SCOTLAND faces a series of “fiscal shocks” after Brexit, with a potential drop in tax revenue threatening the delivery of services, public finance experts have warned.
The Chartered Institute of Public Finance and Accounting (Cipfa) said Scotland was “significantly vulnerable” to the impact of Brexit and had to plan for it now.
The risk also mean it is was important for the Scottish Government to influence the Brexit talks between the UK and the 27 EU nations, Cipfa said.
It highlighted Scotland’s “disproportionate benefit from EU funding”, which is expected to decline after 2020, and its reliance on EU migrants to bolster the workforce.
The SNP government said the report underlined the “danger” of the UK government’s plans.
Nicola Sturgeon and Welsh First Minister Carwyn Jones will meet in Edinburgh today to discuss how their governments respond to the Westminster legislation for leaving the EU.
Ms Sturgeon said the EU (Withdrawal) Bill was a “power grab”, with powers in devolved areas being repatriated from Brussels to London instead of Edinburgh, Cardiff and Belfast.
She said: “As it stands, it is inconceivable that we would recommend that the Scottish Parliament gives its consent to the legislation.
“We are willing to talk constructively with the UK Government on future arrangements. But this has to be on the basis of agreement and partnership, not imposition.”
Mr Jones added: “Our position is clear and unequivocal - the Withdrawal Bill flies in the face of devolution and we cannot accept it in its current form.
“By speaking with one voice, we will make it clear that the UK Government cannot simply impose its will on the other constituent parts of the UK.”
The Cipfa report, submitted to Holyrood’s Finance Committee, said Scottish GDP could fall by up to £11.2bn by 2030, with tax down £1.7bn and £3.7bn annually.
However it acknowledged it was “challenging” to be definitive at this point.
It also warned a share of the Brexit “divorce bill” could fall on the devolved administrations, and said new funding mechanisms for farmers needed to be in place before Brexit.
It urged Scottish ministers to consider the impact during its annual budget process, and look at policy and tax measures that could help overcome any loss in income.
Don Peebles, head of CIPFA Scotland, said: “Scottish public spending is significantly vulnerable to the impacts of Brexit.
“As it is likely that many of the fiscal risks predicted will be realised in future years, the Scottish Government must begin to budget for Brexit so that it will be in the best position to sustain any financial shocks.
“Considering the impact of Brexit may be keenly felt in Scotland, it is important that the Scottish Government has an influence on the negotiations to ensure any Brexit deal works for its public services.”
Finance Secretary Derek Mackay said: "This report further highlights the danger posed by the UK Government's extreme Brexit plans, which threaten jobs, investment and living standards.
"Leaving the European single market and customs union threatens 80,000 Scottish jobs over a decade and could cost our economy more than £11 billion a year by 2030.
"We welcome this report's view - supported by many others, including leading business voices - that the Scottish Government should have a direct role in Brexit negotiations, and we will continue to press the UK Government on that issue."
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