. You don’t have to scratch too far to see the failings of their methodology. Trainee solicitors have been sacked for less.

    1. They use a price for Oil of well under 100$ a barrel (OBR figure), the price is currently around $108- UK Government department has a $128 projection. OECD over 140$. In any event, without Oil our economy is the same size per head as rUK – with it we are almost 20% bigger per head.

    2. They add up all the costs of Independence like Childcare, Air passenger Duty abolition, Corporation Tax decrease – but take no account of the significant growth these policies will have for the economy; like more business locating in Scotland, more people coming to Scotland, meaning more people in jobs paying taxes/spending VAT etc etc etc etc.

    3. They say Oil revenues will continue to decline; this despite record Investment in the North Sea last year (over £14 billion)
    . The IFS position on declining Oil revenues directly contradicts the UK Government’s own Wood report, which the UK Government lauded and accepted in full. Private companies don’t invest record amounts in any given year, unless there is greater profits to be made over the longer term. More profits = more taxation for Scotland under Independence. The Wood reports states that Oil revenues will rise over the next few years – why is that input not used in the IFS projections??

    4.No mention of savings of Independence – Defence saving of £1bn/oversized government department waste which we pay our share of/Trident/billions in interest payments for debt not acquired by Scotland – we have always borrowed less than the UK average but get charged a population share of the interest on the debt. i.e. sub prime rates.

    If you make these failings, stick it all into a calculator, of course you will paint a misleading picture. Do not be fooled. How can our figures be better in each of the last 34 years – yet are projected to be worse now and forever – nonsense. Are we really that thick??

    And on top of that, we are, of course, starting a game of Sim City from scratch – in a desert.

    Don’t be fooled.

    Richard Arkless

  • The IFS describes itself as a leading MICROeconomic think tank. Their latest analysis, and their previous contributions to the independence debate, ignore the MACROeconomic decisions that an independent Scotland would make.

    Funding for their work comes indirectly from Vince Cable’s department in a way that some might interpret as an attempt to disguise the true source of the funding. The IFS uses politically motivated assumptions from the OBR as part of the basis for their research. The assertion that they are an independent think tank is, at best, questionable.

    The high level of credibility attached to the IFS’s work by many commentators is therefore misplaced.

  • Good points which must be conveyed to not only the Business community but very much to the ‘man-in-the-street’.

    This gentleman (the ‘am-in-the-street’) has been told so often through main stream media that the ‘oil is running out’, surely he needs to be told that will happen even if we stayed together but what he is not being told by either side (and for obvious reasons, particularly ‘NO’) that the riches to the West of Scotland are still to be tapped once we get rid of Trident – which seems to only be able to happen if we vote YES.

    • Great point Ian! There is simply so much material like this to hand for the BfS and Yes campaigns to share as widely as possible over the next 99 days! It is imperative that people know how biased the IFS and the other so-called think tanks really are! But how do we get this material to everyone in Scotland when the bulk of the press are so unwilling to publicise our data!

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