Scotland ran a deficit seven times higher than the UK as a whole last year, despite again cutting its overspend on public services.
The latest Government Expenditure and Revenue Scotland (Gers) figures showed there was a record gap of nearly £2,000 per person between how much was spent on public services and debt repayment, and total tax revenues for 2018-19.
Scotland’s notional deficit stood at £12.6bn or 7% of GDP, including North Sea oil revenues, compared with the UK’s total £23.5bn deficit, which includes Scotland’s figure. The UK deficit is equivalent to 1.1% of its GDP.
Total state spending in Scotland was £1,661 higher per person than the UK average at £75.3bn, while tax receipts were £307 less per head than the UK average, at £62.7bn. Excluding oil revenues, the deficit exceeded £14bn, equal to 22.5% of tax revenues.
Opposition parties said the data blew a hole in the financial case for leaving the UK. But Derek Mackay, the Scottish finance secretary, said it proved independence was needed to allow Scotland to control its own economic policies.
“I recognise that the notional deficit isn’t where we would want it to be,” Mackay said, but argued that Gers showed onshore tax income, excluding oil revenues, was up 5.1%, while employment was at record levels. “Revenues are growing faster than expenditure,” he added.
Mackay confirmed that the Gers data, which covers all UK and Scottish government spending in Scotland and a share of pan-UK spending on areas such as defence, overseas aid and debt reduction, was an accurate assessment of the country’s fiscal position last year.
He said they were irrelevant to an independent Scotland’s future finances, however. “I do think these figures speak to the truth, speak to the fact, that Scotland would be better off as an independent country than we are as part of the UK,” he said.
He said current tax revenues now paid for all Scotland’s devolved services, including social care. Total state spending included about £6.5bn on servicing the UK’s debt repayments and defence costs including Trident.
The Scottish National party wants Trident scrapped and Mackay confirmed that his government would refuse to repay its share of UK debt after independence. He said the SNP would instead offer “solidarity payments” to cover its share of historic debts, but he admitted he did not know whether the UK government would agree to that arrangement.
Mackay suggested the SNP would not try to cut public spending after independence but would instead focus on economic growth to cut the revenue gap. However, he was unable to say how quickly GDP would need to grow to avoid spending cuts.
Ruth Davidson, the Scottish Tory leader, was scathing about Mackay’s claims that Scotland should be pleased it was cutting its deficit faster than the UK. The Gers report said Scotland’s fiscal gap had consistently been 7% higher than the UK’s over the last five years.
She said Scotland’s notional deficit was the highest in the EU. Cyprus had the next nearest, at 4.8%, while Romania’s was at 3% and France at 2.5%. EU membership rules require member states to have a budget deficit below 3%. “For the SNP to pretend a 7% deficit is not an issue is criminally negligent,” she tweeted.
Unlike previous years, Nicola Sturgeon, the first minister and SNP leader, chose not to meet the media to discuss the Gers figures. Instead she campaigned for the third time in Shetland in the byelection to replace the Lib Dem MSP Tavish Scott, who stood down in June.
Willie Rennie, the Scottish Liberal Democrat leader, accused Sturgeon of dodging difficult questions by refusing to host the Gers press conference. He said this data showed independence would chaos economic chaos. “Five years ago, the vast majority of people in Shetland voted to avoid this eye-watering deficit by rejecting the SNP’s independence campaign,” and they should reject the SNP in the byelection too, he said.
Scotland’s deficit seven times higher than UK as a whole last year – The Guardian