Poor oil revenues still leaving Scotland with deficit, GERS figures show

Written by Tom Freeman on 23 August 2017 in News

Scotland cuts notional deficit but it still remains three times the rate of UK, GERS figures show

Oil rig Scotland - credit Gary Henderson

Scotland’s public spending deficit remains the equivalent of three times the UK rate, latest Scottish Government figures have shown.

The Government Expenditure and Revenue Scotland (GERS) report, which compares taxes raised with public spending, show a reduction in the notional deficit for Scotland by £1.3bn to 8.3 per cent of Scotland’s GDP in the last year.

However the UK’s deficit has also dropped to 2.4 per cent of GDP in the same period.


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The gap is largely because spending per head on public services like health and education in Scotland is £1,400 higher than the rest of the UK, while the tax taken per person is slightly lower when oil revenue is taken into account.

First Minister Nicola Sturgeon highlighted a £3.3bn increase in onshore revenues in a year, the fastest increase since GERS began in 1998-99.

“By continuing to invest in key sectors, we will ensure Scotland remains a productive and competitive country,” she said.

The report, set up under the John Major government in the 1990s to highlight how Scotland depended on UK subsidy, was also used by the SNP government in the run-up to the 2014 referendum to make a case for independence when the high price of oil meant Scotland was outperforming the UK as a whole.

Economic think tank The Fraser of Allander Institute, which is based a Strathclyde University, said the key reason for the figures was the drop in oil revenue since 2011.

The institute’s director Graeme Roy said the figures give an accurate picture of Scotland’s financial state.

“Some have dismissed GERS as it relies, in part, on estimating some Scottish tax revenues. This is unfair,” he said.

“All economic figures are subject to a degree of estimation, including GDP and unemployment statistics. So estimation is not unusual. Furthermore, radically changing the estimation techniques do not alter the headline conclusions of GERS.” 

An independent Scotland would be forced to meet the “big fiscal challenges” met by all countries, he added.

“It is important to remember that GERS takes the current constitutional settlement as given. If the very purpose of independence is to take different choices about the type of economy and society that we live in, then a set of accounts based upon the current constitutional settlement and policy priorities will tell us little about the long-term finances of an independent Scotland.”

Finance Secretary Derek Mackay said confidence was increasing in the North Sea.

“It is important to also recognise that ONS analysis shows that Scotland performs ahead of Wales, Northern Ireland and several English regions, and in line with the UK average outside of London and the south east,” he said.

Scottish secretary David Mundell called the figures “a cause for concern”.

“Being part of a strong UK has protected our living standards, and that’s one reason the people of Scotland clearly rejected Nicola Sturgeon’s plan for a second independence referendum at the election,” he said.

Scottish Labour leader Kezia Dugdale said Scots had been offered “false hope” in 2014.

“Scotland’s own accounts show that the first year of an independent Scotland would have meant unprecedented levels of austerity,” she said.

The Scottish Greens said the GERS figures showed Scotland was too reliant on fossil fuels.

Finance spokesperson Patrick Harvie said: “Every year these figures set off a tiresome war of words between those who think Scotland could never run its own affairs and those who think the SNP approach is flawless.

“What these figures really show is that Scotland needs to build a clean economy that does not rely on oil and gas.

“If we’re serious about supporting alternative industries to help generate jobs for the future and revenues for public services, we must act now.”

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