An independent Scotland could face deeper cuts to public spending than the rest of the UK, despite North Sea oil and gas revenues, the widely respected Institute for Fiscal Studies (IFS) has concluded.
At present, public spending per head in Scotland is £1,200 higher than the rest of the UK, but household incomes are very similar to the UK norm. The IFS concluded that there is potentially enough oil and gas in the North Sea to support Scotland's higher public spending for a short time, but over the long run the story could be very different.
"Higher public spending than the UK average could be covered by oil and gas revenues if these are assigned on a geographic basis. In the longer run the loss of these revenues would lead to tougher choices than those faced by the UK as a whole," David Phillips, joint author of the report, said.
The IFS report also warned that North Sea revenues were historically very "volatile" and that an independent Scotland could start life with a debt to GDP ratio of close to 70 per cent.
The IFS report will come as a blow to the Scottish National Party government of Alex Salmond, which has long maintained that North Sea revenues will pay for its more extensive public services. It follows a row over whether or not an independent Scotland would be automatically admitted to the European Union or have to apply.