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Scots to Need More Austerity Than U.K. If Independent, IFS Says

Nov. 18 (Bloomberg) -- Scotland would need to reduce spending or increase taxes more than the rest of the U.K. should the country become independent, the Institute for Fiscal Studies said in a report published today.

Higher public expenditure in Scotland can be compensated by North Sea oil, though the country will have to increase borrowing because of a likely drop in that revenue and demographic pressures, the IFS said. Without budget controls, Scotland’s net debt would rise above 100 percent of national income by the early 2030s, it said.

The required austerity measures would be in addition to those already announced by the U.K. government “to put their long-term public finances onto a sustainable footing,” the IFS said. “The scale of this fiscal tightening is likely to be greater than that required for the U.K. as a whole.”

Scotland will hold a referendum on independence on Sept. 18, 2014. A poll published this month showed support for breaking from the rest of the U.K. trailing that for the status quo by 18 percentage points. The Scottish government in Edinburgh, run by First Minister Alex Salmond and his Scottish National Party, will publish a policy paper about what an independent Scotland might look like on Nov. 26.

The SNP says Scotland would be better off managing its own finances. Based on growth rates in small independent nations between 1977 and 2007, gross domestic product per capita would have been 900 pounds ($1,450) higher, the Scottish government said in a report published today.

To contact the reporter on this story: Rodney Jefferson in Edinburgh at r.jefferson@bloomberg.net

To contact the editor responsible for this story: Eddie Buckle at ebuckle@bloomberg.net

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