We Need To Talk About: GERS (2016-17 Edition)

“The GERS figures are not meant to be anything other than a way of showing the current position under the present arrangements.” – The BBC 

The annual Government Expenditure and Revenue report is out and, as with previous years, I’ve written an analysis of the report and what it means for Scotland. The GERS report itself can be downloaded here.

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A more detailed analysis I have prepared for Common Weal can also be read here.

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The UK is a deeply unequal union and London continues to capture a greater and greater proportion of the wealth of the state to the detriment of everywhere else. This single fact has to frame everything we think and say about the finances of Scotland.


The GERS (Government Expenditure and Revenue Scotland) figures published this week show some encouraging signs for the Scottish economy. Onshore GDP and revenue is up even as the Offshore industries continue to contract but overall, the Scottish economy is growing again.

Scotland GDP Onshore Offshore
However, the notional deficit, whilst improving, remains high and has not closed as quickly as the UK’s deficit has. But this is due to our singular fact at the top of the page. The UK is sucking more and more of its wealth and productive economy into the south east. Compared to our neighbours in the EU, Britain is far from “great”. Britain is weird.

eu28-plus-scotland-gdpcapita.png

This also explains why Scotland’s income tax take and capital gains tax are relatively lower than our population “share” of the UK – many of the high paying jobs and high paying people are down south – and it explains why revenue such as alcohol and tobacco duties may be higher in Scotland – people stressed by inequality suffer lower levels of health and wellbeing. The Glasgow Effect is very much visible here.

Of course, many commentators will be wondering what GERS means for independence. The answer – confirmed from multiple sources now – is that GERS, itself, does not indicate the finances of an independent Scotland. It merely speaks about Scotland as a region of the UK.

Simply put, too much changes as a result of independence. Last year Common Weal produced a paper called Beyond GERS which attempted to identify some of these changes.

For example, Scotland would need a new civil service to replace Whitehall and may need new government departments like a Central Bank or a replacement to the DVLA. This would bring thousands of highly skilled and well paid jobs to Scotland which would boost our economy and our tax revenues by billions.

Defence is another sector where even if we maintain spending at its current level, if we deployed more of it defending Scotland rather than in foreign bases or in foreign wars, we could boost the economy significantly.

Debt and assets would certainly be up for negotiation and the historical and legal precedents confirm that if the rUK wishes to hold onto its status as the “continuing state” then it would have to accept all of the debt for the UK in a manner similar to Russia taking on the debt of the USSR. Even after borrowing to build our new infrastructure, this would save Scotland some £2.5 billion per year in debt interest repayments.

Finally, accepting that the UK’s obsession with Austerity and anti-immigration sentiment would allow us to redesign our customs (currently stripped to the bone. When was the last time you saw a customs official in “Anything to Declare” in the airport?) and our tax structures to better close the tax gap. Just capturing a third of Scotland’s share of the gap would be worth £3.5 billion per year. All in, the very act of independence could be worth £7.5 billion per year to Scotland and that’s before we do too much to grow into the country we want to be.

The UK is failing Scotland. And the debate around GERS misses the fact that any small country which joined the UK and ran its finances this way would soon be told how “badly” it is doing compared to the “UK average”. We need to step away from the regionalisation of Scotland and start to look beyond it. This is the true meaning of GERSmas.


A version of this post also appeared in The National.

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4 thoughts on “We Need To Talk About: GERS (2016-17 Edition)

  1. I don’t get this bit…..

    “For example, Scotland would need a new civil service to replace Whitehall and may need new government departments like a Central Bank or a replacement to the DVLA. This would bring thousands of highly skilled and well paid jobs to Scotland which would boost our economy and our tax revenues by billions.”

    Surely those highly paid jobs would be funded from the public purse in the first place.

    That would actually be a cost to Scotland – not an increase in tax revenue.

    Regards

    John Daly

    >

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    • We’re already paying for these jobs at the moment (in fact, because London wages and office running costs are higher that even Edinburgh, we’re probably paying more per job than we would in an independent Scotland).

      But the thing to particularly realise is that currently these civil servants are living in London, spending in London and contributing to the economy of London. There’s a substantial economic boost to be had in moving these jobs to Scotland.

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  2. “any small country which joined the UK and ran its finances this way would soon be told how “badly” it is doing compared to the “UK average””. That really is the key issue that highlights that it’s not a Scotland problem but a UK management problem. Look at how the UK compares with our neighbours over the last 40 years or so. Year after year well below on several critical and connected measures – capital investment, R&D spend, current account, exports as % of GDP.

    This relentless economic mismanagement has resulted in the position of the UK at the bottom year after year in more visible day to day factors as well – GDP (PPP) per capita & health spend as % of GDP.

    http://www.theglobaleconomy.com/compare-countries/

    Yet those in favour of maintaining the UK, criticise Scotland’s economic performance within the UK while ignoring (hiding) the UK’s relentlessly abysmal economic and social track record. All our neighbours have done so much better over the years despite most of them not having a windfall like North Sea oil. Imagine what they’d have done with it if they had. What is a common word used along with UK North Sea oil? Squandered. So even with a huge windfall the UK can’t get it’s act together. Which means, it never will and it will continue to drag Scotland far below a level at which it should be at, ie at least that of our neighbouring countries, as long as Scotland is part of the deluded UK.

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  3. Pingback: Affording It | The Common Green

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