“Everyone is entitled to their own opinion, but not their own facts” – Daniel Patrick Moynihan
So here are the facts about Scotland’s economy I have compiled which will hopefully help expel the myths of our own inadequacy.
“Scotland is too wee to be a viable independent country”
Scotland has a population of around 5.3 million, compared to rUK’s population of approximately 58 million. You don’t need to be a mathematical wizard to see we are smaller, however we are not too small. If you look at the top three wealthiest countries in the OECD (as detailed below) you’ll see that the argument that Scotland is “too wee” is ridiculous and also a blatant lie.
1) Luxembourg – population 523,000 – GDP per capita 86.3
2) Norway – population 5 million – GDP per capita 57.3
3) Switzerland – population 7 million – GDP per capita 48.7
“Scotland is too poor to be a successful independent country”
We have been told for decades that Scotland is the subsidy junkie of Britain, that the rest of the UK pays our way in the world. It’s not surprising that this myth has long gone unchallenged, after all we only make up 8.4% of the UK population; so it must be true that the rUK pays for Scotland, mustn’t it?
Well, no actually, that isn’t true at all.
Making up only 8.4% of the UK population, Scotland actually accumulates almost 10% of the overall tax revenue of the UK (£53.2 billion), which means that Scottish people contribute more tax per head than the rest of the UK. This isn’t just a one off either, Scotland has actually paid more tax per head than the rest of the UK every single year for the last 30 years.
“But you receive more spending per head compared to rUK and you have a deficit of £12 billion”
This line is always, rather smugly I might add, trotted out when it’s pointed out that Scotland raises more tax than rUK. Whilst it’s completely true that Scotland does receive more spending than rUK, it’s not really accurate to say Scotland *spends* more. It’s worth having a deeper look into that spending, who spent it and where it goes.
i) THE SPENDING
In 2012/13 Scotland’s total public spending bill was £65.2 billion, compared to UK’s spending (excluding Scotland) of £609.9 billion.
The spending of Scotland’s £65.2 billion is broken up into two categories:
Identifiable spending: is that which can be identified as being spent to benefit the residents of a particular country or region of the UK. For example, benefit spending can clearly be allocated to the country or region where the recipient lives. Identifiable spending accounts for 86% of total public expenditure on services.
Non-identifiable spending: is that spending which is incurred for the UK as a whole, rather than residents of a particular country or region. The largest categories of non-identifiable spending are defence and interest on government debt. Non-identifiable spending accounts for 14% of total public expenditure on services.
So, of that 86% total identifiable public expenditure on services, Scotland’s Government and Local Authorities had control of approximately £38.5 billion. With that money, the Scottish Government provided the people of Scotland with (among other things) a free publicly owned NHS, free higher education, free prescriptions, free public transport for pensioners, free personal care for the elderly, a publicly owned water board, and also a freeze on council tax. It also attributed to non-reserved matter spending on public order & safety, housing & local amenities, recreation culture & religion, public & common services, and environmental services.
£26.6 billion of Scotland’s total expenditure was spent by the UK Government on Scotland’s behalf, this includes £9.3 billion of “non-identifiable” spending. It’s worth noting that the “non-identifiable” spending isn’t the actual amount spent IN Scotland, but rather an estimate based on Scotland’s population share (8.4%) of the overall spending by Westminster which is deemed as “non-identifiable”. For instance, in 2007/8 Scotland spent an identifiable amount of £400 million on defense in Scotland, our population share of non-identifiable defense spending by the UK Government was £3.1 billion . However, in actual fact we only saw £1.9 billion of that amount spent on defense in Scotland on our behalf.
Scotland’s share of debt interest payments to the UK Government was £4.1 billion for 2012/13. This is our share of interest on a per capita basis. There are no official figures kept for how much of the debt was accrued by Scotland, so we pay a population share on the basis that everyone shoulders the debt burden equally across the United Kingdom. Our debt spend is classed as non-identifiable spending.
So we now know for a fact that the Scottish Government & Local Authorities spent £38.5 billion IN Scotland, and that the UK Government spent £17.3 billion IN Scotland. Unfortunately we cannot say with absolute certainty that every penny of the remaining £5.2 billion of non-identifiable expenditure (£9.3 billion minus £4.1 billion debt spend) was spent IN Scotland. However, what is absolutely certain is the fact that Scotland didn’t SPEND it – the UK Government did.
