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

Donations the SUAT made to the Conservative and Unionist Party were properly reported by the party, the investigation found
Donations the SUAT made to the Conservative and Unionist Party were properly reported by the party, the investigation found
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The publication of the latest Government Expenditure and Revenue Scotland (GERS) annual report will be followed by a familiar barrage of claim and counter claim about the strength of Scotland’s economy, writes Chris McCall

The purpose of GERS is relatively straightforward. The report estimates the difference between what Scotland earns in terms of revenues and what it spends. The Scottish Government's own website claims the aim of GERS is to "enhance public understanding of fiscal issues".

But the publication of the figures provokes a fierce political debate on what exactly they tell us about the nation's finances.

The publication, while complied by impartial civil servants, was first conceived with an objectively political purpose. The inaugural GERS report was released in 1992 at a time when oil prices were low but demands for devolution were high.

It was promoted by then Conservative secretary of state for Scotland, Ian Lang. It was designed - as the minister acknowledged in a leaked document - to “undermine” the UK government’s rivals.

“GERS was intended, in part, to demonstrate to the public that devolved self-government was A Bad Thing,” BBC Scotland political editor Brian Taylor would later observe.

“Much later, with a devolved parliament firmly in place, matters transmogrified as the annual GERS figures were used by SNP ministers to suggest that Scotland’s economic position was relatively strong and that, with oil, we were potentially rich beyond ambition.”

Who compiles the GERS report?

The report is produced by independent civil servant statisticians, who decide on methodology, and is published by the Scottish Government. All methodologies are public and available online for scrutiny.

Data is sourced from the UK Office for National Statistics (ONS) and is then compiled by Scottish Government administrators. The report contains estimates on the Scottish economy within the constitutional arrangement of Scotland as part of the UK. It is not a projection of the economy of an independent Scotland.

On what data is GERS based?

“On the spending side, the figures are actual data and not estimates,” a blog by the Fraser of Allander Institute (FAI) explains.

“For revenues, an increasing proportion of the data used is now collected in Scotland. This includes council tax, business rates, the profits made by Scottish Water, landfill tax, land and building transactions tax and local authority user charges and fees.

“But for other revenues – particularly those collected by HMRC – estimation is needed.”

An example of this is the whisky industry and the duty it pays. The GERS report can’t define how much is paid by consumers in Scotland and how much is paid by consumers elsewhere in the UK. But reliable estimates can be made from other consumer data.

But the FAI said it would be wrong to dismiss GERS as part of it is based on estimation. Scottish GDP figures, for example, are based entirely on estimation, as are productivity, trade, unemployment, oil and national accounts statistics.

Does it tell us what the finances of an independent Scotland would look like?

The short answer is no. The data reflects the current political and financial arrangements of Scotland's place in the UK.

But Unionists believe they offer a good indication of how big an independent Scotland's fiscal deficit would be.

Pamela Nash, chief executive of Scotland in Union, said: "The size of Scotland’s deficit is also important, because at its current level a separate Scotland wouldn’t be able to meet EU criteria for new members without making drastic public service cuts and increasing taxes."

Environmentalists, such as the Scottish Green party, criticise GERS from a different point. Co-leader Patrick Harvie said: "While the discussion around these figures usually focuses on whether Scotland has a notional deficit or not, what GERS has consistently shown us is that Scotland’s definition of success still lives or dies by profits from the oil industry - a volatile and dwindling resource, the pursuit of which is damaging our way of life.