An independent Scotland would require a significant cut in spending or increase in taxes, over and above that already announced by the UK government, in order to put their long-term public finances onto a sustainable footing. The scale of this fiscal tightening is likely to be greater than that required for the UK as a whole.

These are the main findings of new IFS research, funded by the Economic and Social Research Council (ESRC). The research uses a model of the UK’s and Scotland’s long-run public finances to project levels of public revenues and spending over the next 50 years, taking into account projected changes in the size and demographic structure of the population, in order to examine the long-term public finance challenge that would face the UK and Scotland. Even under the most optimistic scenario we consider, the long-run ‘fiscal gap’ in Scotland would be 1.9% of national income compared to 0.8% of national income for the UK as a whole.