I think it’s worth mentioning here that of the money Scotland has control over, the current Scottish Government manages to stay within its allocated budget.
i) THE DEFICIT
The first thing we should note about the deficit (and this is true for revenues too), is that the figures for Scotland are quoted in three stages:
Excluding oil & gas
Including oil & gas on a per capita share
Including oil & gas on an illustrative geographical share.
Meanwhile the figures for the UK automatically include a 100% share of oil & gas.
Another thing which is worth mentioning is that the much quoted £12 billion deficit figure, is the Net Fiscal balance which includes capital investment of public spending on things like new schools being built, hospitals, new roads etc. The Current Budget Balance gives an entirely different deficit figure, a much lower £8.5 billion.
The current balance budget deficit for the UK is £91.9 billion, and £114.7 billion for their net fiscal balance deficit (again, these figures include a 100% share of North Sea revenues in their calculations – a wee bit misleading I feel)
As we can see, both Scotland and the UK are running at a deficit, they both spend more than they create – This isn’t a sole problem for Scotland.
Now, here’s where things get interesting! If you take those figures for Scotland and compare them to the UK figures on a percentage of GDP, here’s what we find.
A) Scotland’s current balance budget, including geographical share of North Sea – 5.9% of GDP
i) UK’s current balance budget, including 100% of North Sea – 5.8% of GDP
B) Scotland’s net-fiscal balance, including geographical share of North Sea – 8.3% of GDP
i) UK’s net fiscal balance, including 100% of North Sea – 7.3% of GDP
There isn’t a whole hell of a lot in it. This isn’t a one horse race with the UK bolting ahead whilst Nicola Sturgeon stands on the sidelines screeching “c’mon Scotland, move yer bleedin’ arse” like some Scottish Eliza Doolittle attending the indyref races. On the contrary, this is a photo-finish. It would be extremely interesting to see a comparison with UK figures including their illustrative geographical share of North Sea instead of a 100% share. I wonder why the UK Government chooses not to highlight these figures…
Anyhoo, moving on.
HOW WILL THESE FIGURES CHANGE IN AN INDEPENDENT SCOTLAND?
Here’s how our economy works at the moment: All monies raised in Scotland are immediately sent to the UK Treasury, they then give us our share of money allocated through the block grant, which is based on the Barnett Formula. The Barnett Formula sets out the rules in how money is divided between England, Scotland, Northern Ireland, and Wales; and is based on a population percentage of each nation. The Barnett formula is not written into law, it is a purely monetary administrative system and there have been constant calls for it to be re-devised or scrapped entirely since it’s introduction. It’s a subject which is often seen addressed within the House of Lords. Let’s be clear here, the money which Scotland receives is entirely dependent on the agreement of the UK government, who could at any time scrap the Barnett Formula if they so wished, or alter it so that Scotland would receive less money than we do at the moment in order to make things “fairer” across the United Kingdom.
In an independent Scotland, we would cut out the Treasury middle man. All monies raised in Scotland would be allocated and spent by Scotland, we would no longer have to rely on money being given to us through block grants or have to worry that our funding could be cut by a Westminster Parliament the people of Scotland largely didn’t vote for and are grossly outnumbered in the hundreds by way of representation.
The argument over Scotland’s expenditure and deficit being a reason to vote against independence largely relies on the assumption that an independent Scotland would continue the spending trend we do at present.
With independence comes the powers to change how our money is spent. We would no longer be sending our per capita share of money down to help refurbish Westminster, or to build a high speed railway which stops 100 miles away from Scotland’s border. We wouldn’t help subsidise the some 780 peers within the House of Lords (an undemocratic and unelected drain on tax payers expenses). We wouldn’t be planning to spend a share of £34 billion on renewing nuclear deterrents on the Clyde when 220,000 children in Scotland are living in poverty with a further 50,000 estimated to join that already horrific number by 2020.
We can choose to create a fairer tax system, we can choose to enable tens of thousands of people back into work by transforming child care policies, we can choose to properly tackle the poverty that has plagued Scotland’s streets for far too long. It all comes down to choice, Scotland’s choice.
The power to change what we are comes only with independence, and that is why I am voting yes for Scotland.