GERS figures are good news for Scotland

In case you missed it, the latest Government Expenditure Revenue Scotland (GERS) figures were released last week.  The report, the authoritative account of Scotland’s public finances, concluded that Scotland ran a near £15bn deficit for 2014/15, equivalent to 9.7% of our GDP.

The results have met with a variety of responses from all political outlooks but none have been particularly welcoming.

Frankly, I disagree with all of them.  There is absolutely nothing in these figures that is “bad for Scotland”.  In fact, there’s an awful lot in them that’s bloody great big stonking brilliant news for Scotland.

First, our onshore economy grew reasonably well from April 2014 to March 2015, with onshore GDP increasing from 2013/14 and onshore revenues increasing by 3.2%.  Although this lags behind the rest of the UK slightly, likely caused by the knock-on impact of North Sea oil decline [LINK], it is still a “fundamentally strong position”.

For all the claims of pro-independence supporters that the GERS figures are somehow evidence of the union’s failure of Scotland, our onshore economy is “fundamentally strong”.  Don’t believe me?  Perhaps you’ll believe her?

I think she says “fundamentally strong” or some version thereof 14 times.

Despite this strength in the onshore economy, Scotland’s revenues have suffered a significant fall – 2.3% in real terms.  This is the direct result of the crisis in the oil industry with revenues from the North Sea amounting to £1.8bn for 2014/15, a drop of £2.2bn from the previous year (in the spirit of generosity, let’s not mention White Paper forecasts).

This drop in revenue is not an isolated phenomenon either.  Indeed, since the SNP took power in 2007, our revenue has dropped by 12.25% in real terms.

Revenue real terms

Obviously, the impact of the biggest financial crisis in living memory has to be taken into account along with the drop in oil revenues.

Nevertheless, that’s a 12.25% drop since 2007 – £7.5bn.  Or, using the SNP’s favourite PR trick, a cumulative drop of £28.7bn.

Despite such a marked fall in our revenues, Scotland’s public spending has increased since the SNP’s election.

real terms TME

That’s 4.8% more than 2006/07 or, cumulatively, £27.2bn more Scottish spending.

So whilst our tax take has gone in one direction, our spending has gone in the other.  When mapped against each other, setting 2006/07 as 100, it makes the point clearly:

revenue v spending

Where’s the bad news in this?  Where is the union “failing Scotland”?   Perhaps you think the falling revenue shows the union’s “poor management of Scotland”?   Well no, because the drop is generated almost entirely by oil revenues.  And remember:

You take oil out of the equation for the economy and I think our output per head is broadly similar to the rest of the U.K. and for most of my lifetime we’ve had higher tax receipts [this bit includes oil – FW] than the rest of the U.K. as a whole so we’re a strong and diverse economy

Nicola Sturgeon [LINK]

Even the latest GERS figures, with the big drop in North Sea oil revenues, bear this out.  Per capita, Scotland’s onshore revenues are only £400 per head lower than the rest of the UK, whilst they are nearly identical with the North Sea revenues included.  Indeed GDP per capita is still just under 1% higher in Scotland than the UK.  Our economy is “fundamentally strong”, remember?

At the risk of repeating myself, the deficit is, and always has been, created by our additional expenditure.  Public spending in Scotland is consistently £1400 per person higher than the rest of the UK.  This is not, as some would have you believe, thanks to the generosity of the SNP.  Our spending has always been higher, and necessarily so.

It costs more to provide the same public services in Scotland than elsewhere in the UK for a variety of reasons.  The First Minister was keen to stress this in her interview with Andrew Neil:

This is not an insignificant point.  In fact, it is probably THE crucial factor in any argument on Scotland’s public finances.  Our spending of £12800 per head is 12.3% higher than the UK average and allows Scotland to spend more on health, education, housing, transport… in fact almost every aspect of public spending is higher in Scotland:

spending per head v UK
From chokkablog
Perhaps a practical example would be better.  Scotland’s geography is clearly very different from the rest of the UK.  Most obviously, there are 89 inhabited offshore islands in Scotland which present various challenges to public services like transport and education.

Providing health services to island communities is a particular challenge.  Clearly it is not possible to have one GP surgery cover the same population in the Outer Hebrides as can be covered in the central belt or Aberdeen.  By necessity, it takes more doctors to provide the same health services to people in island communities.  Statistics like this cost money.

GPs per 10000
Source – ISDS
The average in the rest of the UK is around 6.5 GPs per 10000 patients.

So again, I am left wondering where the bad news is?  There goes that terrible union, supporting our higher spending when times are hard.

Isn’t this *exactly* the point of the United Kingdom?  When one part of the country hits a bad patch, the rest steps up and ensures that vital public services aren’t crippled?

