Scotland’s Economy: GERSday

By Fiona Grahame

Fiona GrahameThe GERS figures were published on Wednesday 22nd August and they showed that Scotland’s economy was running a deficit. So what does this mean? Let’s take a closer look.

Firstly what needs to be stated is that the Scottish Government is not permitted to run a deficit. No matter which party is in control of the Government of Scotland it is a condition of the devolved settlement that it cannot be in debt – it has to produce a balanced budget. The areas of competence devolved to Scotland- the parts of the economy managed by the Scottish Government – are not in deficit.

GERS stands for Government Expenditure & Revenue Scotland. It is an estimate based on a combination of Scottish and UK figures. The Scottish Government is seeking a statistical publication which will deal solely with devolved finances.

“The Scottish Government is considering introducing a new statistical publication, which would have a wider scope and report on all devolved revenue and expenditures. Unlike GERS, it would focus solely on the finances of the Scottish Government, local government in Scotland, and their associated agencies and bodies.”

“It would not report on services provided by other UK Government departments either operating in Scotland or providing wider services on behalf of Scotland. The proposed new publication would be in addition to the existing GERS publication which would continue to be published in its current form.”

Now that is established let’s look at GERS which represents an economy controlled by the UK Government.

Scotland’s public sector revenue is equivalent to £11,052 per person, £306 less than the UK average. Excluding North Sea revenue, it is £10,808 per person, £533 less than the UK average.

Total public expenditure  is 13,530 per person, which is £1,576 per person greater than the UK average.

This means spending is more than is coming in – remember the figures are for an economy run by the UK Government – the Scottish Government cannot run a deficit.

The  UK Government’s Secretary of State for Scotland,  David Mundell said:

“These Scottish Government figures show that at more than £13 billion, Scotland’s deficit at 7.9% as a share of GDP is four times that of the UK’s 1.9% as a whole. This is concerning.”

“Simply put, Scotland contributed 8% of UK tax, and received more than 9% of UK spending for the benefit of families across the country.”

Commenting on the GERS figures,Derek Mackay, Finance Secretary in the Scottish Government said:

derek mackay

Derek MacKay (Photo Scot Gov)

“The latest economic data points to an improving picture in Scotland. Our economy grew twice as fast as the UK in the most recent quarter, while unemployment remains close to its record low and confidence is returning to the oil and gas sector.

“Today’s figures show overall revenue in Scotland reaching £60 billion for the first time ever, underlining the fact that we have a productive and growing economy, despite the UK Government’s London centric economic policies.

“Meanwhile, Scottish exports of goods have increased by 12% over the past year – the fastest rate of growth of any nation in the UK – with huge potential for further expansion in key overseas markets.

“However, that export success and wider potential is directly threatened by the UK Government’s drive to take Scotland out of the world’s largest single market, which is around eight times bigger than the UK market alone. That poses a huge risk to Scottish jobs, investment and living standards, which is why we will do all we can to secure the least damaging Brexit possible.”

This is all  confusing especially when commentators (including  David Mundell) keep telling us that Scotland is in deficit. Is Scotland really poor? Are we incapable of being successful?

What figures do we have?

Scotland has a population of 5.295million. That is a good figure to remember when we look at the money our successful industries are generating.

Today’s price for Brent oil is at $74.89.(22/08/2018)

Here is a map of the oil and gas fields in UK waters.

Now whilst it would be very foolish for any nation to build its economy on the revenues of one industry you can see  the  oil fields which are located in Scottish waters  (not counting those which are earmarked for exploration to the west of Shetland). Scotland is an oil rich nation.

Putting oil revenues aside what else does a country of just over 5 million people produce.

Food and Drink is Scotland’s largest manufacturing sector employing 45,000 people. It is worth £3.8billion to the Scottish economy and in 2017 its exports increased by 11% to £6billion.

Scotch whisky alone accounts for 20% of all the Food and Drink Exports for the UK – not Scotland – for the UK. It is massive. In 2017 it amounted to £139 per second.

Fishing – in 2017 the total value of fish landed by Scottish registered vessels was £559million.

Scotland attracts visitors from around the world. So successful is our tourism industry that some commentators have even coined the term ‘over tourism’ to put a negative spin on a growth sector of our economy. In 2017 it saw a 17% growth in spend and generated £11.2billion. It was a record year for international tourism with 3.2 million people from across the world choosing Scotland as a holiday destination equalling £2.3billion with 59% of them coming from our fellow European countries.

What is going on?

The UK Government retains control over the key drivers of the economy “monetary policy, macroeconomic policy and the majority of tax powers. Control over migration policy, which has a major impact on the economy, is also reserved.” (Scotland’s Fiscal Outlook).

Although Scotland now has some limited tax raising powers the majority  of the money available to deliver services in Scotland is from the block grant allocated to it by the UK Government. In real terms this block grant has been cut by 9% over the last 10 years or £2.6billion.

“Once all Scotland Act 2016 fiscal powers are devolved, it is expected that approximately 50 %  of the Scottish Government’s budget will come from devolved or assigned taxes.”

These sources of income are not yet all in Scotland’s control

Sources of Government Funding

Currently VAT in Scotland contributes £10billion to the UK Government. “The Scotland Act 2016 allows for receipts from the first 10p of the standard rate of VAT and the first 2.5p of the reduced rate of VAT in Scotland to be assigned to the Scottish Government.

