The Chartered Institute of Public Finance and Accountancy (CIFPA) Scotland has today released a substantial report The Scottish Referendum: Scotland’s future in the balance which addresses tough questions around the future financing of an independent Scotland.
The report for the first time considers what a balance sheet for the current devolved Scottish public sector might look like and examines in detail the questions around Scotland’s current financial position and the future financial sustainability of Scotland.
As Scotland is asked to vote on whether it should remain as part of the UK or whether it should become independent, CIPFA believes that the public deserves more transparent and understandable data on Scotland’s finances.
Speaking on the report Don Peebles, Head of CIPFA Scotland said:
“CIPFA thinks that the decision the Scottish people are being asked to take is vitally important and needs to be supported by financial information that is readily understandable.
“A balance sheet for the Scottish public sector would provide a starting point that would help voters to understand clearly what we know about where Scotland’s finances are now, but also where further information needs to be provided.
“Our hope is that this report helps to shed light on the debate so as to better inform voters on all sides of the argument.”
CIPFA Scotland’s report highlights three important points:
- That while devolution has led to significant divergence in policy choices between Scotland and the rest of the UK, the current UK financial reporting framework does not enable the financial position of a devolved Scotland’s public sector to be separately reported. This has led to a lack of clear information and has hindered the production of a clear picture of a devolved Scotland’s financial position.
- Despite this lack of data CIPFA has for the first time considered what balance sheet for Scotland’s devolved public sector would look like. This estimates that the devolved Scottish public sector has assets of around £84bn and liabilities of £100bn. This means that the overall position of the devolved Scottish public sector is a net liability of around £16 billion. However any post-independence negotiation around the division of public sector assets and liabilities would significantly impact upon this balance sheet.
- When considering the future financial sustainability of an independent Scotland CIPFA has analysed that forecasted tax revenues would not match spending, suggesting there will be a shortfall, even without taking into account factors likely to impact significantly on the financial sustainability of an independent Scotland. These would include North Sea revenues, the outcome of negotiations on the division of assets and liabilities, and future debt interest costs.
CIPFA Scotland’s report concludes that an independent Scotland’s public sector would face similar challenges to the rest of the UK in terms of financial sustainability going forwards.
Importantly as a sovereign state an independent Scottish government would need to use the financial tools and levers available to it, to make decisions on taxation, spending and borrowing in order to meet these challenges and ensure that Scottish public services were affordable and sustainable for future generations.
A copy of the report The Scottish Referendum: Scotland’s future in the balance can be downloaded from the CIPFA website: http://www.cipfa.org/regions/scotland