‘We are in deficit be­cause we are part of the Union’


GERS, the Gov­ern­ment Ex­pen­di­ture and Rev­enue Scot­land pub­lished last week, has, as al­ways be­come a po­lit­i­cal foot­ball. No sur­prise, it was de­signed to be such. When it was first pub­lished by the Con­ser­va­tive Gov­ern­ment in 1992 GERS’ main role was to make the case against a Scot­tish Par­lia­ment. Oil rev­enues caused a prob­lem — so they al­lo­cated oil rev­enues to a new area of the UK called the UK Con­ti­nen­tal Shelf and we ended up with two sets of Scot­tish ac­counts: one al­lo­cat­ing North Sea rev­enues on a pop­u­la­tion share ba­sis, and the other in­clud­ing all of Scot­land’s oil.

I want to look at the key uses and the key flaws of GERS in the po­lit­i­cal de­bate, but first let’s look at what they said this year.

to­tal Scot­tish Gov­ern­ment rev­enue was £57.7 bil­lion, an in­crease of 6.3 per cent on the year be­fore,

Scot­land’s share of UK ex­pen­di­ture is around 9.2 per cent when we only have 8.2 per cent of UK pop­u­la­tion,

Rev­enue gen­er­ated per per­son in Scot­land was also £312 lower than the UK av­er­age,

North Sea Rev­enue in­creased to £208m 2016-17 from £56m the year be­fore,

Scot­land’s il­lus­tra­tive deficit was £13.2bn in 2016-17, equiv­a­lent to 8.3 per cent of Scot­land’s GDP an im­prove­ment on 9.3 per cent re­ported the year be­fore,

GDP in­creased from £155.6bn (2015-16) to £159.3bn (2016-17).

The good news is that GERS shows that Scot­land’s rev­enues have grown by 6.3 per cent in the face of low oil prices. The last quar­ter GDP fig­ures even show Scot­land’s econ­omy grow­ing four times faster than that of the UK.

It should also be noted the UK Gov­ern­ment has re­duced key oil taxes to ef­fec­tively zero and so the the drop in oil rev­enues is 50 per cent due to oil price and 50 per cent due to UK Gov­ern­ment pol­icy. Nor­way’s Gov­ern­ment gen­er­ated £11bn more in oil rev­enues than the UK.

GERS tells us what the fi­nances of Scot­land look like un­der the cur­rent con­sti­tu­tional ar­range­ments. They do not tell us what they would look like un­der the full fis­cal au­ton­omy of Labour’s Fed­er­al­ism plan or the SNP’s in­de­pen­dence plan. On reli­a­bil­ity, glob­ally renowned po­lit­i­cal econ­o­mist Richard Mur­phy has cor­rectly claimed that GERS data is not re­li­able enough to make po­lit­i­cal de­ci­sions on how to use de­volved pow­ers. His ra­tio­nale is that of the 26 in­come fig­ures quoted in GERS, 25 are es­ti­mated and there are no Scot­tish spe­cific in­come tax, cor­po­ra­tion tax, or na­tional in­sur­ance fig­ures. Scot­land (al­though tech­ni­cally a na­tion) op­er­ates as a re­gion of the UK. We have no bor­ders to the rest of the UK so we have se­vere dif­fi­culty col­lect­ing re­li­able data on things like ex­ports, and costs are cal­cu­lated on a UK ba­sis and then ap­plied to Scot­land’s ac­counts — and that is still an es­ti­mate and open to de­bate. For ex­am­ple, should you ap­ply a pop­u­la­tion share of the cost of De­fence to Scot­land ac­counts or a ge­o­graph­i­cal share? Well, as part of the UK it’s pop­u­la­tion share, but as an in­de­pen­dent na­tion you could save ap­prox­i­mately £1.5bn a year.

On the in­de­pen­dence is­sue, GERS in­di­cates what Scot­land’s share of sur­plus/deficit to GDP is as part of the UK, but does not show what that fig­ure would be as an in­de­pen­dent na­tion.

A key ques­tion for in­de­pen­dence sup­port­ers is — why, when Scot­land is a coun­try with an em­bar­rass­ment of eco­nomic ad­van­tages that any small to medium-sized in­de­pen­dent coun­try would give their left arm for, do we have a fi­nan­cial deficit greater than any other in­de­pen­dent Euro­pean na­tion of sim­i­lar size? Why,

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