Start-up costs for independent Scotland could reach £2.5bn

The Centre for Business and Economic Research estimated start-up costs for an independent Scotland could reach £2.5bn, more than 10 times the figure set out by first minister Alex Salmond.

Great divergence has already emerged surrounding the costs of setting up an independent Scotland. The UK Treasury puts the total cost at £1.5bn while the Scottish Government, which opted not to publish figures required to go independent, has argued that breaking away from the UK will cost just £250m.

But a CEBR report commissioned by the Sunday Times has estimated it could cost Scotland up to £2.5bn to become an independent country.

Key figures in the report include £1bn required for creating new tax and welfare systems.The set-up of new government departments such as the Scottish foreign office is likely to cost around £450m, according to the report.

Scotland would also have to borrow around £12bn a year, the report says, or opt to raise taxes or drastically cut spending in order to fill the gap between its existing public spending and taxes raised in country.

The possibility that Scotland may have to create its own currency, which the report believes is the most likely long-term solution for Scotland’s currency along with joining the euro, would result in a “huge” one-off cost of £2bn for Scottish taxpayers on top of the £2.5bn figure.

The alternative option of sharing the pound in a formal currency union would require “fairly painless set-up costs”, according to the report.

Unilaterally using the pound would result in “comparatively insignificant costs” too, the report adds, although this is only likely to be a temporary solution before the country is forced to create its own currency or adopt the euro.

CEBR economist and author of the report Sam Alderson argues establishing an independent Scotland “isn’t going to be cheap” but desrcibes these costs as “manageable.”

He says: “The figure of £2.4bn, whilst it is large, represents less than 2 per cent of Scottish GDP and will not fall upon a newly formed government in one lump sum but will be spread across the best part of a decade.

“It is likely the costs involved in establishing the bodies, systems, processes and so on required to function as an independent state will eventually be recouped because of cost savings that could be produced through eliminating the costs arising from the complexities involved across various UK systems – savings incurred because of the more simple process of managing a smaller state and significant savings in areas such as defence.”