Scotland’s soaring budget black hole casts fresh doubt on Scottish independence

Adam Forrest

Wed, 18 August 2021, 3:12 pm

Fresh questions have been raised about the economic of Scottish independence after official figures showed the country’s public finances has an unprecedented black hole.

Scotland’s deficit more than doubled to 22.4 per cent of GDP in 2020/21 – the highest yearly figure since the government’s annual accounts began two decades ago.

Public spending in Scotland increased by 21 per cent during the year, reflecting the impact of the pandemic, while average public spending per person rose to £1,828 above the UK average.

First minister and SNP leader Nicola Sturgeon insisted the deficit was “not a barrier” to independence – arguing that the current fiscal position is not any indication of what life would be like if the country was to break from the UK.

But Tory MP Alister Jack, Scottish secretary in Boris Johnson’s cabinet, claimed the figures showed “how all of us in Scotland have benefitted from being part of a strong United Kingdom”.

The figures were revealed in the Government Expenditure and Revenue Scotland (Gers) report published by the Scottish government – the annual study which always sparks fierce debate on the economic case for independence.

Total public expenditure in Scotland for the financial year gone by, covering both Scottish and UK government spending and the rest of the public sector, was £99.2bn.

As well as the impact of coronavirus, the fiscal position was also affected by declining activity in the North Sea and a fall in oil prices.

This is equivalent to 9.1 per cent of total UK public sector expenditure, or £18,144 per person – which is £1,828 per person greater than the UK average.

Ms Sturgeon insisted the case had not been damaged. “Having a deficit is not – self-evidently – a barrier to any country in the world being independent,” she said.

The SNP leader added: “Almost every country has a deficit and deficits that have grown and become massive over the course of the pandemic because, rightly, governments have chosen to support the economy and to support individuals.

“Independent countries manage their deficits but also independent countries make the most of their talents and their resources and their attributes to build strong, sustainable economies, and that is – I think – the future that Scotland should grasp.”

Tory MSP Murdo Fraser, the party’s shadow Covid recovery secretary, said the figures show the extent of the UK government’s “war chest” of support during the pandemic, such as the furlough scheme.

“These new figures demonstrate the strength and security that we gain as part of the United Kingdom,” said Mr Fraser. “In times of crisis, when a pandemic hits, Scottish jobs and public services are safer because we act together.”

Scottish Liberal Democrat Treasury spokesperson Christine Jardine MP also said the UK was “stronger when we pull together”, adding: “These blistering figures drive home just how economically valuable the partnership across these isles is.”

The Institute for Fiscal Studies (IFS) said the figures showed an independent Scotland would need to raise taxes or cut spending to a greater extent than the UK in order to reduce its deficit.

The respected think tank said oil revenues would have to grow tenfold or the country’s economic performance would have to improve dramatically in a short period in order to avoid this – with neither scenario assessed as being likely.

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