> ## Content Index > Fetch the complete content index at: https://www.peoplesfuture.scot/llms.txt > Use this file to discover other available public pages before exploring further. # 3. Public Finances, Debt, Taxation and Wealth Fund - URL: https://www.peoplesfuture.scot/3-public-finances-debt-taxation-and-wealth-fund/ - Published: 2026-08-18T16:36:13.000Z - Updated: 2026-08-18T16:36:13.000Z - Description: The public finances are where independence meets arithmetic. Scotland would inherit a challenging fiscal starting point. - Author: The Peoples Future Scotland - Tags: The Independence Debate The public finances are where independence meets arithmetic. Scotland would inherit a challenging fiscal starting point. Official notional figures (GERS) show a large net fiscal deficit as a share of GDP under current arrangements. Independence would change the composition of revenue and spending, add a negotiated share of UK debt, and require new institutions — but it would not automatically erase a gap of that order. Closing it requires rules, independent scrutiny, a published multi-year plan, and a willingness to prioritise. Growth and efficiency matter; they are not a substitute for a credible path. This section sets out that path. The positions are achievable and grounded in official data, international practice for debt allocation and fiscal frameworks, and the market credibility required of a new sovereign issuer. They align with the monetary framework in Part 2: under sterlingisation, fiscal discipline carries more of the confidence burden because monetary policy is external and lender-of-last-resort capacity is limited. A large opening deficit is a fact that must be confronted with institutions and a transparent plan, not optimism. Full tax powers and a Scottish Wealth Fund are long-term tools; disciplined fiscal management is what makes them usable. Borrowing will initially cost more than UK gilts; the premium can be narrowed by delivery, not by denial. --- ### **3.1 Opening fiscal position and structural deficit** Under current arrangements, the notional net fiscal balance (GERS 2024-25) shows a deficit of approximately £26.2 billion, or 11.6% of GDP (including a geographic share of North Sea revenue). Excluding the North Sea, the figure is higher. This is the inherited starting point. The actual post-independence deficit would depend on policy choices, growth, the debt-and-asset settlement, and the end of UK-wide pooling and sharing. Closing a gap of this scale requires a multi-year programme of prioritisation, efficiency and growth; it cannot be wished away. --- ### **3.2 Allocation of UK national debt** Existing UK debt remains a legal obligation of the continuing United Kingdom. Scotland would take on a fair and proportionate share, or an equivalent annual contribution, through negotiation as part of a comprehensive assets-and-liabilities settlement. Population share is a common international reference point; historic contributions, resource revenues and the division of assets would also be relevant. The outcome must be transparent and sustainable for both sides. A clean agreement supports credibility; a prolonged dispute damages it. --- ### **3.3 Expected credit rating and borrowing costs** A newly independent Scotland would initially pay a premium over UK gilt yields. Independent estimates have typically put this in the range of 0.4–1 percentage points or more in the early years, reflecting the lack of a sovereign track record, smaller market size, sterlingisation constraints, the fiscal starting point and transition uncertainty. Strong fiscal rules, independent institutions, a credible medium-term plan and an orderly settlement are the main ways to minimise the premium. High ratings under devolution do not automatically transfer to a sovereign rating. Credibility is earned. --- ### **3.4 Legislated fiscal rules from day one** Binding fiscal rules would be legislated before or on Independence Day: a path to bring the structural deficit down to a sustainable level (commonly targeted around or below 3% of GDP over a defined period), a debt stabilisation or reduction objective, and clear borrowing limits. The rules would be transparent, independently monitored, and difficult to change without a parliamentary super-majority or external review. With a large opening deficit and an initial borrowing premium, such rules are foundational — not optional decoration. --- ### **3.5 Independent fiscal institution** The existing Scottish Fiscal Commission would be strengthened into a fully independent fiscal institution with a statutory mandate to produce independent forecasts, assess the government’s fiscal plans, judge compliance with the fiscal rules, and analyse long-term sustainability. Its assessments would be public and embedded in the budget process. Independence would be legally protected. Scrutiny would be independent, transparent, and unavoidable. The government chooses policy; it does not choose whether to publish the independent arithmetic. --- ### **3.6 Scottish Wealth Fund – rules and governance** A Scottish Wealth Fund would convert temporary resource revenues into permanent national capital. It would be capitalised mainly from oil, gas and other resource income, plus any agreed asset transfers. Governance would follow the Norwegian model: strict legal rules on contributions and withdrawals (only a sustainable percentage of the fund’s value available for spending), independent operational management, and political oversight limited to the mandate and ethical guidelines. The purpose is intergenerational equity, not short-term budget support. The fund will take time to reach meaningful scale; high early contribution rates and durable rules are part of the design. --- ### **3.7 Full tax powers and system design** Independence would give Scotland full control over all major taxes. The system would be redesigned for simplicity, competitiveness, revenue stability and fairness, with a broad base capable of funding public services sustainably. Changes would be phased, with clear transitional rules so that taxpayers face continuity rather than disruption on day one. Tax policy would operate inside the fiscal rules and under independent scrutiny. Full powers bring opportunity and responsibility: the power to improve the system, and the duty to raise the revenue sustainable services require. --- ### **3.8 Medium-term fiscal plan** A published multi-year fiscal plan would show how the opening deficit is brought down to a sustainable level. It would combine economic growth, public-sector efficiency and prioritisation, and, where needed, explicit tax and spending measures. It would not assume painless closure through growth alone. The plan would be independently assessed, updated every year, and tied directly to the legislated fiscal rules. Realism about scale and time underpins credibility. Deliberate, sequenced policy closes the gap — not optimism. --- Taken together, these eight positions define a fiscal regime built for a hard starting point: state the inherited deficit without softening; negotiate a fair debt share; expect and manage a sovereign borrowing premium; bind policy with legislated rules; police those rules through an independent institution; save resource revenues in a Wealth Fund rather than spend them as permanent income; use full tax powers inside the framework; and publish a multi-year plan that shows the path in numbers. Markets and the public will judge independence partly on whether this design is delivered. Denial of the opening position, soft rules, or a plan that closes the gap only on optimistic assumptions would raise borrowing costs and shorten the time before difficult choices return under worse conditions. Discipline, transparency and sequenced adjustment are the alternative. That is the fiscal foundation on which defence, borders, energy and the rest of the prospectus must also rest.