Contortions can’t avoid the truth of Scotland’s £15bn deficit

As the GERS figures reveal, there is no doubt that Scotland lives beyond its means year after year, writes Brian Monteith

Every year what passes for Scotland’s notional balance sheet is published and generates a blizzard of headlines about the public finances.

Words such as “deficit”, “fiscal transfer”, “Union dividend” are bandied about for a week or so but then gently fade away from public consciousness until it all happens again the following August.

This year the occasion was brightened up by Scotland’s Finance Secretary, Kate Forbes, making up for the absence of the Festival Fringe by putting on a contortionist act that would surpass anything from a damp tent in the Meadows.

The Government Expenditure and Revenue Scotland (GERS) figures are relatively simple enough to understand, although Forbes clearly had some difficulty. Scottish taxpayers, either as individuals or through businesses, generate £65.9 billion of revenues. The UK government spends £32.8bn on Scotland or the Scottish people and the Scottish Government and its agencies spend £48.1bn. This means there is a shortfall of some £15.1bn which is covered by the UK government.

The estimates and actuals are signed off by impartial and judicious officials and the methodologies used to arrive at the numbers have over the years been refined so they are accepted by all but the most pedantic among those who like to refute what the figures tell us. We know this because the First Minister herself touted the GERS figures as justification for Scottish independence back in 2014.

The UK government’s expenditure is made up chiefly from estimates for the Scottish share of pensions and other welfare benefits as well as items that are provided for the benefit of everyone in the UK, such as national security and defence. The Scottish Government’s expenditure relies more readily on what it controls under its own budgets for devolved responsibilities like education, health and transport. The expenditure is the result of political decisions taken by the governments and were there to be a change in the way we do things – such as Scotland leaving the UK – the figures show the starting-point for our economy from that moment on.

W hile successive UK chancellors have been bringing the national deficit down from £164.5bn in 201011 to £55.4bn in 2019-20, the Scottish finance secretaries have overseen their deficit grow from £11.7bn to £15.1bn over the same period. It is beyond reason to suppose that this annual deficit of £15.1bn would be sustainable without the current support of the UK Treasury. It is beyond doubt that Scotland lives beyond its means, year after year after year.

A new set of political decisions would need to be taken to reduce the deficit to a manageable figure that could be financed by public borrowing and economic growth that raised greater revenues (presuming the economic shock of foregoing the £15.1bn would not cause a recession in itself ).

The focus would inevitably turn to savings that would need to be found, as that is where the pain would be and the victims of spending cuts would be vocal. Due to Scotland’s large size relative to its low population density it costs more to deliver public services than it does in the rest the UK, but this does not explain the deficit of £15.1bn. The reason Scotland lives beyond its means is because Holyrood has taken decisions over the years to do some things differently that cost a great deal of money and the bill is then picked up, not by Scots but by