SCOTLAND'S Finance Secretary has warned that any form of Brexit will be "hugely damaging" to Scotland's economy following the revelation that the least worst scenario in the event of a No-Deal Brexit will raise borrowing to around £100 billion.
The figure represents 4% of national income and Derek Mackay said the news reinforces recent Scottish Government analysis.
The UK Government is “adrift without any effective fiscal anchor", according to the Institute for Fiscal Studies (IFS) which said borrowing is set to top £50 billion next year
The figure could be half as much as what is needed under a “relatively benign” No-Deal Brexit.
The smaller sum is 2.3% of national income and more than double what the Office for Budget Responsibility forecast in March.
Borrowing of that level would breach the Government’s own fiscal mandate, but the IFS £100bn Brexit prediction would see debt reach almost 90% of national income for the first time in around 50 years.
Mackay said: “Any form of Brexit threatens to be hugely damaging to Scotland’s economy, and this IFS report shows that even the least worst impact of a ‘no deal’ Brexit would likely lead to borrowing approaching £100 billion, or 4% of national income.
“This reinforces recent Scottish Government analysis, which shows that leaving the EU without a deal would generate a significant economic shock which will result in recession. There is the potential for GDP in Scotland to contract by 2.5%-7% and for the level of unemployment in Scotland to increase by as much as 100,000.
“Extra spending in future years is by no means the same as reversing the spending cuts seen since 2010. Scottish public services have been constrained by a decade of UK austerity – Scotland’s discretionary resource budget in 2020-21 will be 2.8% lower in real terms than it was in 2010, even after the UK Spending Round.”
The IFS said Westminster is “in practice operating with no effective fiscal rules” and urged against the implementation of substantial and permanent net tax cuts in upcoming Budgets and Spending Reviews.
The findings come from the IFS Green Budget, which is funded by the Nuffield Foundation and Citi and includes analysis from the Institute for Government.
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IFS director Paul Johnson said: “We have a Conservative government set to increase day-to-day spending on public services to a level far closer to what Labour promised in its 2017 manifesto than to what was implied by the Conservative manifesto.
“And just since March, we have moved from a position where there looked to be plenty of headroom against next year’s borrowing target to one where that target is now on course to be missed.
“Given the extraordinary level of uncertainty and risks facing the economy and public finances, it should not be looking to offer further permanent overall tax giveaways in any forthcoming Budget.
“In the case of a No-deal Brexit, though, it should be implementing carefully targeted and temporary tax cuts and spending increases where it can effectively support the economy.”
An HM Treasury spokesperson said: “The Chancellor has already said we will be reviewing the fiscal framework as we turn the page on austerity. In so doing we will retain a fiscal anchor to public spending so that decisions are taken with a view to the long-term sustainability of the public finances.”
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