Insights: analysis of Scotland's fiscal data

35 short pieces on what the GERS figures show, and what they don't.

The scale of Scotland's Deficit

The GERS figures show Scotland running a deficit which is much greater than the EU's excessive deficit threshold

GERS shows Scotland's deficit running far above the EU's 3%-of-GDP excessive deficit threshold — the fiscal position today, before any assumptions about independence of fiscal autonomy

Scotland benefits from a higher share of UK public spending than its share of UK revenue generation

Scotland benefits from a higher share of UK public spending than its share of UK revenue generation - when North Sea revenues were stronger and these figures told a different story, the SNP leader at the time Alex…

Scotland's deficit has become much worse than the UK's over the last decade

Scotland's deficit tracked the UK's until 2014; since then falling oil revenues and higher public spending have pulled them apart, leaving Scotland's materially worse.

The Fiscal Gap (aka the Deficit Gap) describes how much larger Scotland's deficit is than the UK's overall

When we talk about the Fiscal Gap (aka the Deficit Gap), we're simply looking at how much larger Scotland's deficit is - in per capita or % GDP terms - than the UK's overall

For Scotland to match the EU's excessive deficit threshold, large spending cuts or revenue increases would be required

The scale of the fiscal challenge an independent or fiscally autonomous Scotland would face can be seen by comparing Scotland's GERS deficit with either the current UK's or - perhaps more pertinently - the EU's 3%…

Scotland's onshore deficit has consistently been more than 5% of GDP worse than the rest of the UK's

Excluding North Sea revenue, Scotland's deficit has been over 5% of GDP worse than the rest of the UK's for 25 years — every narrowing has come from an oil surge.

Capital and reserved costs can't be ignored when considering the possible sustainability of a fiscally autonomous or independent Scotland

Claims that Scottish revenue covers 'all day-to-day devolved spending and reserved social protection costs' conveniently ignore capital spending and large elements of reserved spending from which Scotland directly…

Scotland doesn't "send more to Westminster than it gets back"

Polling has shown that 76% of SNP supporters believe Scotland sends more to Westminster than it gets back - the GERS figures shows that the opposite is true.

If spending for but not in Scotland was moved to spending in Scotland, the direct fiscal impact would be minimal

A line-by-line audit finds that the difference between non-defence spending for Scotland and in Scotland is at most ~£0.5bn.

Scotland's higher public spending

Scotland benefits from over £2,500 higher spending per head than the UK average

Public spending for Scotland runs over £2,500 per person above the UK average, a gap which has widened over 25 years - devolution and the Barnett Formula has been increasing the spending gap, not closing it.

Scotland's relatively high spend per head is similar to that of London and Northern Ireland

CRA data puts Scotland's spending per head alongside Northern Ireland and London at the top of the UK; the English regions receive significantly less.

Scotland benefits from higher spending per head in nearly every area of public spending

Scotland spends more per head than the UK average in almost every category, with social protection and education & training the largest sources of the difference.

Social protection spending per head is the largest contributor to Scotland's higher spending and it's growing at a faster rate than the rest of the UK

Social protection is the biggest single source of Scotland's spending gap, growing 11% in real terms since 2020/21 against 5% in the rest of the UK.

Spending on education & training in Scotland is significantly higher per head than the UK average

Scotland spends more per head on education than the UK average — part policy choice (no tuition fees), part the cost of serving rural and island communities.

Devolved government functions explain Scotland's higher per head spending on Public & Common Services

Scotland's higher public & common services spend is the cost of running the Scottish Government. The Commons and Lords account for just ~£15 per head of it.

Scotland's higher public spending: deep dive

Scotland used to spend more per head on Health, but that spending gap has declined over the last 20 years

Scotland's health spending per head has converged towards the UK average over 20 years — hard to square with SNP claims of spending 10.6% more than England.

About £100m of transport costs that take place in Scotland are not allocated to Scotland in GERS

No HS2 costs are allocated to Scotland in GERS. It runs the other way too: ~£100m of Scottish ferry costs — 30% of them — are allocated to the rest of the UK.

