The impact of the pandemic has had a severe impact on Scotland’s finances, with its annual GDP deficit projected to be as high as 28% this year due to the economic damage from the pandemic.
Scotland was kept afloat during the past year thanks to an additional £12 billion cash injection by the UK Treasury, with billions more pledged following the March budget to help Scottish businesses and families get through the crisis.
Ahead of Scotland’s crunch local elections in May, the SNP are hoping to claim a majority to push forward a new vote for independence. However, Scotland’s financial distress and reliance on the UK taxpayer to finance essential services during the pandemic has put it in a fragile economic state, and without UK support, Scotland would have faced a severe financial crisis.
With the SNP’s ambitions to rejoin the EU, member deficits have to be around 3% before they can be admitted (although this figure is likely to be raised following the pandemic’s impact), with Scotland hovering at 28%, it would have to make drastic cuts to services and spending before it could be admitted – a process that could take 10 years.
After record borrowing for the UK treasury, it estimated that it will take several decades for Scotland and the rest of Britain to pay back the huge bill accrued since the pandemic hit.
With political parties making economic arguments for and against independence, the reality is that Scotland will have to make difficult decisions on public spending if it wants to leave the UK and adopt the euro as a member of the European Union.