GERS: Nicola Sturgeon claims record deficit no barrier to Scottish independence

Nicola Sturgeon and her finance secretary Kate Forbes have both rejected suggestions that a doubling of Scotland’s deficit as a result of Covid public spending undermines the economic case for independence.

The First Minister said despite the notional deficit standing at 22.4 per cent of GDP in 2020/21 – the highest yearly figure since the government’s annual accounts began two decades ago – the “fiscal position was a result of how we are governed in the UK" and having a deficit was "not a barrier to any country being independent”.

Ms Forbes meanwhile suggested the pandemic had “strengthened” her party's case for separation and having a £36.3 billion black hole was “not an obstacle” to independence.

Finance secretary Kate Forbes. Picture: PA

Public spending increased by 21 per cent during the past financial year, reflecting the impact of the pandemic, while average public spending per person also rose to £1,828 above the UK average.

The figures were revealed in the Government Expenditure and Revenue Scotland (GERS) figures published by the Scottish Government on Wednesday.

Both the UK and Scottish deficits increased during the year, with the UK’s up by 11.6 percentage points and Scotland’s increasing 13.6 percentage points.

The report said: “This reflects the impact of Covid-19, which has seen falls in revenue, increased expenditure, and falls in GDP, all of which contribute to the increase in the deficit.”

Scotland’s 22.4 per cent deficit is more than double that of last year and is the largest since the GERS figures began recording the data in 1998.

As well as the impact of coronavirus, the fiscal position was also affected by declining activity in the North Sea and a fall in oil prices, which led to a drop in North Sea GDP of 40 per cent.

Total public expenditure in Scotland during 2020/21, covering both Scottish and UK government spending and the rest of the public sector, was £99.2bn.

This is equivalent to 9.1 per cent of total UK public sector expenditure, or £18,144 per person – which is £1,828 per person greater than the UK average.

While opposition parties said the GERS figures damaged the case for independence, Ms Forbes admitted the pandemic had “fundamentally shifted our fiscal landscape”, but denied it had set back the debate around independence.

She said: “I think the arguments for independence are strengthened through the pandemic.

“Three years ago, when the figures for the notional deficit were around seven or 8 per cent, similar questions were asked around whether or not Scotland could truly be successful as an independent country.

"The UK’s deficit right now, as a result of an unprecedented shock, is about 14 per cent – the highest in Europe.

“The fundamental difference is that we all assume the UK Government will manage that position down because of the levers at its control – partly growing the economy and partly managing its finances in a prudent and sustainable manner.

“That is what countries around the world are doing.

“So, yes, there is a strengthened argument for us to grow our economy and my position is that I can only go so far without the full levers at our control.

“Yes, the landscape has changed, but I think it’s strengthened the argument for tailored powers to ensure Scotland’s economy can grow, and we can manage the situation.”

Asked if the deficit was an obstacle to making the case for independence, Ms Forbes said: “It is not an obstacle to making the case for independence, because deficits across the world have risen exponentially and having the highest deficit in Europe does not seem to be an obstacle to the UK Government being independent, and the same argument would apply to us.

”This is a case for having the levers, the full control, to manage our fiscal sustainability.”

Ms Forbes would not be drawn on a timetable for reducing the deficit and, despite emphasising a need for the government to have more borrowing powers, she failed to answer a series of tough questions on current yields and the costs borrowing would entail.

Murdo Fraser, the Scottish Conservative Covid recovery spokesman, said the figures showed the extent of the UK Government’s support during the pandemic, such as the furlough scheme.

He said: “These new figures demonstrate the strength and security that we gain as part of the United Kingdom.

“In times of crisis, when a pandemic hits, Scottish jobs and public services are safer because we act together.

“The UK Government has delivered a war chest to fight Covid, back our NHS, and support Scotland’s economic recovery.”

Scottish Labour deputy leader Jackie Baillie said the figures “plainly show how the people of Scotland benefit financially from being part of the United Kingdom”.

She said: "Nothing illustrates the importance of this relationship more than the response to the pandemic, where this additional funding has been key to the protection of the NHS and other public services that have kept the people of Scotland safe.

“The additional £1,828 spent per person in Scotland compared to the rest of the UK is what goes to maintaining the schools, transport and NHS on which we all rely.

“The ongoing economic fallout of the pandemic and the unanswered question of separation remain the largest long-term economic threats to Scotland's prosperity.

"That is why it is reckless beyond imagining to pursue a divisive and economically catastrophic referendum during the recovery.

"No credible politician can look at these figures and believe Scotland would be anything but weaker outside the union.”

However, Scottish Greens co-leader Patrick Harvie, who is set to be part of the Scottish Government in a new deal, said the GERS figures were not an “incisive analysis of the Scottish economy”.

He said: “Each year the same people leap on it to make the same points about the constitution, when it tells us nothing about the real economic challenges and choices facing us.

“The economic impact of the pandemic has been widely predicted and we shouldn’t be surprised at that. The pandemic has also exposed a system where small businesses are vulnerable to economic shocks while the most exploitative and polluting corporations are free to pursue continuous growth.

"If we want a resilient economy, this needs to change so that our focus is on the wellbeing of people and planet.”

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