19 January 2007
A controversial Scottish Executive report showing that Scotland has an £11.2bn funding 'black hole' might have contained an error over the level of public spending, chief economist Andrew Goudie admitted this week.
He was giving evidence at the start of an inquiry being held by the Holyrood Parliament's finance committee into the recently published Government expenditure and revenue Scotland report, which revealed that public spending in Scotland in 2004/05 was £11.2bn more than the amount it raised in tax income.
With the Scottish elections less than four months away and the Scottish National Party pushing ahead of Labour in the opinion polls, the report has become the subject of intense controversy over whether Scotland could stand alone as an independent country.
Giving evidence to the finance committee on January 16, Goudie admitted that the document contained estimates that had to be treated with caution. But he stressed that, given the resources available, the estimates were the best he and his officials could provide and that the findings gave a 'broad picture' of the Treasury's 'fiscal transfer' to Scotland.
However, he conceded that a recent report by two independent economists, Jim and Margaret Cuthbert, had disclosed a £440m overestimate in the level of public spending that had to be investigated.
The economists argued that certain types of spending in areas such as prisons and nature conservation is excluded from some calculations in England but not in Scotland.
Goudie told the MSPs that he hoped the Treasury would rectify the figures so that they could be adjusted in next year's GERS statistics. He said the Cuthberts' work had brought to light something that was extremely important.
Goudie added: 'While this is a matter of concern and I wouldn't pretend otherwise, I don't think it changes the fundamental robustness of what we do.'
But SNP finance spokesman John Swinney said later that the revelation 'blew a hole in Labour's scaremongering attempts to mislead the Scottish people about our real fiscal position'.
Finance committee convener Wendy Alexander said: 'However inconvenient the SNP may find it, officials confirmed GERS represents the best estimate of the financial position a new government of any colour would expect to inherit.'
PFjan2007
