Posted by Euan Bennet on 19/09/2013
This appears to be one of the central concerns people have about the prospect of independence. Can we afford it? Even though it seems self-evident to those of us who have already chosen to engage in politics and find out about the figures, there are still many people who are unaware of the true wealth of Scotland. It is important for those of us campaigning for a Yes vote next year that we provide truthful and accurate figures to the people who have still to make their minds up. Here we will tackle the two figures that are most commonly used by the media: Public spending and GDP.
Revenue and Expenditure
The figure that will be most familiar to people, because Unionist politicians and the media mention it quite a lot, is that public spending per head per year is £1200 per head higher than the UK average. See for example Tuesday evening’s Newsnight debate; skip to 2min30s for the beginning of the debate, or go to 4min25s to see Margaret Curran deploying this very argument as an apparent great benefit of the Union.
Understandably, people might hear the £1200 per head per year figure and get a bit concerned about the sustainability of such spending. It is a factually accurate statement to make however, although it is extremely disingenuous to present out of context. The context being that there are two sides to every balance sheet.
Tax revenue identified as coming from Scotland (and we will return to the theme of identifiability in the future I am sure) is £1700 per head per year higher than the UK average. As neatly demonstrated by Wings over Scotland, these figures from 2010-2011 coincide nicely with a recent opinion poll which claimed that a majority of people would vote Yes if they thought it would make them £500 better off each year.
In fact, the most recent figures show Scotland in an even stronger relative position than that. The Government Expenditure Review Scotland figures (GERS) are accepted by both campaigns, and for 2011-12 showed that Scotland contributed 9.9% of UK revenues with only 8.3% of UK population, and in return 9.3% of UK spending was identified as being spent in Scotland, or on our behalf. We shall probably return to what “spending on our behalf” means at a later date.
If Scotland had received 9.9% of UK spending, in proportion to our contribution to revenues, then in absolute terms around £4.4 billion more would have been spent in Scotland in that year. Or to put it another way, Scotland subsidises the UK to the tune of £4.4 billion every year. Just imagine what we could do with that money. We could spend it on something, save it, or elect to borrow less, or a combination of all three. To put it into context, the entire health service in Scotland cost £11billion. So more than a third of the cost of the health service goes to the UK treasury every year and is never seen again. And in exchange we get debt accrued in our name, and then more interest charged to that debt than our fair share.
Revenue and expenditure is only one part of the story when it comes to general finances – another figure that is commonly bandied around is Gross Domestic Product (GDP). Rightly or wrongly, this is normally used as a measure for comparing the relative wealth of nations, both to each other and to themselves over time.
What does GERS have to say about GDP?
- Scottish GDP with oil (2011-12) = £151bn.
- For a population of 5.3m = £28,500 per head.
- UK GDP (with oil) (2011-12) = £1526bn
- For a population of 62.65m = £24,350 per head
With oil Scottish GDP per head is 18% higher than UK GDP/head.
- WITHOUT oil Scottish GDP = £125bn = £23,550 per head.
- Without oil UK GDP = £1495bn = £23,900 per head
Without oil Scottish GDP per head is 99% of the UK level.
Hat-tip to Ivan McKee of the excellent Business for Scotland for compiling that list.
The GDP figures make it clear that discounting oil, Scotland would not be very different to the UK. The oil and gas should therefore be viewed as a bonus, rather than the basis for our entire economy. As page 59 of this report shows, revenues from oil and gas consistently make up less than 20% of all tax revenue collected in Scotland, and our economy is far more diverse than people realise. That diversity is a great strength, and is another topic that deserves an entire post dedicated to it.