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