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More spent per person north of border

Scottish deficit falls but remains above UK

Nicola Sturgeon

Eye on the future: Nicola Sturgeon at the Aquila Biomedical lab in Edinburgh (photo: Terry Murden)

Scotland’s deficit fell by £1.3 billion last year but remains more than three times higher than that of the UK as a whole.

The latest data shows that more continues to be spent by the government on each person in Scotland than the UK average, and that borrowing per person is higher.

The latest Government Expenditure and Revenue Scotland (GERS) figures show Scotland’s fiscal position improved in 2016-17 and the deficit stands at 8.3% of GDP.

However, this is higher than the UK figure of -2.4% for the same year. This is the largest relative gap in the notional Scottish and UK deficit since the GERS figures started to be published on a consistent basis back to 1998-99.

Graeme Roy, director of the Fraser of Allander Institute, said the reason the Scottish figures were less favourable was because Scotland spends more on devolved services – such as health, education and economic development – and has higher spending on some key welfare programmes. 

Secondly, GERS shows that –including a geographical share of North Sea revenues – Scotland raises slightly less than the UK per head in tax revenues (by about £300 per person).

He said the figures raise concerns for those advocating independence.

“It is important to remember that GERS takes the current constitutional settlement as given,” he said.

“If the very purpose of independence is to take different choices about the type of economy and society that we live in, then a set of accounts based upon the current constitutional settlement and policy priorities will tell us little about the long-term finances of an independent Scotland. 

“But GERS does provide a pretty accurate picture of where Scotland is in 2016-17. In doing so, it sets a useful starting point for a discussion about the immediate choices and challenges that need to be addressed by those advocating further constitutional change.

“All countries face big fiscal challenges in terms of what will replace declining revenues in the face of rising spending pressures over the next few years. Changing the constitutional set-up doesn’t alter the fact that these fiscal challenges need to be addressed by all governments in all countries. But a more autonomous Scotland will be forced to meet such challenges sooner rather than later.”

Brent oil field

Oil revenue picked up, but low prices are the ‘new normal’

Scotland contributed 8% of UK tax and received 9.2% of UK spending in 2016-17.

First Minister Nicola Sturgeon said the data showed the economy remains strong, while Scottish Secretary David Mundell said “the figures from the Scottish Government are a cause for concern.”

Onshore revenues increased by £3.3 billion (6.1%) between 2015-16 and 2016-17 – the fastest increase since current records began in 1998-99 – while North Sea revenue also grew.

Oil accounts for only £208m of revenue but it increased by 6.1%, from £54.5bn in 2015/16 to £57.8bn.

Including North Sea revenue, Scotland’s public sector revenue is equivalent to £10,722 per person, £312 less than the UK average.

Total expenditure by the Scottish government, UK government and other public bodies in Scotland came in at £71.2bn, or  9.2% of total UK public sector expenditure.

This was equivalent to £13,175 per person, which was £1,437 per person greater than the UK average.

Speaking while visiting business start-up Aquila Biomedical, based at Edinburgh BioQuarter, First Minister Nicola Sturgeon said: “Scotland’s economy remains strong. In the last quarter, our economy grew nearly four times faster than the UK and the number of people in employment is at a record high.

“These figures reflect Scotland’s finances under current constitutional arrangements. However, they show that our investment in key industries – such as the life-science sector – is providing a real boost to our onshore economy. By continuing to invest in key sectors, we will ensure Scotland remains a productive and competitive country.

“The lower oil price had an impact on North Sea revenues and the wider economy last year. However, it is encouraging to see an improvement in the overall fiscal balance and that onshore revenues grew at their fastest rate in nearly twenty years.

“However, our long-term economic success is now threatened by Brexit, which risks reducing household incomes, employment and funding for public services. That is why we continue to press for the Scottish Government to have a direct role in Brexit negotiations.”

Finance Secretary Derek Mackay added: “It is encouraging that our fiscal balance improved by nearly 10% last year. It is important to also recognise that ONS analysis shows that Scotland performs ahead of Wales, Northern Ireland and several English regions, and in line with the UK average outside of London and the south-east.

“Meanwhile, evidence also points to signs that confidence is increasing among North Sea operators, with the sector set to remain an important part of Scotland’s economy for years to come.

“An extreme Brexit outcome would do significant damage to Scotland’s public finances and would cost our economy up to £11 billion a year from 2030, and 80,000 jobs over a decade. We will continue to do all that we can with the powers available to us to grow our economy, protecting and creating jobs.”

David Mundell
David Mundell: (photo by Terry Murden)

Scottish Secretary David Mundell said: “These figures from the Scottish Government are a cause for concern, and show clearly there is still much to be done to improve Scotland’s economy.

“They also highlight the value of pooling and sharing resources around the UK.  Being part of a strong UK has protected our living standards, and that’s one reason the people of Scotland clearly rejected Nicola Sturgeon’s plan for a second independence referendum at the election.

“Scotland’s deficit is falling at a slower rate than the UK as a whole and economic growth is lagging behind. It is vital we grow the economy and we want to work with the Scottish Government to achieve that.

“We will continue to invest in Scotland, with new initiatives such as UK City Deals, which have already seen around £1 billon of UK Government money committed to Scotland. I would also urge the Scottish Government to use their significant economic levers – including on tax, skills and getting people into work – to improve Scotland’s economic future.”

Kezia Dugdale speaking

Kezia Dugdale: false hope (photo: Terry Murden)

Scottish Labour leader Kezia Dugdale said: “These figures prove once and for all that the SNP sold false hope to the poorest people in Scotland.  The real hope is with a Labour government.

“Scotland’s own accounts show that the first year of an independent Scotland would have meant unprecedented levels of austerity. 

“These cuts would not only have been the largest ever felt by Scottish public services like schools and hospitals, the Nationalists’ plan would have taken a sledgehammer to the welfare state as we know it. 

“Nicola Sturgeon knew the sums didn’t add up. But she offered false hope, especially to the poorest people in Scotland. Thousands of Scots voted Yes on the basis of a falsehood the SNP knowingly sold them. 

“A fairer Scotland is with a Labour government – willing to tax the richest, stand up to vested interests and redistribute wealth and power across the UK.”

Comment: Scotland living beyond its means 

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