Measuring our worth

The election of a pro-independence majority in Holyrood and the certainty that there will be a referendum on Scottish independence has understandably excited much comment in the media over recent weeks. Clearly political discourse in Scotland is moving into new territory and although the referendum will not be held until the latter part of our term in office, as we promised in our manifesto, there will be much debate and discussion to come between now and then.

One of the perennial topics that are inevitably raised in any discussion on independence is Scotland’s finances and our ability to afford independence. If you were to read some of the claims in newspaper columns published south of the border which seem to have only a passing familiarity, let alone interest in Scotland, you might think that people north of the border did not pay any taxation and Scotland existed only on the generosity of taxpayers elsewhere in the UK.

The truth is of course somewhat different. The Government Expenditure and Revenue Scotland figures or GERS are the most comprehensive set of statistics that exists on how much Scotland generates in taxation and spends on public services in both devolved areas and on things still reserved to Westminster’s control. While it is not perfect, given that there areas where it has no choice but to rely on estimates because the UK Treasury simply doesn’t separate out the level of some taxes contributed from Scotland when gathering statistics, it is the most useful starting point in any discussion on how much Scotland generates and spends on the public sector.

The most recent of these GERS statistics covering the 2009/10 financial year was published in recent days and paint an interesting picture of Scotland’s finances. During that year Scotland generated £48.1 billion in taxation, or 9.4% of the entire tax take for the whole of the UK. This compares to having a population that makes up 8.4% of the UK total and public spending levels which represented 9.3% of UK expenditure. Those figures show that Scotland generated a greater share of tax revenues than its population share of the UK and saw a slightly lower proportion of money spent in Scotland than the share of tax revenue that went to the UK Treasury from Scotland.

The 2009/10 financial year was of course when the recession was biting hard and it is therefore no surprise that the figures for that year show a current spending deficit of £9 billion or 6.8% of GDP in Scotland, as reduced tax income had not been matched by reduced expenditure. When capital spending is included, this deficit increased to £14 billion or 10.6% of GDP.

Although it is normal for countries around the world to run deficits, ones on that scale are not healthy in the long term. However, the size of Scotland’s deficit for that year was entirely a result of the recession and does not measure poorly when compared with the rest of the UK. The same financial year saw the UK run up a deficit of £107.3 billion or 7.6% of GDP on current spending which rises to £156.5 billion or 11.1% of GDP when capital spending is also included. In both cases, Scotland’s deficit as a percentage of GDP remained lower than the figure for the UK as a whole.

What this shows is that Scotland had a stronger budget position than the UK as a whole, just as it has in each of the last five years. Scaremongering over Scotland’s financial strength is clearly just that, given that even in tough economic times we outperformed the UK as a whole.