Scotland politics

Scottish independence: Post-Yes Scotland 'to end austerity'

saltire piggy bank Image copyright Getty Images
Image caption The Scottish government believes increasing public spending will help encourage economic growth after independence

Scotland would borrow billions of pounds in the first few years of independence in a bid to kick start the economy and end austerity, the Scottish government has confirmed.

The SNP administration has previously proposed increasing public spending by 3% in each of the first three years

It has now confirmed the extra money would be raised through borrowing.

Chancellor George Osborne's austerity drive has limited UK public spending increases to 1% per year.

A recent Scottish government paper on Scotland's public finances said its proposals for a 3% rise would require an independent Scotland to borrow £2.4bn in 2018-19.

Under the SNP's timetable, the country would become independent on 24 March 2016 if there is a "Yes" vote in the referendum on 18 September.

The paper did not say how much would be borrowed in the first two years after independence.

A Scottish government spokeswoman said: "We have made clear that we oppose Westminster's austerity measures and believe the best way to reduce the deficit in the long term is to invest in public spending, to grow the economy and reduce the deficit in a sustainable way, ensuring there is less need to borrow in the future by boosting revenues in the long term.

"We believe that investing in public spending can bring real benefits to the economy and our public finance projections include a 3% increase in public spending funded by additional borrowing in order to ensure public spending keeps pace with inflation - in contrast to UK government plans for a 1% increase which would be a real terms cut.

"Even with a 3% increase in spending growth, Scotland's deficit is forecast to fall to 2.2% of GDP in 2018-19, significantly below the current level of 8.3% and would ensure that the country's debt was falling as a share of GDP."

In an interview with the Herald newspaper, Finance Secretary John Swinney said the Scottish government's proposals showed a "willingness to invest in the economy" and to "encourage growth and dynamism".

The Herald quoted Mr Swinney as saying the UK's refusal to borrow more in order to encourage recovery in 2010 had caused a "great deal of hardship" for the Scottish economy.

He added: "Economic performance might be better now, and I can't deny it's better than it has been, but it was shocking in 2011 and 2012 and shockingly worse than was predicted by the Office for Budget Responsibility.

"There are choices to be made. My point about austerity is that the Labour Party, the Liberals, the Conservatives are all signed up to a UK ­austerity agenda.

"What an independent Scotland would have to do, or would have the choice to do, is do things differently and to make some of those choices I would like to have seen in 2010 to encourage growth and dynamism."

Reducing spending

In its White Paper on independence, the Scottish government said an independent Scotland would save £600m through measures such as reducing spending on defence and security, ending the married couple's allowance and no longer contributing to the cost of running the Westminster Parliament.

It intends to use these savings to fund a range of policies including providing 600 hours of childcare to around half of two years olds and abolishing what it described as the "bedroom tax".

Referring to Mr Swinney's comments in the Herald, Scottish Labour's finance spokesman Iain Gray - speaking for the pro-Union Better Together campaign - said: "It looks like Honest John has struck again by admitting that we would need to borrow more if we leave the UK.

"If John Swinney has a plan to borrow more to pay for the cost of independence then he should publish this in full. The Scottish government must have made an assessment of tax, spending, borrowing and start-up costs in a separate Scotland. People in Scotland deserve to see this.

"The nationalists need to be honest about the impact of this admission on their plans for an oil fund. If we would need to borrow more to pay for everyday public services, there is no sense in borrowing to save. It would be like using the credit card to invest in a savings account.

"As part of the UK we can have the best of both worlds for Scotland. We can have a strong Scottish Parliament, with more powers for Scotland guaranteed; and we can benefit from the strength, security and stability of being part of the larger UK economy. Only separation puts that at risk, which is why we should say No Thanks in September."