Scotland has a £12bn finance deficit, report says

SCOTLAND is carrying a £12 billion black hole in its finances, a new report has found.

But the figures from the Centre for Economics and Business Research (CEBR) show that the country’s deficit – about 10 per cent of GDP – is no worse than the UK as a whole, debunking the claim that Scotland is subsidised.

Public spending in Scotland on services such as the NHS and schools is currently about £62.4bn, the report finds, while only £50.6bn is raised in taxes – including Scotland’s share of oil and gas revenues.

This leaves an annual deficit of about £11.8bn.

Finance secretary John Swinney has argued that the official Government Expenditure and Revenue Spending (Gers) figures indicate Scotland’s finances operate in small budget surplus.

The coalition’s interpretation of these official statistics is that Scotland’s deficit, even with oil and gas receipts, would be about £14bn – far closer to the estimate in today’s report.

Conservative finance spokesman Gavin Brown said: “This clearly shows that Scotland is spending 10 per cent more than what it’s raising in tax receipts.

“Under separation, this shortfall would have to made up through more borrowing.

“Scotland currently enjoys the economic strength of being part of the United Kingdom and its triple-A rating, but this would not be the case if we broke away from Britain, resulting in higher interest rates.” 

Labour finance spokesman Ken Macintosh said: “Being part of the United Kingdom allows Scotland to share the benefits and spread the risks, and that is why the vast majority of Scots want to stay in the Union.”

The annual deficit comes on top of the share of UK national debt which Scotland would have to take on after independence, estimated to be somewhere in the region of £80-110bn.

But the report does show that Scotland’s deficit level is no worse than that of the rest of the UK as a whole.

“In the light of the independence debate, Scotland receives no net subsidy,” it states.

“The oil and gas revenues exactly cancel out the fiscal transfers from the non-oil sector.”

The report uses the figure of 83 per cent to account for Scotland’s share of North Sea oil and gas revenues.

The Scottish Government, however, insists that this is closer to 91.4 per cent.

Mr Swinney said: “Year-on-year, Scotland is in a stronger financial position than the UK as a whole.”

He explained: “Taking all Scottish revenues and all spending in Scotland into account – including the net cost of the financial sector interventions – the official Gers statistics show that Scotland has run a current budget surplus in four of the five years to 2009-10, while the UK was in current budget deficit in each of these years, and hasn’t run a current budget surplus since 2001-2.

“In the five years to 2009-10, Scotland was in a stronger financial position than the UK as a whole to the tune of £7.2bn – or nearly £1,500 for every person in Scotland.”