Gers figures: Scotland's public spending deficit rises to £15.1bn

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Image caption,
The figures only include the first two weeks of the coronavirus lockdown

Scotland spent £15.1bn more on public services than it raised in taxes last year, according to Scottish government statistics.

This public spending deficit was £2bn higher than the previous year, and represented 8.6% of the country's GDP.

The figures cover the financial year to 5 April 2020, so do not reflect the full impact of the Covid-19 pandemic.

The deficit for the UK as a whole rose from 1.9% of its GDP to 2.5% for the same period.

The statistics also estimated that Scotland raised £308 less per person than the UK average in taxation, while public spending was £1,633 per person higher in Scotland.

The figures were contained in the annual Government Expenditure and Revenue Scotland (Gers) statistics which have become a key battleground in the independence debate in recent years.

They are compiled by Scottish government statisticians free of political interference, and estimate spending that "benefits the people of Scotland" by the Scottish government, UK government, and all other parts of the public sector in Scotland.

It also estimates the total amount of taxation raised in Scotland, including a proportional share of UK government taxes.

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Where is public money being spent in Scotland?

  • £81bnSpending in 2019-20

  • £24bnSocial protection inc state pension

  • £14bnHealth

  • £9bnEducation

  • £4bnTransport

Source: Gers

What does the report say?

The report estimated that a total of £81bn was spent by the public sector in Scotland last year - about £2.5bn more than the previous year.

Meanwhile total revenues were put at £65.9bn, which was an increase of 0.7% and the highest on record.

But revenues from the North Sea oil and gas industry dropped by £642m to £724m, which the report said reflected a fall in the oil price towards the end of the year.

North Sea tax receipts brought in about £11bn a decade ago.

The report says that its figures include the "initial impacts" of the coronavirus pandemic - but warns that the impact will be greater next year.

What has the reaction been?

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Finance Secretary Kate Forbes said governments across the world were spending more to deal with coronavirus

The Scottish government's finance secretary, Kate Forbes, said the pandemic had "fundamentally changed the fiscal landscape".

She added: "We are now witnessing an unprecedented health and economic crisis.

"Countries across the world, including the UK, have increased borrowing to record levels and, as we emerge from the pandemic, high fiscal deficits will inevitably be one of the consequences.

"An independent Scotland would have the power to make different choices, with different economic budgetary results."

'Massive setback'

But the Scottish Conservatives said the figures were a "massive setback for SNP plans for separation" and showed that being part of the UK was "more valuable than ever" to Scotland.

The party's finance spokesman, Murdo Fraser, said Scotland's public spending deficit was now higher than its health budget of £13.8bn.

He said: "The SNP and Nicola Sturgeon herself used to hail Gers figures as all the evidence Scotland needed to separate from the UK.

"Now, nationalists will spend the day denying facts from their own government."

His comments were echoed by the UK government's Scottish secretary, Alister Jack, who said the "Union dividend" was worth £1,941 for every person in Scotland.

Scottish Labour leader Richard Leonard said the figures showed that Scotland's deficit had increased even before the full economic impact of coronavirus were felt.

He added: "With billions draining from the Scottish economy in the event of separation, Scotland would be thrust into years of savage and unrelenting austerity."

The Scottish Greens said the statistics showed that the "old economic system" had failed, and that "independence must come with a determination to build a future for all in a new greener Scotland."

And the Scottish Liberal Democrats said the "eye-watering" figures "really drive home just how economically valuable the partnership across these isles is".

Every part of the UK is out of kilter. Three parts are reckoned to be net contributors: London, south-east England and the east of England.

Scotland is one of the net beneficiaries, but the notional deficit per head is lower than Northern Ireland, Wales and the north of England.

Its tax take per head is close to that of the UK average, which indicates the economy has been performing nearly as strongly as the UK one. Scotland's spending level per head is significantly higher than the UK figure.

So why does this matter so much in Scotland but not elsewhere? Probably because Scots are debating whether to become independent or not.

Next August, Gers will look very different. The UK, Scotland and every other country are facing enormous deficits, from lower tax and higher spending, and the damage from having to tackle coronavirus and recession is likely to be felt for several years to come.

These figures are acknowledged by most people, on both sides of the debate, as the starting point for a discussion about the affordability of public services and welfare benefits if Scotland's budget were to stand alone.

But they only show the starting point if Scotland had become independent last year, and before any changes could be made to tax or spending.

With a deficit of 8.6% of total output - well above a sustainable level - many of those early decisions would be difficult.