analysis

The annual Government Expenditure and Revenue Scotland (GERS) figures have, in an annual (or even bi-annual) ritual, found themselves at the centre of political debate this week. The GERS are Scotland’s official government statistics, and showed the country’s public spending stood at £14.8 billion more than the revenues being raised for the last fiscal year.

The £14.8bn deficit as a proportion of Gross Domestic Product (GDP), a key measure of national output, according to these figures, includes a geographic share of North Sea oil and stands at 9.5%. This compares to a UK-wide deficit of about 4%, and exceeds by some margin the Eurozone’s stipulation that national deficits should not exceed 3% of GDP (although many do).

The GERS figures indicate that public sector expenditure in Scotland stands at around £12,800 per person, or about £1,200 higher per person than the UK average. The challenging fiscal situation Scotland finds itself in reflects a precipitous decline of estimated North Sea oil revenues from £1.8bn to just around £60 million last year, somewhat offset by positive growth of non-North Sea onshore revenues of £1.9bn.

These figures are also against a backdrop of significant economic headwinds caused by the ‘out’ vote in the UK inout referendum on the EU, which the Scottish Government estimates could cost the Scottish economy between £1.7 and £11.2bn over time.

The GERS figures are largely an indicator of Scotland’s fiscal position with either a full range of tax-raising and spending powers or with full independence. As it stands, much of the 9.5% deficit is absorbed within the wider fiscal framework that Scotland shares with the rest of the UK. With the new devolution settlement, Scotland will have control over revenue accounting for around half of its devolved expenditure, and about 15% of benefit spending in Scotland.

As an indicator, then, with either the full range of tax-raising powers or full independence, the Scottish Government would have, and very likely will have, difficult tax and spend choices to make in order to plug the fiscal hole in its finances. This is unless, of course, greater growth rates in either onshore or offshore revenue could and can be achieved.