“All VAT policy, including the power to set VAT rates, will remain reserved to the UK Government.”

With threats of a Power Grab by the UK Government once the UK leaves the EU will Scotland have even less control over how it steers its economy than it does now?

The EU is the largest single export market for Scotland’s products. When the UK leaves the EU on March 29th 2019, now only a matter of months away, if we are also out of the single market this will have a huge impact on Scotland’s economy. Scotland’s exports to the EU were worth £12.7billion in 2016 – that’s a lot of jobs being put at risk.

Scotland voted overwhelmingly to remain in the EU. The politically savvy voters of Scotland realised that for our economy to continue to grow the choice to remain in was in our best interests.

If the GERS figures show us anything it is that control over Scotland’s economy by the UK Government is not working to our advantage. Scotland is  a successful exporting country, punching way above its weight with a highly skilled and educated population. Tinkering about with some areas of taxation will not build a strong Scottish economy. Only with full control over our own decisions will that be achieved –  building an economy that suits the distinct needs of a resource rich nation.

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8 replies »

  1. Good piece Fiona and I think it is important to emphasise that the DEFICIT PART of these Fairy Tale Figures is solely down to Wastemonster and very largely based on what they refer to as estimates. I’m afraid that I’m not so kind, estimates indeed, more like very, very bad guesstimates and bear no relevance to a future expenditure of an Independent Scotland.

    For example they attach a cost of £3 billion for defence, now I can never foresee the day that an Independent Scotland would spend £7/£8 billion for two useless aircraft carriers and with the MOD committed to buying 48 F35’s or Lightning II stealth strike fighters from America at a cost of £9.1 billion up till 2025. I could also add that we would never be wasting God knows how many billions on Trident and other vanity projects.

    Readers might also like to note that part of this Wastemonster ‘deficit’ is for Pensions and Benefits. Now while it would be true that Benefits would fall to an Independent Scotland pension contributions towards pensions paid by Scots up and until the date of Independence would be the responsibility of Wastemonster to pay the pensions due up and until the last contributor before Independence had popped his/her mortal clogs.

    Finally let me remind everyone that these figures were the ‘brainchild’ of Iain Lang, Tory, Secretary of State for Scotland and were designed with the specific intention of painting the worst possible mythical position of the Scottish Economy and to misleading the people of Scotland. Personally I would never elevate them to the title of ‘Statistics’ for statistics have as their basis, FACTS.

  2. Fiona,

    I received an email, plus additional comments from ‘Pensioners for Independence’ which are interesting. I’m copying them below with acknowledgements to original writers. This is the email:

    The GERS numbers tell us today that Scotland accounts for 34% of the whole UK deficit (Scotland £13.4bn vs UK £39.4bn).

    That with a Scottish population of only 8.4% of the UK, and a Scottish Government budget, (which makes approx. 50% of all spending in Scotland) in balance. The Barnett “grant’ of Scottish spending is only ~54% of total Scots direct tax revenue paid to Westminster.
    So, based on GERS numbers, and for these numbers to rationalise out within the 27 of the 28 Estimated revenue and spend figures provided by the UK government used to calculate them, the UK governments spend in Scotland, and on Scotland’s behalf outside Scotland, must, on average, be close to 8 (eight) times that for another individual in the UK, outside Scotland.
    But with similar levels of DWP spend, state pension spends in Scotland (these being largest direct costs to Westminster as the UK per population in general, and no other obvious sign of prolific wastage or largess in Scotland from the UK government, I have to ask myself.
    Where the f##k is all this spend going, or are GERS just a sham of calculations, that is now reaching embarrassingly obvious proportions.

    Gordon Smith
    Pensioners for Independence

    To Which: Neil Caple also from Pensioners for Independence added:

    Gordon, the numbers are even worse when you look at the available figures for Wales & Northern Ireland. Combining all the numbers shows that, according to Whitehall, Scotland, Wales, & Northern Ireland are collectively responsible for 92% of the total UK deficit. That’s 15% of the population creating 92% of the deficit. Does anyone find that even remotely credible? The numbers stink and should be rejected in their entirety.

    Neil Caple.

    And Peter Swain, also from Pensioners for Independence further added:

    You may already be aware of this, but Richard Murphy, Professor of Practice in International Political Economy at London City University famously calls the GERS figures “crap”.

    Peter Swain.

  3. I’ve said it before, and I’ll say it again – we are presented with a lot of bogus hogwash. Watch out for bogus hogwash! That’s what it is.
    And – once again – I ask, I beg, folk to PAY ATTENTION!

  4. If the GERS data shows that Scotland is a drain on the UK economy, why does Westminster do everything they can to prevent Scotland from gaining Independence ? With UK national debt approaching 1.5 trillion pounds surely it is in the best interests of Westminster to get shot of Scotland ASAP. Or is there something that the UK government is not telling us ???

  5. As of Q1 (the first quarter of) 2018, UK government debt amounted to £1.78 trillion, or 86.58% of total GDP, at which time the annual cost of servicing (paying the interest) the public debt amounted to around £48 billion (which is roughly 4% of GDP or 8% of UK government tax income).

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