At this point, the usual response is “aye but an oil fund would’ve done the same thing”.  Of course, independence wouldn’t have brought with it a free DeLorean and no amount of wishful thinking or what-ifs would change the fact that an oil fund does not exist.

Instead, we were net contributors to the UK for those years when oil revenues were high and there is no doubt that, at some point in the future, we will once again be net contributors.  For the moment, we’re beneficiaries.  This is how all countries work.  It is how a theoretically independent Scotland would work.

Of course, none of this is to say that Scotland *couldn’t* be independent.  No-one sensible has ever said that.  The argument is that we couldn’t currently be independent without fiscal detriment and that we are, demonstrably, better off within the UK.

That our revenue could fall by over 12% but our spending increase by almost 5% is not bad news for anyone in Scotland who uses public services.

It’s not bad news for anyone needing a doctor in Stornoway; it’s not bad news for any student requiring financial support in Glasgow; it’s not bad news for anyone receiving housing benefit in Edinburgh and it’s not bad news for my kids going to school in Aberdeenshire.  It’s not bad news for anyone paying any tax anywhere in Scotland.

Don’t let them fool you.  This is not bad news for Scotland, it’s only bad news for Scottish nationalists.

Such a clear and demonstrable destruction of the Yes campaign’s supposed “economic case for independence” and vindication of Better Together’s founding premise is hardly going to be welcomed by those supporting a party whose sole raison d’etre is independence.

Whilst some may consider independence to be worth it, it can no longer be denied that there would be financial pain.  And plenty of it.

Instead, thanks to our No vote and the reciprocal support of the UK, we currently benefit from an £8bn union dividend.  After years of making “union deposits” with our 80s oil revenues, it’s our turn to receive fiscal support.  The GERS figures show our economy within the union is fundamentally strong and performing well against other comparable EU nations whilst our particularly high spending is supported by our continuation within the United Kingdom.

You ask me, that’s at least eight billion obvious reasons the GERS numbers are good news for Scotland.

 

 

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6 thoughts on “GERS figures are good news for Scotland

  1. Good form with your analysis, Fraser. Indeed, your take on Scotland being a beneficiary after being contributor is a satisfactory response to the oil fund.

    On that note, Alaska has an oil fund, but still depends on federal money. Like Scotland, it has a vast rural and rugged area, but bigger (being the biggest state in the Union), which means it’s more difficult and expensive to do certain things like deliver public services. Alaskan politicians have defended heavy federal spending on these grounds and others, because that’s what the Union is for.

    And as you say, there may be a time when Scotland becomes a net contributor again. Over the long course of our history, many states have transitioned from being beneficiary states to contributor states and vice-versa. No big deal either way, because we are parts of the same country and stand for each other’s benefit when it’s needed.

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    1. Thanks Wesley. I hadn’t thought about the comparison with Alaska but I guess there are quite a few parallels, as you point out. I guess Alaska has never really had a ‘national’ identity of its own though, unless I’m mistaken? I’ve actually been to Alaska but was only 13 at the time so didn’t pay much attention to these sorts of things!

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  2. Very well made argument as ever, Fraser.

    I like how in this piece especially you “accentuate the positive” – even if your (entirely genuine) optimism is accompanied by a wry grimace at a couple of points. (The points where you reflect on Nationalist wishful thinking, or worse: a propagandistic, objectively unsubstantiated mock-up of positivism supporting vested Party interests.)

    “Blindsiding the knocking slogans” might in itself be an effective rhetorical response to tired mantras – since you clearly imply, who ACTUALLY has been “talking (and doing) Scotland down”? – but your piece goes beyond that.

    Evident also is a calm, collected, critical appreciation of objective grounds for confidence and hope. An approach, by the way, which I feel you exemplify very well in such pieces.

    The only upshot that makes me scratch my head a bit is this: if overall revenues (including tax revenues) have been decreasing, and public spending generally increasing, is there not a dangerous “scissors effect” in motion here? The danger of Scotland increasingly (on trends of the last 3-5 years – “SNP Era”) living beyond its means?

    In other words, do I understand not only that a leap into Independence would be disastrous under anything like current conditions and current trends – the clear enough flipside of your stressing the benefits of having a United Kingdom, I believe – but that the Scottish Government’s economic management skills, its governance of the nation as it stands, are highly and deeply questionable?

    Maybe I have misunderstood that bit.

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  3. Did the SNPs own oil fund report not actually say that we could not have had an oil fund due to the fact we only had one year in fiscal surplus in the last 20 odd years and 9 or so over all .

    I believe the report said because of our high public spending, to establish an oil fund we would have been required to raise taxes , cut public services or a combination of both along with higher public borrowing ?

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