News story

Scottish government challenged to set out start costs for independence

Independent research based on Quebec setting up a new state estimates that it could cost up to one percent of a country’s GDP to establish the new systems required to run a newly independent state.

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

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The Treasury has challenged the Scottish government to publish estimates for the cost of setting up an independent Scotland.

Up to now, the Scottish government have failed to provide any costs for either setting up or running a new independent state, and they have also failed to outline how these costs would be met.

Independent research based on Quebec setting up a new state estimates that it could cost up to one percent of a country’s GDP to establish the new systems required to run a newly independent state.

Treasury analysis published this week will show that in Scotland’s case, one percent of its GDP would see taxpayers face a £1.5billion tax bill – equivalent to £600 per household.

But, with the Scottish government estimating roughly 180 public bodies will need to be established, the costs are likely to be far greater.

The Institute for Government (IfG) and the London School of Economics (LSE) have published independent analysis which puts the average cost of setting up a new policy department at £15 million. Applying this to the 180 departments the Scottish government states it would need could see Scottish taxpayers fork out £2.7bn.

Chief Secretary to the Treasury, Danny Alexander, said:

The Scottish government is trying to leave the UK but it won’t tell anyone how much the set up surcharge is for an independent Scotland.

As part of the UK, Scotland gains from a strong and stable tax and benefits system and our comprehensive analysis, published this week, sets out how much better off Scottish taxpayers are, that’s why we’re better off together.

While the UK government has not published its own estimate, it has already published analysis which calculates that a new benefit system could cost £400 million alone, and setting up a new tax system could be as much as £562 million.

Comparing with other countries, a report by the Institute of Chartered Accountants Scotland (ICAS) published on Tuesday 20 May 2014 estimates the cost of setting up a new tax system alone in an independent Scottish state could be ‘significantly greater’ than New Zealand – which is currently undergoing less complex changes but whose costs are around £750m.

An independent Scotland would need a new welfare department, a significantly expanded tax collection authority, a debt management agency, a security and intelligence agency, a new Scottish defence headquarters and economic regulators such as the Competition and Markets Authority, a financial regulator, a pensions regulator, transport organisations such as the Driver and Vehicle Licensing Agency and a passport office amongst others.

Published 26 May 2014