31/10/2013 09:07 GMT | Updated 31/10/2013 09:11 GMT

An Independent Scotland Could Be Forced To Hike Taxes, Warns IFS

UNITED KINGDOM - JANUARY 31: Alex Salmon, Leader of the Scottish National Party poses with the Saltire flag, the national flag of Scotland in the background at their headquarters in Edinburgh, Scotland, U.K., Tuesday, Jan. 30, 2007. As if Chancellor of the Exchequer Gordon Brown didn't have enough to worry about, his Scottish homeland may be about to vote for a party that wants to disunite the United Kingdom. (Photo by Mike Wilkinson/Bloomberg via Getty Images)

Scotland could be forced to put up taxes if it wins independence in order to fill a black hole in its budget, experts have warned.

The Institute for Fiscal Studies, an independent think-tank, said that an independent Scotland could be forced by underwhelming oil revenue streams to impose "significant" tax increases to fill "a substantial fiscal gap".

This comes alongside a report from Glasgow University's Centre for Public Policy for Regions which warned that an independent Scotland would face greater fiscal pressure.

The CPPR said: “Unless conditions affecting the North Sea improve significantly for the better in the future, then moving to a position of independence would most likely lead to a small net loss in government funds.”


The IFS estimated that a one percent point hike in all income tax rates, or in the main value added tax rates, could raise about £430 million in Scotland. It calculated that £2.5 billion of tax rises, or cuts, would be needed during 2016-2017 and 2017-2018 to match the UK government's plans.

In order to offset an expected decline in North Sea oil revenues as forecast by the Office for Budget Responsibility by 2017-2018, the Scottish government would need to raise another £3.4bn, according to the IFS.

The IFS said: “There would be a strong case to focus taxes more on immobile tax bases such as property. This would involve a reversal of longstanding policy which has seen council tax rates in Scotland fall well below English levels.”

The IFS' analysis comes after former prime minister Tony Blair urged the United Kingdom to "stick together".

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