The Scottish government is facing a £1.7bn shortfall in public finances over the next five years, according to its own independent economic forecaster.

The Scottish Fiscal Commission predicts that reduced expectations for wage growth will result in a significant drop in income tax revenues, as Scotland’s economy lags behind the rest of the UK with growth remaining below 1% a year until 2023.



The forecast, described as “grim” by opposition politicians, also indicates an immediate £220m gap in the 2018-19 budget in comparison to projections set out in February. GDP growth will reach 0.9% by 2023, according to the independent body, rising by just 0.2% this year, lower than forecasts in December.



Commission chair Dame Susan Rice described the outlook for the growth as “subdued”.

“The drivers of this are modest population and productivity growth; with productivity forecast to improve slowly from the weak performance experienced over 2016 and 2017.”

Acknowledging that there could be “difficult years ahead”, the Scottish government’s finance secretary Derek Mackay insisted that the forecasts were “much closer to UK growth” when population change was stripped out, making the case for devolution of immigration controls.



Mackay, who was making his inaugural medium term fiscal statement as the forecasts were published, accused the UK chancellor of continuing needlessly with austerity, creating a “fiscal straitjacket” which was to blame for weak growth.

The annual statement is intended to allow for greater parliamentary scrutiny of the budget process in the light of Scotland’s newly devolved fiscal powers.

Mackay added: “This strategy clearly lays out the consequences of UK choices on Scotland’s public finances, including UK-imposed decisions on austerity, immigration policies that don’t suit Scotland, and taking us out of the single market through Brexit.”

But, responding to the statement in the Holyrood chamber on Thursday afternoon, the Scottish Conservative’s finance secretary Murdo Fraser said that Scotland’s poor growth predated the Brexit referendum vote.

“The SNP has obsessed with the constitution for years now, and we can see the impact of its neglect on areas like the economy in these figures.”

The new figures contrast with the report from the SNP’s sustainable growth commission, published last Friday, which suggested that Scotland should aim to match the 2.5% growth rate of other small wealthy countries such as Denmark or Finland within 10 years of independence.



The report also warned that Scotland would need “robust” controls on public spending to cut the country’s large deficit to less than 3% of day-to-day spending.

Referring to this, Scottish Labour’s finance spokesperson James Kelly said “last week we had the SNP cuts commission, today we have Derek Mackay’s cuts forecast”.

Mackay’s attacks on Tory austerity came the day after Nicola Sturgeon responded via Twitter to ongoing criticism of the proposals from within the pro-independence movement, insisting that the growth commission “explicitly rejects austerity”.

The long-awaited report, intended to offer a more convincing and realistic economic case for independence than the one thought to have scuppered the 2014 campaign, has attracted a wave of criticism from members of the wider Yes movement, most recently from the grassroots thinktank Common Weal which argues that plans to keep sterling for an indefinite period would leave a newly independent Scotland beholden to the UK’s financial markets.