GERS: Gap between Scottish public-sector spending and revenue fell by over £1 billion in 2018/19

Ben Wray

Comment on GERS figures from Derek Mackay, Patrick Harvie, Richard Leonard, Ruth Davidson and Craig Dalzell

  • Scotland’s budget balance is –4.4 per cent, down from –5.5 per cent in 2017/18 but higher than UK’s 0.8 per cent surplus
  • Scottish onshore revenues grew by 5.1 per cent, largest rise since 2010/11, while north sea oil revenues remained static
  • Finance Minister Derek Mackay: “Scotland’s economy and public finances are strong”

THE gap between Scotland’s public sector spending and revenue has fallen over the past financial year, according to the Scottish Government’s annual statistics publication.

Government Expenditure and Revenue Scotland (GERS) is an assessment of Scotland’s fiscal position over the last financial year, pertaining to both UK Government and Scottish Government revenue and expenditure in Scotland. 

The report found that over 2018/19 Scotland’s budget balance (the difference between revenue and current spending) is -4.4 per cent, compared to 0.8 per cent for the UK as a whole. The Scottish figure was -5.5 per cent in 2017/18, a drop in the ‘notional deficit’ worth £1.37 billion.

The fiscal balance (including the cost of long-term capital investment) is -7.0 per cent, compared to -8.1 per cent last year. The UK fiscal balance is -1.1 per cent.

The falling gap between revenue and expenditure is largely explained by rising onshore revenues, which grew by 5.1 per cent, the fastest growth since 2010/11. Increases in VAT and income tax revenue of 7 per cent drove this growth.

North Sea oil revenues were broadly static, increasing by just four million from 2017/18. North Sea oil revenues attributed to Scotland’s geographical share are just under £1.5 billion per annum.

Scottish revenue as a per centage of GDP is 34.7 per cent, compared to 36.8 per cent for the UK. Both figures are significantly below the EU average of 45 per cent of GDP.

Total expenditure as a per centage of GDP in Scotland is 41.7 per cent, compared to 37.9 per cent for the UK. Again, these are below the EU average, at 45.6 per cent.

The per head figure is £307 more raised per person in UK as a whole than Scotland, while £1,661 more was spent in Scotland per person than the UK as a whole.

REPORT: Beyond GERS: Scotland’s fiscal position post-independence

Commenting on the latest figures, Finance Secretary Derek Mackay said: “With record tax revenues, strong economic growth and near record low unemployment, Scotland’s economy and public finances are strong. Today’s figures show overall revenue in Scotland reached £62.7 billion – exceeding £60 billion for the first time – reflecting the strength of our economy.

“Our notional deficit has fallen while public spending has increased thanks to our efforts to grow the onshore economy and the strong performance of taxes in Scotland. The Scottish Government’s choices on taxation are helping to create a more progressive tax system.”

Mackay added that “these figures reflect Scotland’s position as part of the UK”.

“The Scottish Government believes we could unlock our full potential with independence, allowing us to take the best decisions for Scotland.”

Scottish Greens co-leader Patrick Harvie said that the figures showed the need for a “Scottish Green New Deal” to grow Scotland’s onshore revenues sustainably.

READ MORE: Patrick Harvie: Green New Deal ‘impossible’ under SNP Growth Commission model

He said: “Once again GERS is our annual reminder that too many Scottish politicians remain unwilling to break our reliance on oil revenues, despite all the rhetoric about a climate emergency. 

“The figures are also a reminder of the urgent need to build a post-oil economy, whether Scotland is part of the UK or not. Independence would force us to face that urgency, but would also give us the powers to fully develop the Scottish Green New Deal agenda that is necessary.”

Harvie added that the reduction in the UK’s budget deficit was a result of an “unfair, unsustainable and failing economic model”.

“The figures for the UK disguise the immense human cost that has been paid to reduce the deficit. The UN described the cruelty, rising child poverty, record levels of hunger and homelessness that have characterised that deficit cut as ‘punitive, mean-spirited, and often callous’,” he said.

“Thankfully the rapporteur also praised Scotland for mitigating some of that, but the SNP need to come off the fence and have an honest debate about tax, including on asset wealth and corporations.

“The SNP’s vision for independence laid out in the Growth Commission would continue this austerity-driven race to the bottom with the rest of the UK.

“The Greens believe independence must come with a determination to build a new greener Scotland, instead of pursuing our own version of the UK’s unfair, unsustainable and failing economic model.”

READ MORE: The City of London extracts wealth from the rest of the UK’s regions, inquiry submission finds

Craig Dalzell, head of policy and research at the Common Weal think-tank, said that “there are encouraging signs” in the GERS report.

“Scotland’s revenue has increased significantly and signs are pointing to it essentially all being derived from onshore revenue rather than fresh oil money, so this may point to a fundamental strengthening of the Scottish economy.”

Dalzell added that the figures vis-a-vis the UK highlighted the need to tackle Britain’s regional inequalities, which are the highest of any western European country.

“The UK’s regional inequalities remain severe and systemic,” Dalzell stated. “We will have to wait till next year for the ONS’s full breakdown of notional regional deficits but it appears that Scotland’s notional share of the UK’s deficit has increased from around 34 per cent of the UK total to around 54 per cent of the UK’s total deficit.

“This is almost certainly due to increasing notional surpluses in England which, if previous trends have continued, means increasing surpluses in London and the South East. More and more commentators even in London are pointing with alarm at the over-concentration of the UK’s economic activity in the capital and this should be addressed by policy makers urgently.

READ MORE: Richard Murphy: GERS really is CRAP

“As an illustration, if the UK’s tax revenue was shared evenly across the UK, Scotland would bring in an additional £2.3 billion in income tax and an additional £700 million in onshore corporation tax.”

Scottish Labour leader Richard Leonard responded to the figures by arguing that they “underline the importance to Scotland’s vital public services like our NHS of remaining part of the UK.”

He added: “A stand-alone Scotland would have one of the biggest fiscal deficits in the developed world, and the SNP’s shock treatment plan to close it is by dumping the pound and imposing unprecedented levels of austerity.

“It’s time for Nicola Sturgeon to admit that her independence plans would mean unprecedented cuts for Scotland’s schools and hospitals.”

CS FORUM: A Green New Deal for Scotland, with Richard Murphy

Scottish Conservative leader Ruth Davidson said the figures were proof of a “union dividend”.

“With a tax take £307 per person lower and expenditure £1661 higher, today’s GERS figures show Scots are nearly £2000 per year better off for Scotland being part of the United Kingdom.”

Journalist and independence supporter Michael Gray highlighted aspects of UK Government spend in Scotland which an independent Scotland may wish not to prioritise.

Tax expert professor Richard Murphy reiterated his critique of GERS ahead of publication, arguing that the data it is based on is largely extrapolations of UK data, with a lack of sound data at all in areas like Scottish imports and exports. 

Picture courtesy of The Scottish Government

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