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HM Treasury analyse Scottish Government's deficit forecast

New analysis shows the Scottish Government’s deficit forecast is billions of pounds out of step with all other recent forecasts.

This was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government

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New analysis produced by the Treasury today shows the Scottish Government’s deficit forecast for the first year of independence is billions of pounds out of step with all other recent forecasts.

Scottish Secretary Alistair Carmichael said this was further evidence that Scottish Government Ministers will say anything to try and win the independence referendum.

The Treasury paper published today shows that the most recent forecasts from the Centre for Public Policy and the Regions (CPPR), the Institute of Fiscal Studies (IFS), Citi Group and HM Treasury all estimate Scotland’s deficit in 2016-17 at between 5.1 and 5.4% of GDP. The Scottish Government’s most cautious forecast is 3.2 per cent which is more than £3bn more optimistic than all the others.

Mr Carmichael said that Alex Salmond’s faith in higher oil revenues in the future was undermined by the fact that the Scottish Government’s independence white paper relied on a ‘forecast’ that predicted revenues of almost £7bn for 2012-13 when the actual figures had already been published by HM Revenue and Customs (HMRC) and the Scottish Government’s geographic share would be almost £1bn lower.

Alistair Carmichael said:

It is no surprise that Alex Salmond is the odd man out when it comes to predicting the deficit that would confront an independent Scotland. He will say anything to try and disguise the problems of independence. He will say anything to try and win this referendum.

I totally accept that people are suspicious when politicians start throwing figures around. All I am asking is that people in Scotland listen to what outside experts are saying. The Treasury forecasts are very much in line with three of the most recent studies from respected economic analysts. These analysts have no axe to grind and are simply offering their expert view.

Trust and credibility are vitally important in this debate. The Scottish Government don’t help their case when their white paper relies on an oil revenue forecast that has already proved to be over-optimistic in 2012-13 by almost £1 billion. That is not optimism. That is saying anything to try and win a referendum.’

Extracts from the Treasury paper published today:

The table below summarises recent forecasts of Scotland’s fiscal position in 2016-17. Most forecasts are published as the Scottish deficit as a share of Scottish GDP in 2016-17, but HM Treasury have also approximated the overall £s billion figure and what this means per Scottish person in 2016-17.

The Scottish Government’s forecast is its most cautious forecast of the 2016-17 deficit that was contained in its White Paper. At a deficit of 3.2 per cent of GDP (£5.5 billion or £1,020 per person) this forecast is almost 2 per cent of GDP and more than £3 billion more optimistic than any other forecast of the Scottish deficit in 2016-17 set out below.

Forecasting body Per cent of GDP £ billions £ per head
Scottish Government 3.2 5.5 1,020
Centre for Public Policy for Regions (CPPR) 5.1 8.8 1,630
Institute for Fiscal Studies (IFS) 5.2 8.9 1,660
HM Treasury 5.3 9.1 1,690
Citi Group 5.4 9.3 1,720

The Scottish Government’s least optimistic White Paper forecast for 16-17 used a North Sea scenario that forecast £6.9 billion for Scotland’s share of North Sea revenues in 2012-13, despite the fact that the total UK revenues had already been published by HMRC in April 2013 at £6.5 billion. The Scottish Government’s geographic share would give Scotland £800 million less than their £6.9 billion forecast at £6.1 billion, while in October 2013 HMRC’s experimental publication estimated Scotland’s geographic share in 2012-13 at £5.1 billion.

Published 11 March 2014