As GERS figures show, Scotland lives beyond its means - Brian Monteith

As the GERS figures reveal, there is no doubt that Scotland lives beyond its means year after year, writes Brian Monteith.

Kate Forbes MSP. (Photo by Fraser Bremner - Pool/Getty Images)
Kate Forbes MSP. (Photo by Fraser Bremner - Pool/Getty Images)

Every year what passes for Scotland’s notional balance sheet is publ-ished and generates a blizzard of headlines about the public finances.

Words such as “deficit”, “fiscal transfer”, “union dividend” are bandied about for a week or so but then gently fade away from public consciousness until it all happens again the following August.

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This year the occasion was brightened up by Scotland’s Finance Secretary, Kate Forbes, making up for the absence of the Festival Fringe by putting on a contortionist act that would surpass anything from a damp tent in the Meadows.

The Government Expenditure and Revenue Scotland (GERS) figures are relatively simple enough to understand, although Kate Forbes clearly had some difficulty. Scottish taxpayers, either as individuals or through businesses, generate £65.9 billion of revenues. The UK government spends £32.8bn on Scotland or the Scottish people and the Scottish Government and its agencies spend £48.1bn. This means there is a shortfall of some £15.1bn which is covered by the UK government.

The estimates and actuals are signed off by impartial and judicious officials and the methodologies used to arrive at the numbers have over the years been refined so they are accepted by all but the most pedantic among those who like to refute what the figures tell us. We know this because the First Minister herself touted the GERS figures as justification for Scottish independence back in 2014.

The UK government’s expenditure is made up chiefly from estimates for the Scottish share of pensions and other welfare benefits as well as items that are provided for the benefit of everyone in the UK, such as national security and defence. The Scottish Government’s expenditure relies more readily on what it controls under its own budgets for devolved responsibilities like education, health and transport. The expenditure is the result of political decisions taken by the governments and were there to be a change in the way we do things – such as Scotland leaving the UK – the figures show the starting-point for our economy from that moment on.

W hile successive UK Chancellors have been bringing the national deficit down from £164.5bn in 2010/11 to £55.4bn in 2019/20, the Scottish finance ministers have overseen their deficit grow from £11.7bn to £15.1bn over the same period. It is beyond reason to suppose that this annual deficit of £15.1bn would be sustainable without the current support of the UK Treasury. It is beyond doubt that Scotland lives beyond its means, year after year after year. A new set of political decisions would need to be taken to reduce the deficit to a manageable figure that could be financed by public borrowing and economic growth that raised greater revenues (presuming the economic shock of foregoing the £15.1bn would not cause a recession in itself).

The focus would inevitably turn to savings that would need to be found, as that is where the pain would be and the victims of spending cuts would be vocal. Due to Scotland’s large size relative to its low population density it costs more to deliver public services than it does in the rest the UK, but this does not explain the deficit of £15.1bn. The reason Scotland lives beyond its means is because Holyrood has taken decisions over the years to do some things differently that cost a great deal of money and the bill is then picked up, not by Scots but by taxpayers across the UK and most obviously from London and the South-east where the majority of tax revenues are generated. If there were an independence day this flow of revenues, the fiscal transfer, would end overnight. . Immediately.

So a new Scottish Government would be faced with some really tough choices that would change our way of life. How would free tuition at university be sustainable? It costs at least £213m a year – how could that be afforded? How would free personal care for the elderly be afforded? Introduced in 2002, it costs over £500m a year. These policies do not exist in England, but taxes generated in England pay for such benefits in Scotland. How would we continue with this policy without the flow of funds from London to Edinburgh?

As an example, I have occasion to go to the Republic of Ireland to see my grandchildren from time to time. A couple of times I have had to visit a doctor for a consultation and each time I was charged 50 euros for the privilege. It was the same when I lived in France, only it was 23 euros. These were not private doctors but charges of the state health services that people pay. Never mind how long could Scotland’s NHS maintain free prescriptions – the more likely question would be how quickly would Scotland abandon free GP consultations by adopting charges like those in Ireland?

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Kate Forbes said last week the GERS figures demonstrated independence was more necessary than ever and that the deficit could be solved by greater economic growth generating higher tax revenues. That response twisted beyond recognition what GERS revealed. The fact Scotland has been able to make different policy choices and have the costs underwritten, year after year, by English tax revenues and UK borrowing pays testimony to the strength of how the UK pools and shares incomes and expenditures. The fact the SNP have a history of raising taxes that lead to lower than expected revenues leaving black holes in the public finances offers no confidence that they could deliver higher economic growth that would pay down Scotland’s enormous deficit of their own making. A strong dose of honesty is required from SNP politicians but it is not forthcoming, instead we get absurdities and self-denial.

If Kate Forbes is ever out of a job she need only contact Cirque du Soliel; they are always looking for good contortionists in Las Vegas.

Brian Monteith is editor of ThinkScotland.org

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