“Scotland’s national deficit is now 7.2% and rising” – LibDem MSP Alex Cole-Hamilton, Twitter, February 2 2020


Scotland pays its way. The latest GDP accounts show Scotland is as rich per head as Japan or France. The Scottish economy grew faster than the UK in 2018, the last full year we have data for.

The National:


Cole-Hamilton is quoting from a piece attacking the SNP Government published in The Times newspaper (February 3, 2020), itself using as a source claims made by the economist John McLaren, the former Labour Party researcher and former special advisor to both Donald Dewar and Henry McLeish.

In The Times article, McLaren claims that Scottish ministers “buried a £5 billion devaluation of the economy on the day Holyrood backed a second independence referendum”.

McLaren is referring to the publication on 29 January 2020 – the same day as the Scottish Parliament passed a motion calling for an independence referendum in 2020 – of the regular Quarterly National Accounts for Scotland. The latest accounts cover changes to output (GDP) in the July-September period.

Each GDP quarterly account also incorporates updates and revisions to earlier data, as these arrive. Such revisions are normal, as more disaggregated statistics emerge, as sample data is replaced with aggregated figures, or as definitions are altered. The publication dates for the GDP quarterly accounts are set well in advance, including that scheduled for January 29.

The data are compiled by civil servants and specialists independently of ministers. It would be very difficult for ministers – even if they so desired – to alter publication dates to “bury” awkward findings, or even to know ahead of time that such findings were about to see the light of day, in order to “schedule” a debate as a distraction. Possibly McLaren’s suspicions arise as a result of his own personal experience as a special advisor to two Labour administrations.


Contrary to Cole-Hamilton’s negative gloss, the January 2020 quarterly accounts indicate a relatively positive economic picture in Scotland, given the drag on investment arising from Brexit uncertainties which are no fault of the Scottish Government. The accounts show Scotland’s GDP grew by 0.3% in real terms during the third quarter of 2019. Compared to the same quarter in the previous year, Scotland’s onshore GDP was up by 0.6%. This indicates economic growth had started to accelerate by the third quarter.

The latest GDP quarterly accounts did include significant data revisions. However, the overall result was that for 2018 – the latest full calendar year for which numbers are available – Scotland’s onshore GDP growth was 1.5%. The equivalent UK growth was smaller, at 1.3%.

Cole-Hamilton implies that Scotland’s economic condition is deteriorating. The quarterly accounts show otherwise. He also misunderstands the deficit rules for EU entry. True, these lay down a reference annual budget deficit of 3%. But accession is not (and never has been) dependent meeting any arbitrary deficit target. Instead, the EU Commission seeks reassurance that the economy of a prospective member is strong and sustainable. The latest Scottish quarterly accounts suggest this is the case.


The latest quarterly accounts do contain important revisions of earlier data. For instance, overall GDP growth for the year till September 2019 has been reduced from 0.7% to 0.6%. This reflects the major fall in business investment (across the whole UK) arising from Brexit uncertainty and the deadlock at Westminster.

However, the most significant revision is in regard to oil and gas output and how this is treated in the GDP accounts. This is what has animated Cole-Hamilton and McLaren and led to highly misleading claims that Scottish GDP has suddenly fallen, or that the country’s notional public deficit “is now 7.2% and rising” (Alex Cole-Hamilton).

In the autumn of 2019, the UK Office for National Statistics (ONS) revised down the nominal value of oil and gas GVA produced in UK waters, going all the way back to 1998. GVA is a variation on measuring GDP output, which takes away taxes on sales (to get a better idea of the true value received by the customer). Scottish Government civil statisticians have now incorporated this new ONS data into Scotland’s GDP Accounts. The result is to reduce the 2018 GDP figure from £180.4bn to £175.4bn – a nominal reduction of 2.8%.

This does not mean that the Scottish economy contracted in any real sense by 2.8%. It simply means the statisticians have revised how they define what they are counting. It also shows the obvious fact that if you use different measuring sticks you get different answers. The justification for the ONS change of methodology is complex and in part has to do with how to measure the impact of inflation at a regional level, which requires much guestimation. There is no implication that Scotland is less productive or even that its output was originally over-estimated in any significant way.

It appears that McLaren (followed by Cole-Hamilton) has appropriated this complex revision and simply slotted it calculations given in the Government Expenditure and Revenue Scotland (GERS) report published in August 2019. On this basis they claim Scotland’s notional public deficit has “risen”. But this so-called “rise” is the result of substituting a different number for GDP than the one actually used in the GERS report. This without examining the implications for all the numbers and calculations in the original GERS paper.

We should also note that Cole-Hamilton’s addition of the words “and rising” implies he is claiming that the notional public sector debt will increase even further. He presents no evidence for this bogus assertion.


This whole argument leaves aside the continuing debate over the relevance of calculating a notional public deficit for an independent Scotland using the existing GERS calculations. The existing devolved Scottish Government does not run any deficit and maintains a small annual budget surplus. Any notional deficit is therefore derived as a hypothetical exercise by apportioning a share of the Westminster administration’s deficit to post-independence Scotland. No one assumes that an independent Scotland would maintain the same tax and spend policies inherited from Westminster.

The substance of the budget deficit debate lies in Scotland’s ability to fund a high level of public expenditure post-independence. The January GDP national accounts provide hard evidence in this regard. For 2018 – and after the ONS revisions – the annual value of Scotland’s GDP in current prices is £32,300 per person, or circa $42,313. That is only slightly below Japan ($44,227) or France ($45,775) and better than Spain ($40,139) or New Zealand ($40,135) – IMF data for 2018. Scotland is a rich industrial nation that can afford welfare services on a par with these other nations.


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