Scotland's public spending deficit rises to £22.7 billion as North Sea revenue halves

First Minister John Swinney and finance secretary Shona Robison. Picture: Lisa Ferguson/National World | National World

Scotland’s public spending deficit has risen to £22.7 billion amid a drop in revenue from North Sea oil and gas.

The latest annual Government Expenditure and Revenue Scotland (GERS) report shows there was an estimated deficit of 10.4 per cent of GDP in 2023/24, compared to 4.5 per cent for the UK.

It came as it emerged public spending in Scotland is to be halted and key projects cancelled to help fund hundreds of millions of pounds worth of public sector pay deals.

The UK Scotland Office said the figures showed people in Scotland benefit from £2,417 more per head of additional spending compared to the UK average, as a result of the redistribution of wealth throughout the UK.

Scotland Office minister Kirsty McNeill said: “These figures underline the collective economic strength of the United Kingdom.”

GERS sets out revenues raised in Scotland alongside public spending north of the border, and is prepared independently of Scottish ministers. Its figures have long been a focus of debate when it comes to the finances of an independent Scotland.

Excluding the North Sea, Scotland had a deficit of 13.2 per cent of GDP (£26.6 billion).

The Scottish Government pointed to the fact that revenue generated for Scotland’s public services increased by £1.7 billion last year to £88.5 billion, driven by a strong labour market, progressive taxation and renewable energy.

Of this, £4 billion was North Sea revenue, down from £7.9 billion in 2022/23, following falls in energy prices and production. Scottish non-North Sea revenue was £84.6 billion.

Non-North Sea revenue increased by £5.7 billion in 2023/24 – an rise of 7.2 per cent, with income tax and onshore corporation tax both growing.

Total spending for Scotland increased to £111.2 billion, with additional funding for the NHS and Scottish Child Payment. Spending increased by £6.3 billion (6 per cent).

In 2022/23, Scotland’s public spending deficit was £19.1 billion.

SNP finance secretary Shona Robison said: “I welcome the fact that Scotland’s revenues grew last year, with those generated onshore growing faster than in the rest of the UK, thanks in part to our progressive approach to tax and the revenue from renewable energy.

“As the report makes clear, the notional deficit is not a reflection on the finances or policies of the Scottish Government – it is a reflection of UK Government choices.

“It is also important to emphasise that these figures reflect Scotland status as part of the UK. As figures from the Office for National Statistics show, the UK economic model is driven by London and the South East of England. The UK Government retains control of 40 per cent of expenditure and over 70 per cent of revenues in Scotland. Indeed, a significant portion of the spending allocated to Scotland relates to servicing UK Government debt, which is paid at a higher rate than our European neighbours.

“As an independent nation, we would have the powers to make different choices. As it is, we are using all the powers we do have to deliver our priorities of growing the economy, investing in net zero, eradicating child poverty and delivering strong public services.”