A NEWLY independent Scotland would face years of budget cuts and tax rises as it tried to get on top of a deficit that has ballooned since 2014, a leading think-tank has said.

The Institute for Government (IfG) warned there would be an immediate need for "difficult fiscal choices" to tackle the gap between public spending and tax revenues.

It said: "While Scotland has a smaller underlying deficit than Wales or Northern Ireland, its deficit is now much larger than it was at the time of the last independence referendum, raising more difficult questions about how - and how quickly - an independent Scottish government would reduce its spending or raise taxes."

The report was last night seized on by Unionist parties, who said it showed the SNP was being "reckless" in pushing for a second referendum in the absence of any updated economic plan of its own.

Nicola Sturgeon, who has said she wants Indyref2 by 2024, Covid permitting, admitted on Sunday that she had not modelled the impact of independence on incomes.

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The SNP's last economic plan for independence, done before Brexit and the pandemic, predicted it could take a decade of spending curbs to halve Scotland's deficit to 3 per cent.

However the IfG report said even Scotland's deficit in 2018/19, of nearer 8%, would cause significant issues, with the pandemic having a "lasting" effect on public finances.

The IfG said the calculations in the SNP's 2014 White Paper on Independence were no longer valid because of the collapse in North Sea oil revenue and the pandemic, and Scotland's "fiscal position is markedly weaker now".

In a study that looked at the deficits of Scotland, Wales and Northern Ireland, it said Scotland had the lowest funding gap of the three devolved nations, but still enjoyed significantly higher public spending per head than England because of Treasury transfers.

While the deficit per person in England in 2018/19 was £91, it was £2,543 in Scotland, £4,412 in Wales and £5,118 in Northern Ireland.

The IfG said: "In principle, both Scotland and Wales could function as independent countries.

"Similarly, a reunited Ireland could in principle be a vibrant, successful, small open economy. However, there would be difficult fiscal adjustments to be made in the years after secession to address the fiscal imbalances that each currently faces.

"The larger the deficit, the harder these choices will be."

It added: "There are many reasons why the people of Scotland or Wales might want to seek independence from the UK, or why the people of Northern Ireland might want to be part of a United Ireland.

"However, one cost of doing so would be that they would no longer be able to benefit from the redistribution of resources that currently takes place across the UK.

"The larger the deficit that they have is, the harder the case for independence becomes."

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To cut the deficit and stop debt spiralling, the IFG said a newly independent Scotland could impose a combination of spending cuts and tax rises - most likely on immovable assets such as land or property - along with launching policies to boost the economy.

However, even if Scotland pursued new economic growth policies with the powers of independence, these would take time to make a difference.

"This would be unlikely to happen quickly enough to avoid the necessity for difficult tax and spending choices after secession.

"Substantially boosting growth... would require a reversal of recent patterns of sluggish growth.

"The uncertainty and disruption [of] breaking away from an established fiscal, monetary and trading union could drag on growth."

Earlier this week, the Institute for Fiscal Studies estimated Scotland's deficit had grown to around 25% of GDP as a result of more spending and lower taxes in the pandemic.

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Gemma Tetlow, the author of the report and chief economist at the IfG, said: "Any advocates for breaking away from the UK must address the reality of the nations' current fiscal imbalances and the difficult policy choices these would necessitate after secession."

Tory MSP Maurice Golden said: "This respected independent thinktank lays bare the chilling economic reality of ripping Scotland out of the UK. When all focus should be on recovery and rebuilding, this is reckless beyond belief."

Labour MP Ian Murray, the shadow Scotland secretary, said: "Scotland clearly benefits financially from being part of the UK. Covid has shown that more than ever.

"And this report is just another that lays bare the truth of independence - that it would unleash austerity on a scale the Tories can only dream of."

Scottish Liberal Democrat MP Christine Jardine said: "The nationalists shouldn't be trusted with a piggy bank, never mind the tens of billions in trade that Scotland does with the rest of the UK."

However SNP Finance Secretary Kate Forbes said Scotland's wealth and resources meant there was "no reason whatsoever" it could not emulate the success of countries such as Denmark and Norway.

She said: "Every country in the world is dealing with exceptional public finance pressures as we recover from the pandemic. The UK last week saw its deficit rise to the highest level since 1946 - its national debt is now more than £2 trillion."