New GERS figures shows Scotland's deficit stands at £15.1 billion

Scotland's annual financial report has shown the country's deficit is around three-and-a-half times bigger than the UK’s in percentage terms, despite a record increase in revenues.

The latest GERS figures have been published today

The latest Government Expenditure and Revenue Scotland analysis of the health of the economy, has shown that the Scottish “notional deficit”, the difference between how much is raised in tax and how much is spent, stands at 8.6 per cent – £15.1 billion – compared to 2.5 per cent for the UK as a whole. Further, it rises to 9.4 per cent – £15.9bn – if North Sea revenues are excluded.

The report also shows that despite rising tax revenues overall, Scotland's public sector take is £12,058 per person, £308 less than the UK average, while expenditure levels mean that on average, spending per person in Scotland is £1644 higher than on those living elsewhere in the UK.

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Scottish Conservative MSPs and the Scottish Secretary said the new figures proved the benefit of the "pooling and sharing" of resources across the UK, while the Scottish Government said that an independent Scotland would have the powers to make “different choices, with different economic budgetary results."

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GERS figures: What are they and why are they controversial?

Despite a pledge last year by then Economy Secretary, Derek Mackay, that the Scottish Government would produce "alternative GERS figures" this year, the data will not be published as the Covid pandemic "diverted resources."

The report shows that overall revenues, including North Sea receipts, increased to a record £65.9 billion, with onshore revenues growing by £1.1 billion to reach £65.2 billion.

However corporation and VAT receipts fell compared to the previous year and both the Scottish and UK Governments increased spending to tackle the pandemic.

As a result of this, plus a rise in UK Government spending on reserved matters, Scotland’s notional onshore deficit – the difference between income and expenditure - rose 0.6 per cent to 9.4 per cent of GDP. Adding North Sea revenues which totalled £724 million – £642 million less than in 2018-19 – the notional overall deficit stood at 8.6 per cent of GDP.

Finance Secretary Kate Forbes said the figures emphasised how Covid-19 had fundamentally changed the fiscal landscape. “The Scottish Government has responded swiftly to the challenges of Covid-19 and has worked hard to protect Scotland’s economy, providing over £2.3 billion of support to businesses.

“The public finances were already facing challenges this year due to the uncertainty caused by Brexit. We are now witnessing an unprecedented health and economic crisis. Countries across the world, including the UK, have increased borrowing to record levels and, as we emerge from the pandemic, high fiscal deficits will inevitably be one of the consequences.”

She added: “That is why the UK Government should prioritise economic stimulus over austerity. I will also continue to press for the Scottish Government to be granted additional financial powers to enable us to tailor a response that meets Scotland’s needs.

“Scotland, unlike most other countries around the world, large and small, does not currently have the full financial powers needed to chart a way to sustainable recovery from the economic impact of the pandemic. The current situation, with the looming withdrawal of furlough support by the UK Government, means it is now more urgent than ever that we gain those powers.

“It is important to stress that 40 per cent of spending and 70 per cent of revenue income in GERS, combined with key powers over the economy, are reserved to the UK Government and outside the control of the Scottish Government. An independent Scotland would have the power to make different choices, with different economic budgetary results.”

However Scottish Secretary Alister Jack said the Scottish Government figures “show clearly how much Scotland benefits from being part of a strong United Kingdom, with the pooling and sharing of resources that brings.”

He added: “ People in Scotland, year after year, benefit from levels of public spending substantially above the United Kingdom average, with a Union dividend of £1,941 per person in Scotland.

“That has never been more important than it is right now. In the face of a global pandemic, the strength and experience of the UK Treasury is helping people in Scotland and across the rest of the United Kingdom.

“The UK Government is currently supporting more than 930,000 jobs in Scotland – a third of the workforce. This is just one part of a huge package of measures to get our economy back on track, on top of an extra £6.5 billion for the Scottish Government to fund public services in Scotland. We will continue to back all parts of the UK as we recover from the economic impact of coronavirus.”

His colleagues in the Scottish Parliament went further, saying the figures were "a massive setback" to the SNP's independence plans with the deficit rising by £2bn from last year, and is now “larger than the entire Scottish health budget of £13.8 billion".

Scottish Conservative finance spokesperson, Murdo Fraser MSP, said: “The SNP and Nicola Sturgeon herself used to hail GERS figures as all the evidence Scotland needed to separate from the UK. Now, nationalists will spend the day denying facts from their own government.

“Today’s GERS official statistics show that the UK Union is more valuable than ever. It is worth nearly £2,000 a year for every man, woman and child in Scotland.

“And this doesn’t even take into account the blockbuster support from the UK Government throughout the pandemic, including one of the largest and most generous job-saving schemes in the world.

“This is a hammer blow to the SNP and a massive setback for separation. Nicola Sturgeon would have to throw away Scotland’s entire NHS, every nurse and doctor, just to come close to balancing the budget in her separate state.

“It’s beyond dispute that the economic case for independence has never been weaker. Separating would cost Scotland £15 billion a year that we need for our schools and hospitals.

“Instead of debating the merits of slashing £15 billion from Scottish public services, we should be debating how we put that £15 billion to better use in our schools, hospitals and high streets.”

Scottish Labour leader Richard Leonard said the coronavirus pandemic had “plunged the Scottish and UK economies into the biggest freefall for 300 years.

"The Scottish and UK governments need to co-operate to restart the economy and to retain, guarantee and create jobs, and to remobilise our public services.

“These statistics show that Scotland’s deficit has increased in size even before the impact of the economic ramifications of the pandemic are felt.

“With billions draining from the Scottish economy in the event of separation, Scotland would be thrust into years of savage and unrelenting austerity.

“We cannot let a generation be lost to austerity caused by the pandemic or the creation of a separate Scottish state. Scottish Labour will continue to fight for the investment and jobs that Scotland so badly needs.”

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