Bill Jamieson: We don't have to be economic guinea pigs

Many revere Yanis Varoufakis for opposing austerity. Picture: Angelos Tzortzinis/Getty

Two pathways have been set out for Scotland. They are markedly divergent '“ but both deeply troubling. It would be comforting to dismiss them as extreme positions that can be safely ignored. But there is little doubt that uncomfortable truths lie ahead.

The first is an unsparing analysis from The Taxpayers’ Alliance. Its starting point is the latest set of GERS figures. At £14.8 billion, Scotland’s fiscal deficit last year was 9.5 per cent of Scottish GDP, more than twice the UK deficit, and higher than any other member of the EU, including Greece. This deficit has deteriorated over recent years. North Sea revenues have collapsed by £9.6 billion since 2011-12 and falling production means that revenue loss will never be recovered even if oil prices return to previous highs. Despite this collapse in revenues, Scotland’s public spending remains far in excess of England’s, running 20 per cent higher per head.

The declared wish of the SNP administration, should the UK opt to leave the Single Market, is to hold a second independence referendum and apply to become a full EU member. But to do so an independent Scotland would need to tackle its deficit. It would be subject to the rule that any deficit over 3 per cent of GDP is deemed excessive, requiring an agreed programme of fiscal retrenchment.

This, says the Taxpayers Alliance, could be achieved by tax increases. The basic rate of income tax could be increased from 20p to 39p. VAT could be doubled to 40 per cent. But such increases, it adds, would almost certainly prove undeliverable politically, and would be deeply damaging to Scotland’s economy.