What can we expect from the 2017 GERS figures?

The publication of the Government Expenditure and Revenue Scotland (GERS) annual report will be followed by claim and counter claim about the strength of Scotland's public finances and economy.

Finance secretary Derek Mackay will face the media on Wednesday following the publication of the 2017 GERS report

The publication, while presented as an impartial summary of the facts, serves an intensely political purpose. It first appeared in 1992, 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.

The timing was significant. All other major parties in Scotland were in favour of the creation of a Scottish Parliament. The Tories were not.

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

“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 the Fraser of Allander Institue (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.

“In the next few years, with the identification of Scottish taxpayers for the first time in 2016-17, income tax will be added to this along with air passenger duty and aggregates levy.

“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 know how much is actually ‘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.

What can we expect in tomorrow’s report?

If last year’s GERS report is anything to go by, the 2017 variety is unlikely to make happy reading. Last year, Scotland had a net fiscal balance of -9.5 per cent - including a geographical share of North Sea oil - for 2015-16. The UK as a while had a balance of -4 per cent.

The FAI has said “most economists would be wary of a net fiscal balance to GDP ratio being much than -3 per cent on a regular basis”.

It predicts the 2017 report will likely to see a similar relative gap – but both the Scottish and UK figures will improve.

What has caused this gap?

The short answer is oil, the price of which has tumbled over the past three years. To ensure the North Sea sector remains competitive, and workers still have jobs, the UK Government has offered tax breaks to firms - meaning receipts to the exchequor are down significantly.

“Unless there is a dramatic turnaround in oil revenues, Scotland’s net balance – based upon the GERS methods – is projected to be weaker than the UK position going forward,” the FAI concludes.