Astonishing blunders from Scotland Office expose truth about fiscal position
Scotland has consistently outperformed the UK in recent decades when it comes to balancing the books on public finances, significantly subsidising the rest of the UK, a new analysis of official statistics has shown.
The analysis shows that, even if the Scotland Office’s flawed figures are accepted, Scotland is shown to have been in a better fiscal position than the rest of the UK. Official Office for National Statistics and HM Treasury figures show that between 1980-81 and 2007-08 there were only six years in which the UK as a whole had a net fiscal surplus, including a 100% share of North Sea revenues (footnotes 1 and 2). The Scotland Office has asserted that Scotland was in surplus for nine of those years, thereby on the UK Government’s own figures significantly outperforming the UK, and indeed subsidising the rest of the UK.
Using constant 2008-09 prices to adjust for inflation, UK net borrowing between 1980-81 and 2007-08 was £672.5 billion. Scotland’s per capita share of that would be £56.5 billion – again showing that Scotland has been subsidising the rest of the UK’s borrowing requirements, given that the Scotland Office have calculated Scotland’s own borrowing requirements over the period at around £23.5 billion. Scotland’s per capita figure is given in footnote 3.
In contrast to the Scotland office claims, Government Expenditure and Revenue Scotland (GERS) figures show that Scotland ran current budget surpluses in each of the three years to 2007-08, worth a cumulative £2.3 billion (footnote 4), with a geographical share of North Sea revenues. In comparison, the UK last managed a current budget surplus – including a 100% share of North Sea revenues – in 2001-02.
It is also wrong to claim, as the Scotland Office have, that money must be invested in an Oil Fund every year. Countries with such funds typically make payments when the economic and fiscal conditions are appropriate (footnote 5). Such funds can improve stability by offering a source of stimulus during downturns. Over the last year, North Sea revenues have held up more strongly than other sources of revenue, while rising oil prices mean that the value of remaining supplies is likely to increase. Oil and gas UK estimate remaining reserves at between 15.5 billion and 25 billion barrels (footnote 6), and North Sea revenue is forecast to generate £50 billion over the six years from 2009-10 to 2014-15 (footnote 7).
Finally, while the Scotland Office has so far refused to publish the detail behind its claims, it should be noted that the UK Government’s own fiscal rules, including the so-called “golden rule”, explicitly allow for infrastructure borrowing which incurs fiscal deficits in some financial years. In 2009, 27 out of 28 OECD countries have run fiscal deficits (footnotes 8,9), with the UK itself forecast to run the biggest such deficit in the OECD in 2010 and 2011 – double the Euro Area average. It should also be noted that the UK Government’s own Office of National Statistics announced in December that Scotland had outperformed the rest of the UK in terms of economic growth during 2007-2008, the first year of the SNP Government at Holyrood, with GVA growth of 4.7 per cent compared to the UK’s 3.5 per cent.
A spokesperson for Finance Secretary John Swinney said:
“The Scotland Office would be better known as the anti-Scotland Office, given that its sole purpose these days appears to be to pump out dodgy figures to do Scotland down. As such, their so-called analysis deserves to be taken with a large pinch of salt. However, even accepting their methodology, the figures show that Scotland has consistently outperformed the rest of the UK.
“These are astonishing blunders by Jim Murphy and the Scotland Office. Their claims about Scotland’s true position are exposed by the UK Government’s own figures. These statistics prove, beyond any doubt whatsoever, that Scotland has been outperforming the UK, not just in recent months and years, but over a prolonged period of time.
“It is Britain that is bust, not Scotland – and these figures prove it.
“What these statistics show is that, even within the financial straightjacket of the UK, Scotland has what it takes to prosper. An independent Scotland would not just be able to stand on its own two feet – it would be in a position to husband its own oil revenues, allowing it to run a healthy surplus, while also investing for the long-term and borrowing sensibly as all normal governments do.
“The Scotland Office’s smears about Scotland cannot be allowed to stand, and this analysis of the UK Government’s own figures proves the case for independence.”
1. Source for all UK figures: HM Treasury Public Finances Databank 20th November 2009
2. Excluding North Sea Revenues, the number of years when the UK had a net fiscal surplus falls to four.
3. Scotland’s population relative to the UK is taken to be 8.4%
4. Source: GERS:
5. For example, Norway established an Oil Fund 1990, however the first net transfer was not made until 1996.
6. Oil and Gas UK – 2009 Economic Report
7. Source: Annex B 2009 Pre-Budget Report
8. Source: OECD Economic Outlook November 2009
9. Norway is an exception and due to its oil wealth and Oil Fund is forecast to run a fiscal surplus of 9.6% of GDP.
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