Time For Some Facts
The Telegraph reported today that Gordon Brown has announced a review of the Barnett formula on Scottish public spending, which it claimed means that an annual £1,500 more per head is now spent north of the border.
The vitriolic and ill-informed row which this provoked between English and Scottish readers in the comments indicated that the time had come to have a look at the facts. Do the Scots get more public money? Are they subsidised by England? And what about North Sea oil?
The first question is easily answered by a Treasury document called "Public Expenditure Statistical Analysis (PESA)". Latest figures - those for 2005-6 - show that the answer is "yes".
On the basis of the 87% of government spending which it is possible to account for by region, the Scots received £8,179 that year as against £6,835 for us Sassenachs (actually a difference of £1,344).
The second question is harder to answer. Identifying Scottish revenue is tricky. A report from the Scottish Executive, however, gives an informed estimate of £36.4bn for 2004-5 (excluding oil revenues).
Including £5.2bn of North Sea oil revenues would have given a Scottish government total income of £41.6bn.
The other side of the equation is simpler. The Treasury gives UK total managed expenditure of £491bn for that year. Multiplying this by the Scottish share of identifiable spending by region - 9.6% - gives total Scottish expenditure of £47.1bn.
Add in 9.6% of the UK's annual £31bn of debt interest and this gives an approximate Scottish budget of £50.1bn.
So even including all North Sea oil revenues, an independent Scotland would have had a budget deficit of £8.5bn a couple of years ago. At about 10% of Scottish GDP that is much higher than the UK's 3% (and completely unsustainable).
We could say, then, that England "subsidises" Scotland to the tune of 7% of Scottish GDP, or about £6bn per year.
On the North Sea oil question specifically, revenues were given as £9bn for 2006-07 in last year's Pre-Budget Report. They may well be even higher this year, but peaked over twenty years ago and fell as low as £1bn in 1991-2. So reliance on this source of revenue is a double-edged sword (and even the record oil prices seen recently would not have bailed Scotland out of its fiscal black hole).
For the modern British economy as a whole - contrary to what some seem to believe - oil revenue is irrelevant.
Finally, some Scots wondered why Westminster seems so keen to preserve the Union.
The answer is simple: Labour needs its Scottish seats.
That's the real benefit of breaking up the Union for England. £6bn is a rounding error for our public finances, but a fatally wounded Labour party - now that's worth having.
3 comments:
Whilst we are part of a United kingdom Scottish revenue does not come into it.
There is no 'Scottish Oil' because oil is a UK resource, the proceeds of which should be shared equally - just as the revenue generated by the more prosperous South East should be shared with less well off parts of the UK.
Don't over complicate the issue. Scotland receives far too much in social spending in comparison to both England and Wales.
If Scotland wants tax from 'Scottish oil' then it will have to vote for independence and make that oil 'Scottish'.
Thanks for the comment.
Scotland does indeed receive more government spending than England, as I point out, but I also wanted to assess the likely fiscal position of an independent Scotland (in relation to quesions over an English "subsidy" which cannot be resolved by reference to spending alone).
I sympathise with your point about the Kingdom being United, and I have lamented Labour's cackhanded demolition of it several times. On the oil question, however, which vexes the Scots as it would be material to their economy (though as I note, not to England's), I would propose handing all of it over to an independent Scotland in return for their accepting their share of the UK national debt. This reflects geographical / geological reality: as a rule the UK's oil fields are north of the border, the gas fields south (see here). As it would leave the Jocks quids in - for the moment - I think it's also a generous and honourable arrangement.
I propose calling it the "Joseph Settlement" :)
Yes Scotland is subsidised, your estimate seems about right, could be more or less, who cares really.
To whom the oil belongs is a question of geography. A ruler has to be stuck on a map and projected out at whatever angle from where the border is. If most of it belongs to Scotland, then so be it. As you say, the other half of the equation is how much of the national debt they assume. Horses will be traded, if a proper deal is struck, then one side will end up regretting it afterwards, but such is life.
Oh ... as a caveat, would the Scots mind taking Northern Ireland off our hands? It's a terrible shame that we didn't bundle this up with Hong Kong and fob it off on the Chinese.
Post a Comment