YESTERDAY the Government Expenditure and Revenue Scotland (GERS) report was published. Independence supporters point to the strong foundations and frankly quite stunning resilience of Scotland’s economy under pressure from Westminster’s economic mismanagement. British nationalists, however, point to the illustrative deficit in GERS and for a few years have been able to say it’s a larger percentage of the economy than the UK’s debt is.

It’s key to understand that GERS does not offer any real indications on the finances of an independent Scotland. GERS is a set of regional accounts for Scotland, as part of the UK, and that’s important because it means we have to pay a share of the costs of servicing debts run up by the rest of the UK, and that is where Scotland’s illustrative deficit comes from.

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What – you thought the recent run of GERS deficit claims was due to the oil price fall? No, but that’s made a significant contribution to it, due to the UK Government’s incompetent stewarding of Scotland’s oil revenues for generations. This incompetence put the UK Government in a position where it had to reduce Petroleum Revenue Tax to zero and even offer tax rebates against decommissioning costs to assist the oil industry, thus cutting Scotland’s oil revenues.

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To illustrate my point the good news being reported is that Scottish oil and gas revenues rose from a paltry £266 million in 2016/17 to £1.3 billion in 2017/18. Now compare that to Norway’s oil revenues for roughly same period of £28bn – almost 21 times larger than Scotland’s. When you add in that Norway also has a sovereign oil fund of £800bn, providing generous pensions and to be reinvested in the economy, it’s obvious that if the Westminster management of Scotland’s oil revenues had been as competent as Norway’s (a small, independent Northern European nation of roughly 5.5 million people), then there would be no mention of deficits in GERS.

I use the term “illustrative deficit” rather than an actual deficit because the deficit figure, and past surpluses in GERS, are illustrative of Scotland’s finances as part of the UK and not in any way indicative of what they would be if Scotland were independent. Nor even if Scotland had full fiscal autonomy through a federal system like the one Labour occasionally pretend to be interested in.

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So how does an oil-rich nation with a strong and resilient onshore economy end up with a set of accounts that suggest it’s a failing economy?

Well, there is a line in GERS called “Public Sector Debt Interest”, and that shows that every year since records began Scotland has been paying interest on a population share of the UK’s debts – it’s not related to what region generated the debt or where the money was spent. For example, in the years since the 2014 independence referendum, the Scottish Government has paid interest of £2.8bn, £2.9bn, £3.3bn and now £3.7bn this year. However, Scotland, until recently, hasn’t had any borrowing powers, and so the key question is who generated all that debt?

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Over the 38 years, Scotland’s share of UK debt interest amounted to a staggering £89bn. However, had Scotland been an independent country, it’s borrowing requirement over those 38 years would have been zero.

The National:

So Scotland’s government has had to pay £89bn (eighty-nine thousand million pounds) of interest on debts that Scotland did not generate, nor benefit from, simply because we are not an independent nation and had to chip in to service the rest of the UK’s rising debts.

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Let’s explore three alternative scenarios for how we could have managed Scotland’s finances.

If we look back as far as reliable historical figures for Scotland’s revenues and expenditure go we can see that in 1980/81, before the UK debt started to spiral, that Scotland was charged £845m to service the UK debt, but despite that managed to record an illustrative surplus of just over £1bn.

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Indeed, Scotland’s finances showed a surplus till 1990, when the cumulative surplus amounted to £36bn (even with UK annual debt charges).

Here’s scenario one, which I call “what actually happened”. Scotland was part of the UK and so the surpluses went to the UK Treasury, and no-one in the UK Government asked for any acknowledgement that Scotland was actually subsidising the UK. Resultantly the weight of the UK debt payments meant that the surpluses declined during the 1990s and the cumulative surpluses were eaten up by deficits and now the GERS accounts show a cumulative illustrative deficit of £162.5bn.

Ask yourself how an oil-rich nation with a highly developed onshore economy could be in that much in debt?

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It can’t, because Unionist claims about those GERS deficit figures omit the fact that as an independent nation Scotland would have had those cumulative surpluses of £36bn to invest. It would also have retained the £89bn of debt interest charges as it wouldn’t have needed any debt of its own, and that would have changed everything.

Those deficit claims assume that the surpluses disappeared into thin air, but it’s a fact that the surpluses would either have been invested to grow Scotland’s economy, or maybe put into an oil fund like Norway’s.

That leads us to scenario two, which I call “what’s the dumbest thing we could have done?” That is to say that as an independent nation, if Scotland did nothing with those surpluses except put them in a bank, let them gain interest and continued to make all the same bad economic decisions and mistakes as Westminster – what would have happened?

Well, those cumulative surpluses, plus standard bank rates of interest, would have topped out at £198.8bn in 2009/10 and then started to fall till we had £115.5bn in the bank today. Yes, that’s right, the very dumbest thing Scotland could have done as an independent nation would have left Scotland £278bn better off today than GERS indicates we are.

Finally, scenario three: “What would Norway do?”

Let’s assume we just banked the early surpluses until we noticed Norway was starting an oil fund and decided to copy it. Applying the same annual rates of return from its investments as Norway did, and not a penny more, since 1998/99 Scotland’s national oil/pension fund would now be worth £385bn.

It’s fair to say that in 2014 many people just didn’t believe me when I pointed out that Westminster was completely economically incompetent, didn’t care about the impact of its policies on Scotland and was acting against our best interests. Now, however, Brexit makes my opinions more mainstream, and slowly but surely as Brexit unravels more and more people will begin to see that Scotland can’t afford to stay within this failing, disinterested and dysfunctional Union.