Scotland’s public spending gap falls to seven per cent of GDP, latest GERS figures show

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Scotland’s estimated deficit has reduced by £1.1bn in 2018-19, but remains higher than the UK average, according to the latest official figures published today.

The Government Expenditure and Revenue Scotland (GERS) figures show that the deficit – the gap between what is collected from taxes and what is spent on public services – reduced to seven per cent of GDP, down from 8.1 per cent of GDP in 2017-18.

The drop is due to increased economic growth, with onshore revenues increasing by 5.1 per cent, or £3bn, to £61.3bn in 2018-19, the fastest growth since 2010-11.

However, the notional gap between income and expenditure in Scotland remains well above the UK-wide deficit of 1.1 per cent of GDP, and Scotland was responsible for nearly half of the UK's deficit.

Spending in Scotland per head was nearly £1,661 higher in 2018-19 than the UK average, while Scotland’s tax contributions per head were around £307 lower.

The UK Government has pointed out that Scotland contributed eight per cent of UK tax and received 9.3 per cent of UK spending in 2018-19, with a population share of 8.2 per cent in 2018-19.

Interpretation of the GERS figures is a contentious issue, with disagreement between unionists and nationalists on the significance of the figures.

Unionists point out the difference in spending and revenue in Scotland as evidence that Scotland benefits from staying within the union and they warn of the deficit that Scotland would start off with in the event of it becoming independent.

However, nationalists contend that the figures only describe the current tax and spending situation with Scotland as part of the UK, including a notional share of UK-wide spending, and do not reflect the situation were Scotland to take its own tax and spending decisions.

Commenting on the 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.”

He added: “This strong performance from Scotland’s economy is at risk as a result of the UK Government’s EU exit plans, and in particular a 'no deal' Brexit, which poses a severe threat to jobs, investment and living standards

“A ’no deal’ Brexit could reduce revenues in Scotland by around £2.5 billion a year, holding Scotland back and demonstrating why people in Scotland increasingly recognise the importance of making our own decisions.

“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.

“As we have always said, Scotland has a strong, and growing, economy and our future will be far brighter as an independent member of the EU.”

However, Scottish Secretary Alister Jack said: “Today’s GERS figures show clearly how Scotland benefits from being part of a strong UK with every man, woman and child in Scotland receiving a ‘Union dividend’ of nearly £2,000 a year. 

“These Scottish Government figures also show there would be a £12.6 billion black hole at the centre of an independent Scotland’s finances.

“Real questions need to be asked about the First Minister’s stewardship of the country’s economy.

“With Scotland’s deficit now more than six times greater than the UK average, the Scottish Government needs to take action.

“Scotland remains the highest taxed part of the UK. This is harming our economy and should be a huge concern to us all.

“The UK Government is investing in Scotland to deliver jobs, opportunities and sustainable growth, including £1.4 billion for city and growth deals.

“We are working hard to support businesses and bring further opportunities as we leave the EU on 31 October.”  

And Scottish Labour leader Richard Leonard also warned of the risks of independence.

He said: “These figures underline the importance to Scotland’s vital public services like our NHS of remaining part of the UK.

 “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.

 “Only Labour in government will end austerity and invest in our communities to grow the economy and build our lifeline public services.”

Scottish Conservative shadow finance secretary Murdo Fraser said: “These figures reveal an enormous gap between what Scotland spends and what it raises in tax.

“We can have much higher spending in Scotland on public services thanks only to fiscal transfers from the rest of the UK, now worth £2,000 for every man, woman and child in Scotland.

“These figures make it clear – had we followed Alex Salmond and Nicola Sturgeon’s advice in 2014 and backed independence – Scotland would now be facing up to an unprecedented financial black hole.

“Thanks to this union dividend, we continue to dodge the SNP bullet.

“What is remarkable is that, despite today’s clear evidence of the cost of independence, Nicola Sturgeon is still demanding we re-run the independence referendum as early as next year.

“Not only is she unable to spell out how she’d close the gap between spending and tax revenue, she can’t even tell us which currency we would use.

“These figures show once again that the SNP’s independence obsession isn’t standing up for Scotland – it would wreck Scotland.

“It’s time to take indyref2 off the table, and back a Scottish Conservative plan to get back to the things that matter – growing our economy, delivering high-quality public services, and keeping the UK together.”

But the Scottish Greens said the figures were evidence of the need for a ‘Green new deal’ to grow the economy.

Scottish Greens co-leader Patrick Harvie 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.

"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'.

“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.”