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'Setback' to separation

Union tensions rise as Scotland’s deficit balloons

Scottish Parliament Holyrood

Holyrood spending has risen (pic: Terry Murden)

Tension over Scotland’s constitution rose further today as new figures showed the deficit now well above the threshold required for it to re-join the European Union.

Scotland spent £15.1bn more on public services than it raised in taxes in the year to 5 April – so the figures do not take into account the full impact of the lockdown.

This public spending deficit was £2bn higher than the previous year, or 8.6% of the country’s GDP compared to 2.5% for the whole UK and well above the 3% required for EU membership.

Official Government Expenditure and Revenue Scotland (GERS) figures show a ‘union dividend’ of £1,941 per person for schools, hospitals and other public services.

The Institute for Fiscal Studies warned that the figures are likely to be considerably inflated in the current financial year because of the impact of the coronavirus.

It says the UK’s actual and Scotland’s implicit budget deficit this year could spike at almost 19% and 26-28% of GDP respectively, based on Office for Budget Responsibility projections. Ongoing economic weakness means that the deficits will likely remain elevated even in 2024-25. 

This year’s GERS data shows:

  • Scotland’s notional deficit rose from £13.1bn to £15.1bn – more than the entire annual cost of running the NHS. As a percentage of GDP that is 8.6%, compared to 2.5% for the UK as a whole – and well above the 3% ceiling for EU member states.
  • Public spending in Scotland was £81bn or 9.2% of the UK total.
  • Revenues raised in Scotland were £66bn or 8% of the UK total.
  • Public expenditure per person in Scotland on public services such as the NHS, schools and state pensions was £1,633 higher than the UK average, while revenues were £308 lower than the UK average following a further fall in North Sea Oil revenue.
  • The UK Dividend was therefore the equivalent of £1,941 per person, up by £136 since 2018-19. That’s the combined value of higher spending and lower revenue in Scotland compared to the UK.

Scottish Finance Secretary took to Twitter to defend the government.

“All the major fiscal levers are reserved – GERS demonstrates why Scotland shouldn’t accept the current constitutional arrangements any longer,” she said.

Kate Forbes

Kate Forbes: ‘we are dependent on another government’ (pic: Terry Murden)

“Countries around the world are running significant (real) deficits – don’t see any of them reconsidering their independence. The difference is they have the levers to do something about it and aren’t dependent on another government’s policy choices.”

But opposition parties saw the figures as supporting evidence for the union.

Scottish Conservative Finance spokesman Murdo Fraser said: “This is a hammer blow to the SNP and a massive setback for separation. Nicola Sturgeon would have to throw away Scotland’s entire NHS, every nurse and doctor, just to come close to balancing the budget in her separate state.

“It’s beyond dispute that the economic case for independence has never been weaker. Separating would cost Scotland £15 billion a year that we need for our schools and hospitals.”

Scottish Labour leader Richard Leonard said: “These statistics show that Scotland’s deficit has increased in size even before the impact of the economic ramifications of the pandemic are felt.

“With billions draining from the Scottish economy in the event of separation, Scotland would be thrust into years of savage and unrelenting austerity.

Scottish Liberal Democrat spokesman Wendy Chamberlain said: “These numbers from before the crisis really drive home just how economically valuable the partnership across these isles is.”

Tracy Black, CBI Scotland Director, said: “It’s clear that Scotland continues to spend significantly more than it raises in tax.

“With only the tip of the coronavirus iceberg captured by the latest statistics, it’s clear that further pain is in the post for the Scottish economy.”

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