Sturgeon: Scotland is a more prosperous country ... GERS report and analysis

The Government Expenditure & Revenue Scotland (GERS) showed that people in Scotland paid £400 more in tax than in the UK as a whole in 2013/14.

However, it also reported they received £1,200 more in spending. That figure includes taxation from the oil and gas industry deemed to be in Scottish waters.

The figures showed that Scotland’s deficit was £12.4 billion in 2013/14, or 8.1 per cent of GDP, compared to 5.6 per cent of GDP for the whole of the UK.

The previous year’s deficit was £14.3bn.

Sturgeon said the latest GERS report “confirms that Scotland continues to pay more in revenues per head to the Treasury than the rest of the UK.”

She added that Scotland has had a stronger budget balance than the UK as a whole in some years while in others it has been lower.

“In the year we are looking at today that is a lower position than the rest of the UK,” she said.

“Over the longer-term, though, the fact remains that Scotland’s fiscal position is broadly similar to the UK’s as a whole.”

Sturgeon said the Scottish economy had been in a stronger position than the UK economy for three of the past six years and said the fundamentals of the Scottish economy were strong.

The Scottish Government intends to close the gap between its income and spending by promoting “sustainable borrowing” to invest in economic growth, Sturgeon said.

The First Minister also argued that more powers were needed to grow the Scottish economy and said she would continue to argue for full fiscal autonomy if the SNP gains significant electoral clout in the General Election.

“Scotland is a prosperous country – our proposition is that it will be in an even stronger position if we gain the greater powers that we need to grow our economy faster, create more jobs and boost our revenues,” she said.

“I think it is worth remembering that those who will use what this report says today about Scotland’s deficit to argue that Scotland should not have extra economic powers made that self-same argument in years when our relative fiscal position was stronger than the rest of the UK.”

Sturgeon rejected arguments made by those against independence or full fiscal autonomy for Scotland that Holyrood’s current constitutional funding settlement provides “protection for the Scottish budget”.

“The reality that we have lived through over the past few years suggests the opposite,” she said.

“The Scottish Government’s budget since 2010/11 has been cut by 10 per cent in real terms, so the idea that the current system offers some protection to the Scottish budget – I just don’t think is borne out in reality.”

The Scottish Government warned that further Westminster austerity cuts risk a fall of £1,000 per head in day-to-day spending.

“In Scotland, this would be equivalent to a cumulative cut of £15bn to our budget over the five years to 2019/20 – that is the unacceptable price of Scottish finances and welfare policy being controlled by Westminster, which will continue to be the case after the Smith Commission proposals are implemented,” said SNP MSP Kenneth Gibson.

“In contrast, today’s figures show that Scotland’s finances are robust and improving – despite record capital investment in the North Sea lowering oil revenues. For 34 years in a row, Scotland has generated more tax per head than the UK average – £400 higher in 2013/14.”

The GERS figures also showed that Scotland’s deficit before the independence referendum was bigger than the figure published by the Scottish Government.

The deficit grew by 3.8 per cent between 2011/12 and 2012/13, rather than the 2.5 per cent published six months before the referendum, the chief economic adviser has revealed.

The adjusted figure means Scotland’s fiscal balance has improved by a more significant 1.6 per cent rather than the fractional 0.2 per cent implied by last year’s unadjusted figure.

Gary Gillespie, chief economic adviser to the Scottish Government, said the move to the European System of Accounts 10 (ESA10) has had a big impact on GDP changes at a UK level.

It now includes research and development, Network Rail and VAT changes, while there has also been changes in corporation tax estimates by HM Revenue & Customs.

“There is quite a number of complex changes to do with changes in calculations, ESA10 and other issues which are all documented in the paper,” he said.

Gillespie confirmed that the ESA10 figures were not published ahead of the referendum.

THE PROPHETS OF DOOM

THE SNP’S political opponents yesterday seized on the new GERS figures to return to referendum arguments and insist that they showed that Scotland was better off with the current settlement within the UK.

Secretary of State for Scotland Alistair Carmichael said: “Today’s figures put the case for remaining in the UK beyond all doubt. It is concrete proof that Scotland’s public spending is protected and receives secure and stable levels of funding, alongside the ability to absorb economic shocks more effectively.”

Chief Secretary to the Treasury Danny Alexander said: “Today’s figures show that Scotland’s borrowing was £800 per head higher than the UK average last year: that’s £800 more that an independent Scotland would have to tax every man, woman and child.”

Scottish Labour Leader Jim Murphy claimed that the GERS figures showed that his was Scotland’s only “anti-austerity party”.

“We already know the Tories want to take public spending back to the 1930s, before the days of the NHS and the welfare state as we know it. Now the SNP Government’s own figures confirm their plan for full fiscal autonomy would mean cuts on a scale never before seen in Scotland.

“It’s a cruel irony that after years of claiming that they alone stand up for Scotland, the SNP’s own figures have exposed the fact their plan for full fiscal autonomy would impose austerity-max on our country.”

ANALYSIS

THE GERS report shows the Scots economy is on a solid footing – but cannot be used to argue the country is better off within the union, according to the founder of Business for Scotland.

Gordon MacIntyre-Kemp said: “This conclusively demonstrates the Scottish economy is fundamentally sound. Indeed, this now means Scotland has paid more tax per head of population than the UK on average for 34 years in a row.” He said the near-£2 billion cut in the country’s deficit to £12.4bn, a smaller deficit drop than for the rest of the UK, was partly because of tax falls from North Sea revenues, due largely to tax incentives for oil firms that hit record levels of investment in exploration and new field development.

He added: “The Scottish Government also spends more, about £1,200 per person ... this extra spending may explain some of the SNP Government’s popularity.”

And he said he believes the Westminster parties have been wrong-footed on the economic debate.

“The GERS report represents how Scotland’s economy is performing within the union and tell us next to nothing about how Scotland would have performed as an independent nation now or in the past, nor about how it would perform in the future.

“This makes it strange then that Labour is looking to score political points by stating that GERS shows that fiscal autonomy would be bad for Scotland; it wouldn’t, and they and other unionist parties seem to have put the wrong foot forward on the economic debate that GERS will ultimately kick off.

“Jim Murphy seems to misunderstand that the purpose of full fiscal powers is to create economic growth and increase government revenues, thus enlarging the funds available for public services. Devolving only tax-spending powers on welfare but not tax-raising powers, as Labour suggests, would lead to an increase in the Scottish deficit as a percentage of GDP when compared to the UK, just the thing they are complaining about.

“Labour’s plan would initially increase spending whilst denying Scotland the full powers needed to implement policies that would increase revenues. This would in the short-term give the false – and for Labour and its Westminster allies politically expedient – impression that Scotland’s economy is reliant on Westminster. Planning to raise spending without also devolving the tools to raise revenues would result in poorer economic performance and, ultimately, lower welfare spending – Labour is planning to fail.”