60% of GDP comes from public sector

Published on Sunday 28 May 2006 00:24

SCOTLAND'S reliance upon the state for its income is revealed in a new survey this week, which shows that nearly 60% of the economy is produced by public sector spending.

A report by analysts at the Centre for Economics and Business Research (CEBR) claims that 57.7% of gross domestic product comes from the public sector.

The figures show that Scotland's public sector spending is now well above former Soviet republics such as Poland, the Czech Republic and Slovakia.

Scotland even narrowly beats Sweden, well known for the all-embracing size of its own welfare state.

Top of table in the UK is Northern Ireland, where 76% of GDP relies upon the state. Next is Wales (66%), the north-east of England (65%) and then Scotland.

The figures are in massive contrast to the south, where a more dominant private sector is the main driver of income. In London, only 35.6% of the economy relies upon public spending.

Business leaders said that the figures for the north of Britain renewed worries that the public sector was "crowding out" the wealth-creating private sector.

Sir Digby Jones, the director-general of the CBI, said: "I'm very, very worried about this. The private sector is responsible for around 62% of GDP in China - a communist, totalitarian regime."

Tony Travers, director of the Greater London Group at the London School of Economics, added: "All of this raises the question of whether public spending is a good or a bad thing.

"Thirty of 40 years ago, regional planners would have said that the thing to do to close the north-south divide would be to shift public spending north.

"The thing that makes economies grow is the vibrancy and success of the private sector."

Last year, Sir John Ward, the chairman of Scottish Enterprise, compared public spending in some parts of Scotland to "Eastern bloc" levels.

SE figures showed that in some parts of Scotland, 75% of the economy came from public spending.