Scottish independence would bring five years of cuts, says SNP MP

Scotland could face five years of 'painful' budget cuts if it votes for independence in a post-Brexit referendum, an SNP MP involved in planning for a new Scottish currency has said.

By The Newsroom Tuesday, 19th July 2016, 8:47 pm Updated Tuesday, 19th July 2016, 9:47 pm

The Scottish Parliament, with the pro-independence Indy Camp settlement in the foreground. An SNP MP has admitted that an independent Scotland would face five years of painful budget cuts. Picture: PA

George Kerevan, the party’s representative on the Commons Treasury select committee, said in an article for London financial newspaper City AM that the Scottish Government would need to cut spending to deal with the economic consequences of leaving the EU.

Mr Kerevan is one of three SNP MPs examining options to create a separate ‘Scottish pound’ in the event of a second independence vote in order to avoid having to join the euro as a new member of the EU. The former economist said a new Scottish currency pegged to sterling would require the government to “cut its budget coat to fit its fiscal means” in order to reassure foreign exchange markets.

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The SNP’s stance on currency was considered a major weakness during the 2014 referendum, when nationalists insisted on a Sterling currency union with the rest of the UK despite the possible loss of sovereignty on monetary policy and budget decisions.

Even before the vote to leave the EU, the Institute for Fiscal Studies warned falling oil prices mean Scotland faces a budget deficit of six per cent of GDP, or £12.8 billion, by 2021.

“Scotland’s post-independence fiscal consolidation should take only five years (one parliamentary cycle), lifting her economy on to a high productivity, high growth path by shifting resources from consumption to investment,” Mr Kerevan wrote, adding that it would be “painful in the immediate short term”.

An SNP spokesman said the party’s record in opposing austerity was “impeccable” and that an independent Scotland would “make its own spending choices”.

Scottish currency pegged to sterling would require the government to “cut its budget coat to fit its fiscal means” in order to reassure foreign exchange markets.

The SNP’s stance on currency was considered a major weakness during the 2014 referendum, when nationalists insisted on a Sterling currency union with the rest of the UK despite the possible loss of sovereignty on monetary policy and budget decisions.

Even before the vote to leave the EU, the Institute for Fiscal Studies warned falling oil prices mean Scotland faces a budget deficit of six per cent of GDP, or £12.8 billion, by 2021.

“Scotland’s post-independence fiscal consolidation should take only five years (one parliamentary cycle), lifting her economy on to a high productivity, high growth path by shifting resources from consumption to investment,” Mr Kerevan wrote, adding that it would be “painful in the immediate short term”.