Enterprise & Economic Development spend is higher per head in Scotland due to devolved spending choices

Scotland's higher than population share of enterprise and economic development spending is entirely down to devolved spending choices — Scottish Enterprise, councils, VisitScotland etc.

Scotland spends more per head on Housing & Community Amenities

Scotland spends more per head on housing and community amenities; about half the gap is publicly owned Scottish Water's capex, the rest genuinely higher spending.

Scotland used to spend slightly less per head on Public Order and Safety, but that is no longer the case

Scotland used to spend slightly less per head than the UK average on public order and safety. That reversed around the time Police Scotland was formed.

Scotland's revenue generation

Including North Sea tax revenues, Scotland's revenue per head over the last decade has roughly matched the UK average

Including a geographic share of North Sea revenue, Scotland's revenue per head has roughly matched the UK average for a decade. Onshore, it lags by about £500 per head.

Scotland performs relatively well in terms of revenue per head when compared to other devolved nations and most English regions

Scotland raises more revenue per head than Wales, Northern Ireland and every English region bar London and the South East — even when North Sea revenues have slumped.

Scotland's North Sea Revenues have rebounded in recent years, mainly due to the Energy Profits Levy

North Sea revenues have rebounded on high oil prices and the 2022 Energy Profits Levy, which now accounts for the majority of North Sea revenues.

Scotland's onshore revenue per head is not lower in all categories, but overall nets to a lower figure than the UK average

Scotland's onshore revenue gap is lower income, corporation and capital taxes, partly offset by higher VAT, business rates, duties and gross operating surplus.

Income tax revenue represents the biggest relative shortfall in revenue per head, despite higher income tax rates in Scotland

Income tax is Scotland's largest revenue shortfall per head relative to the UK average - the introduction of the Scottish Rate of Income Tax (meaning on average Scottish tax payers pay higher tax then in the rest of the…

Council tax freezes in Scotland have contributed to materially lower council tax revenues being raised per head in Scotland

Council tax was frozen for nine consecutive years and twice since; Scottish councils now raise about a fifth less per head than councils elsewhere in the UK.

Scotland's revenue generation: deep dive

Reserved Corporation tax, CGT and IHT all generate lower revenues per head in Scotland

Scotland raises less corporation tax, CGT and inheritance tax per head than the UK average - the corporation tax figure is not simply based on the location of company headquarters

Scottish business rates are higher, council tax rates are lower

Scottish business rates raise slightly more per head than the UK average — larger properties are taxed more heavily — while council tax raises materially less.

Scotland's higher "Other receipts - Gross operating surplus" per head are mainly due to accounting adjustments relating to Scotland's higher capital expenditure per head

Scotland's higher gross operating surplus is mostly accounting: of ~£400 per head, ~£300 mirrors capital consumption adjustments and ~£100 is attributable to public ownership of Scottish Water.

Survey-based allocations all show higher revenues per head for Scotland (with bounded confidence intervals)

VAT, alcohol and tobacco revenues are survey estimates with published confidence intervals — all show Scotland raising above the UK average per head.

The introduction of the Scottish land & buildings transaction tax appears to have had little impact

Comparing LBTT with the stamp duty it replaced on a like-for-like basis, devolving the tax appears to have made no material difference to revenue raised per head.

The deficit gap and fiscal transfer

Because Scotland benefits from higher spending and consistently generates lower onshore revenues per head, a large onshore deficit gap exists

Scotland's higher spending per head and lower onshore revenue per head explain the consistently large onshore deficit gap that exists between Scotland and the UK overall.

As North Sea revenues have declined, the scale of the deficit gap has increased (revealing more of the onshore deficit gap)

North Sea revenues have masked Scotland's onshore deficit gap for decades - as they has declined, the underlying gap has been progressively revealed.

The deficit gap has increased dramatically compared to the pre-indyref years

In 2014 GERS could be cited to argue Scotland paid its way in the UK - the deficit gap has widened sharply since, and the same framing now tells the opposite story.

The deficit gap leads to a large implied fiscal transfer in Scotland's favour

The deficit gap per head times Scotland's population gives the implied fiscal transfer. This is simply an accounting outcome under current arrangements, not a financing requirement - it has no direct fiscal implications…