AN independent Scotland would start life with a large budget deficit "substantially higher than the rest of the UK" and would face difficult choices to reduce it, a top economist has said. 

David Phillips, an associate director at the Institute for Fiscal Studies (IFS), said Scotland's underlying fiscal position has been "relatively weaker than the UK as a whole" since the fall in oil prices in the mid 2010s.

He said the coronavirus crisis has "blown a hole" in Scottish and UK finances, while a harder-than-expected Brexit has also raised tricky issues around the border with England.

Appearing on the BBC's Andrew Marr Show yesterday, Nicola Sturgeon said the impact of independence on people's incomes has not yet been modelled. 

She accepted independence would create a border with England if Scotland was in the EU. 

But she said the SNP wanted to "keep trade flowing across the England-Scotland border, that would be in the interests of Scotland as well and we would work to make sure that happened". 

Mr Phillips was asked about the public finances of an independent Scotland during an IFS briefing ahead of the Holyrood election on May 6.

He said: "I think clearly, for quite a while now, since the big fall in oil prices in the mid-2010s, Scotland's underlying fiscal position has been relatively weaker than the UK as a whole. 

"And that's because spending on public services and benefits is higher in Scotland than it is in the rest of the UK, but the taxes raised are actually slightly lower than in the rest of the UK. 

"You can't deny the fact that an independent Scotland would start life with a relatively high budget deficit, substantially higher than the rest of the UK. 

"The SNP's Growth Commission, three years ago now, recognised this and set up a plan to bring that deficit down by holding down growth in spending. 

"They didn't want to call it austerity, but it was effectively austerity."

Mr Phillips said a couple of things have changed since the Growth Commission report in 2018. 

The coronavirus crisis has "blown a hole" in Scottish and UK finances. 

He said: "That would mean we're having to do a fiscal tightening at a UK level. Scotland would have to do that added on top of the one that was already there.

"The other thing that's changed is it's become clear that Brexit is a harder Brexit than we thought, and I think that means the issues around the Border have become more tricky since 2018 as well."

He added: "It's clear than an independent Scotland would start life with a large deficit. It would need to get that down, and that would mean difficult choices. 

"That doesn't mean Scotland can't afford to be independent. Scotland's a relatively rich country. 

"But it would need to make sure that it cut its cloth to fit the size of its own purse, rather than having fiscal transfers from the rest of the UK."

SNP Finance Secretary Kate Forbes said: "When it comes to the finances of independence, as the IFS has said, Scotland is a rich country. However, we don't yet have full control over those many resources.  

"The Tory response to the last recession was to impose a decade of austerity on Scotland, and then at the height of the pandemic they imposed a hard Brexit on Scotland against our will - that shows that Scotland simply cannot afford to leave the key powers in the hands of Westminster."