GERS report finds falling Scottish public spending deficit

11 Mar 15

Scotland’s current budget deficit has fallen as a percentage of gross domestic product over the last year despite lower oil revenues, according to the annual Government Expenditure & Revenue Scotland figures published today.

The figures put current expenditure in Scotland for 2013/14 at £13.8bn more than the tax take, excluding oil revenues, equating to a deficit of 10.3% of gross domestic product – down from 11.5% the previous year. This falls to 9.8% of GDP if a population share of North Sea revenue is taken into account (down from 10.9%) and to 6.4% using an illustrative geographic share of income from the oil sector (6.5% in 2012/13). The UK deficit of £71.5bn equates to just 4.1% of GDP.

However, the deficit worsens to 12.2% of GDP based on onshore revenues when capital spending is factored in, or 11.7% with a population share of offshore revenues or 8.1% with a geographic share. The equivalent UK net fiscal deficit is 5.6% of GDP.

Scotland, with 8.3% of the UK population, also continues to enjoy higher than average per capita public spending, at £66.4bn or 9.2% of total UK public spending.

As is traditional, however, the figures provide ample ammunition for both sides in Scotland’s perpetual constitutional debate.

The GERS analysis of tax revenues showed Scots paying £300 less per head than the UK average if only onshore taxes are counted, and – less usually – the same if a per capita share of the oil revenues is used. But, on a notional territorial share of oil revenues, Scots pay £400 per head more than the UK average. Revenue form the north sea on a geographical basis stood at nearly £4bn in 2013/14, down from over £5.2bn in 2012/13.

This enabled First Minister Nicola Sturgeon to claim: ‘This is the 34th year in which we’ve contributed more than the rest of the UK and is a testament to the inherent strengths of the Scottish economy.

‘Scotland makes higher revenue contributions than the UK as a whole, we have higher employment and lower unemployment than the other nations of the UK, and our economy is growing at a faster rate than the UK as a whole.’

UK averages are also skewed by the vibrancy of the Greater London economy. For the first time the GERS figures compare revenues across the UK nations and regions, showing Scotland to be the fourth highest contributor.  EU-driven technical changes to the statistics additionally distort comparisons with previous years.

Sturgeon said that the figures showed the Scottish performing relatively well over the past decade under the constitutional status quo, but that they gave little indication of the opportunities that might be open were Scotland to enjoy a fuller range of economic and job-creating powers.

However, Scottish Secretary Alistair Carmichael insisted that GERS ‘put the case for remaining in the UK beyond all doubt’ by showing how UK membership helped Scotland absorb economic shocks while retaining relative fiscal stability.

‘Today's figures will force the long overdue retirement of a number of economic myths used by those who argue for Scotland leaving the UK,’ he said.

  • Keith Aitken
    Keith Aitken

    covers Scottish affairs for Public Finance from Edinburgh. He was formerly economics editor and chief leader writer on The Scotsman and now has a busy freelance career as a writer, broadcaster and event chair.

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