Fall in North Sea oil revenues could raise borrowing levels for an independent Scotland

Dwindling North Sea oil revenues could mean that a newly independent Scotland will find itself failing to benefit from the upturn in the British economy and forced to borrow more in the short term, according to the Institute for Fiscal Studies (IFS).

While Britain is set to achieve a budget surplus in 2018-19, according to the Office for Budget Responsibility (OBR), the IFS has said that while Scotland could end up borrowing less over the medium term, the declining revenues from oil could mean that the country would face “higher borrowing over the next couple of years”.

Should the country vote for independence, Scotland would have to borrow the equivalent of 2.5% of GDP over 2018-19.

Paul Johnson, director of the IFS, said: “If the OBR is right then it looks like the gap between public spending and tax receipts will be bigger in Scotland than in the rest of the UK after 2012-13, even when Scotland is assigned most of the oil revenues.”

“In these circumstances even the very tight policies proposed by the current UK government which, if carried out, would take UK public finances back to balance by 2018-19, will not be enough to achieve budget balance in Scotland”.

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