And the country’s North Sea oil revenues have plummeted to just 60mby John McTernan / August 25, 2016 / Leave a comment
This week the Scottish Government published a report in which it conceded that independence is never going to happen because Scotland can’t afford to go it alone.
Of course, they didn’t admit that openly, but the facts cry out to heaven. I’m referring to the publication of Government Expenditure and Revenue 2015-16, colloquially known as GERS. This annual publication is the most authoritative account of how much tax is raised in Scotland and how much is spent on all public services—so it includes the welfare and pensions spend of Westminster as well as the health and education budgets of Holyrood.
This year’s figures are eye-watering. Scotland has a deficit of nearly £15bn—9.5 per cent of GDP compared to the UK deficit of 4 per cent. Why so high? The reasons are simple. First, Scotland’s historically high levels of public spending. Second, the complete collapse of oil revenues—they brought in only £60m in 2015-16. There is simply no way to make this into a positive story for separatism. That is a huge gap—an unbridgeable gap for an independent Scotland.
First Minister, Nicola Sturgeon, did her best to promote the standard SNP line—when figures look bad for Scotland they make the case for independence, just as when figures look good they equally make the case for separation. But her heart wasn’t really in it. Instead she tried misdirection—the basis as much of clever politics as it is of great comedy. There was a briefing about civil servants drawing up a bill for another independence referendum—one that the Scottish Parliament has no power to call. There was the appointment of a Brexit minister and the publication of wild estimates of the possible cost of Brexit to the Scottish economy. How much, you ask? Considerably less than the costs of Scotland leaving the UK, but that is not the point. Sturgeon was desperate to talk about anything other than the GERS figures.
The reason for the studied silence is obvious. This is a really easy story to understand—Scotland spends more than it earns. Way more. To put the situation in stark terms, tax revenue raised per person in Scotland is £400 lower than in the UK as a whole, while public spending on the same basis is £1200 more. That is a huge gap—an unbridgeable gap for an independent Scotland.
The case for Scotland leaving the UK to join the European Union (EU) has been exposed for what it really amounts to—self-inflicted austerity. Reducing Scotland’s deficit to the 3 per cent required by the EU requires a cut in spending equivalent to nearly 7 per cent of GDP—that is the size of the hit to UK wealth caused by the Global Financial Crisis. Cuts would be the only practical approach to the Scottish deficit after independence because borrowing £10bn a year, every year is unsustainable. And a tax increase is out too as it would need a 20p hike on the basic rate to fill the hole. Some nationalists claim that a change in economic policy would increase growth—the truth is that Scotland would need sustained growth of more than 5 per cent a year which a developed country simply can’t achieve.
None of this is to run Scotland down, or to say it is too wee or too poor to be independent. Scotland is wealthy today but, as Jim Gallagher, former Director-General for Devolution in the Cabinet Office, now at Oxford, puts it, Scots have the public services of an even wealthier country. It is the fiscal union of the United Kingdom which allows that to happen. Leaving that for the customs union of the EU would be very costly—and Scots will not vote to take £10bn out of the public services they receive.