The result of the EU referendum left a sour taste in the mouths of the Scottish people. The country voted to remain part of the European Union, but will be part of Brexit nonetheless.
That prompted First Minister Nicola Sturgeon to raise the possibility of another referendum on Scottish independence from the United Kingdom.
The latest figures on Scottish finances have raised huge doubts over the Scottish government’s ability to afford independence.
Official figures showed a £15 billion deficit in the Scottish government coffers for 2015. It comes after the plunge in oil prices, which started in the summer of 2014, caused an unprecedented drop in revenue. Scotland’s share of tax revenues from North Sea oil companies was utterly obliterated, from £1.8bn to just £60m.
At 9.5% as a share of its GDP, Scotland’s deficit was actually more than double the UK’s, which was roughly 4% of GDP for the financial year.
For decades, North Sea oil tax revenues had pushed Scotland’s tax receipts per person above the UK average. But in the 2015/16 financial year, it fell £400 below the British average. In fact, the Scottish and UK governments spent £1,200 per head on public services in Scotland, but recouped just £400 in tax receipts per person.
Nicola Sturgeon said the country had “suffered an economic shock, which has impact on our fiscal position”.
She added: “It is a challenge we have had for some time now – how to grow and diversify our onshore economy.”
In April, two separate surveys appeared to suggest that the Scottish economy was ‘getting worse’. In March, the Institute of Fiscal Studies (IFS) warned that the Scottish government is facing a deficit three times higher than the UK’s, which which effectively make independence impossible to afford. Closing the deficit, as we heard George Osborne say many times during his six-year stint as Chancellor, would require Ms Sturgeon and her Scottish National Party (SNP) to introduce huge spending cuts, or big tax hikes. There’s one big problem with that, however, the SNP is an anti-austerity party.
The Fraser of Allander Institute, a think-tank part of of Strathclyde University, said: “It is simply not possible to operate under independence with a deficit at this scale – full stop.”
It added: “The Scottish government needs to set out the tough choices that it would make alongside a detailed and comprehensive plan for how it would manage the public finances under independence. This won’t be easy, but is essential.”