Economy

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Revenue and Expenditure in Scotland compared to the UK[1]

In 2012-13, when a geographical share of North Sea revenue is included, Scottish public sector revenue was estimated at £53.1 billion (9.1% of UK total public sector revenue). Public sector expenditure for Scotland, including a per capita share of UK debt interest payments, was £65.2 billion, 9.3% of UK public sector expenditure. Comparable figures for the last five years are shown in the first table below

Net fiscal balance

GERS (Government Expenditure and Revenue Scotland) provides two measures of Scotland‟s fiscal position. The current budget balance shows the difference between current revenue and current expenditure, i.e. excluding capital investment. The net fiscal balance measures the difference between total public sector expenditure (including capital expenditure) and public sector revenue. Treating North Sea revenue on the same basis as above, the figures for Scotland and the UK. as a percentage of GDP, are shown in the second table below.

Scotland's Revenue & Expenditure compared with UK
Year Revenue Share of UK Revenue Expenditure Share of UK Expenditure
2008-2009 £55bn 10.3% £59bn 9.4%
2009-2010 £48bn 9.2% £62bn 9.2%
2010-2011 £52bn 9.3% £64bn 9.2%
2011-2012 £56bn 9.8% £65bn 9.3%
2012-2013 £53bn 9.1% £65bn 9.3%
Deficit in Scotland and the UK
Year Scotland UK
2008-2009 -2.9% -6.9%
2009-2010 -10.7% -11.0%
2010-2011 -8.5% -9.3%
2011-2012 -5.8% -7.6%
2012-2013 -8.3% -7.3%

References

  1. Scottish Government: Government Expenditure and Revenue Scotland 2012-2013, March 2014, Executive Summary
FOR INDEPENDENCE FOR THE UNION
The Border effect

Trends in Revenue and Expenditure

The drop in revenue has been caused a temporary dip in oil-related income. See: Oil and Gas, "Current Revenue".

Strength of the Economy

In the Financial Times on 14 February[1]it was reported that leading players on both sides accept that Scotland has all the ingredients to be a viable nation state. An independent Scotland could also expect to start with healthier state finances than the rest of the UK. Although Scotland enjoys public spending well above the UK average, the cost to the Treasury is outweighed by oil and gas revenues from Scottish waters.
The value of the North Sea oil receipts is recognised by the markets: on September 2, according to the Financial Times [2] analysts said they expected the pound to fall ... sharply in the event of a Yes vote. A particular concern for currency investors would be the UK’s persistent current account deficit, if this were no longer offset by North Sea oil revenues.

One commentator writes[3]:
The Deutsche Bank’s group chief economist’s remarks are less economic than political in nature: “Why anyone would want to exit a successful economic and political union … to go it alone for the benefit of ... what exactly, is incomprehensible to this author.” Fair enough: it’s one man’s view...the head of the global strategy team at Société Générale argues that a yes vote would lay bare the fact that, without Scotland’s oil exports, the rest of the UK simply doesn’t pay its way in the world – and so independence would see “sterling quite rightly plunge into the abyss”. Two well-known financial strategists, two divergent views – but only one gets amplified by the media. Funny that. To make the sort of call issued by the Deutsche economists, you would need the kind of information about who would get what share of the oil and of the UK’s debts that we just don’t have yet – because those negotiations between Holyrood and Westminster haven’t even begun. Despite that, the no camp leaps on any passing argument to support its side.

References

  1. Financial Times: Independence debate: Yes, Scotland? 14 Feb 2014
  2. Financial Times: Scottish poll has investors rushing for cover retrieved 4 September 2014
  3. Guardian: A go-alone Scottish economy is viable – but would it be any better? by Aditya Chakrabortty September 15, 2014

The Border effect

Professor Jim Gallacher, a former senior civil servant who advises the Better Together campaign, argues that, at its heart, economic union is about free trade – the movement of goods and services, people and capital, without hindrance, to all parts of the country. An independent Scotland couldn’t, in the long run, remain as integrated with the UK economy. International borders do matter for trade, as we see in the EU - ask any insurance company - because laws and regulations differ. Scotland’s biggest export market by far is the rest of the UK, and our exports to it have grown much more swiftly than to Europe or the rest of the world. The example of the US and Canada is interesting. Despite being in a free trade area, it has been estimated that Canadian provinces are more than 20 times as likely to trade with each other than with equally distant US states[1]. Based on information on trade between Ireland and the UK as a whole, it has been estimated that Scottish GDP would fall by 5.5% due to the border effect[2] .

Trends in Revenue and Expenditure

Strength of the Economy

References

  1. Scotsman, 27 August 2013
  2. Scotland's Decision: 16 questions (Jeffery & Perman, ed) Question 1 by David Bell (Birlinn)