19 December 2003
The amount Scotland receives from the Treasury to make up for a shortfall in tax income has increased to £8bn, according to the Scottish Executive's latest assessment of the country's finances.
Statistics contained in the Government Expenditure and Revenue in Scotland (Gers) report show that the deficit in 2001/02, the latest year for which out-turn of expenditure and revenue is available, increased by almost £2bn over the previous year.
The sum of £39.4bn spent in Scotland was 10.1% of the UK total. Receipts from taxes and national insurance amounted to £31.4bn. The gap resulted in a net borrowing figure of £8bn – the estimate of the extent to which Scottish expenditure exceeds receipts.
First introduced ten years ago, Gers has consistently identified a deficit, bringing controversy over the extent of 'subsidy' by English taxpayers, and claims that the shortfall undermines the Scottish National Party argument that Scotland could stand alone as an independent nation.
The £8bn deficit is exclusive of North Sea oil revenues. However, the report calculates how the figure would be affected if all North Sea oil revenues and output were attributed to Scotland in line with SNP policy.
According to the latest report, Scotland would still be in debt if oil revenues were included, although the net borrowing figure would be reduced to £2.9bn.
Economists at the Scottish Executive say the increase in debt from £6bn to £8bn in one year reflected the state of the economic cycle and that Scottish expenditure was broadly in line with the rest of the UK. When calculated on the same basis, the UK net borrowing figure was £5.9bn in 2001/02.
The report shows that the total 'identifiable' expenditure in Scotland was equivalent to £6,246 per head – about £1,000 a year higher than in England. A majority of the expenditure – about 55% – was on health and personal social services.
Andy Kerr, the finance and public services minister, said the figures pointed to an 'independence black hole' and showed that Scots benefited from its stable and maturing relationship with the rest of the UK. However, the SNP dismissed Gers as a political exercise that had been comprehensively discredited over recent years.
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