GERS: Pandemic spending sees Scotland's notional deficit more than double in a year

Huge spending on the COVID crisis has spurred Scotland’s notional deficit to record levels, the latest Government Expenditure and Revenue Scotland (GERS) figures have revealed. 

Last year, the gap between income and spending in Scotland was £36.3billion, 22.4 per cent of GDP, that’s up from £15.1bn (8.6 [er cent of GDP) in 2019-20. Excluding a share of the North Sea revenue, it's at 23.8 per cent of GDP or £36.9 billion.

That equates to a total expenditure per person in Scotland of £18,144. The equivalent figure for the UK as a whole is £16,316, a difference of £1,828.

The annual publication of the figures always sparks a frenzied constitutional debate, with the Conservatives saying the figures show the "Union dividend" Scots receive from being part of the UK.

Including an illustrative geographical share of North Sea revenue, Scotland’s public sector revenue - the money taken in by the government - is equivalent to £11,496 per person, £382 less than the UK average. Excluding North Sea revenue, it is £11,395 per person, £477 less than the UK average.

Revenues totalled £62.8 billion, down from £66.2 billion in 2019-20. This includes a drop in North Sea receipts of 35 per cent as worldwide demand for oil and gas fell sharply, as well as lower receipts from non-domestic rates and VAT.

Total expenditure in Scotland, by the Scottish Government, UK Government, and all other parts of the public sector was £99.2 billion, an increase of 21 per cent. 

However, the Scottish Government also warned that the final impact of the COVID spending is not yet known. 

Finance and Economy Secretary Kate Forbes said: “These statistics clearly highlight the significant economic impact of the pandemic. Scotland’s economy contracted by about 10 per cent last year, which is in line with the performance of the UK economy.

“The pandemic has not only changed people’s lives but it has fundamentally shifted our fiscal landscape, with countries and markets around the world reassessing what represents a viable deficit.

“The Scottish Government has worked tirelessly to support businesses and households throughout the pandemic. While we face continued challenges, there are welcome signs that the Scottish economy is beginning to recover strongly.

"Business confidence is back above pre-pandemic levels, output is increasing and job vacancies are rising.  As we rebuild, we are pushing forward with an ambitious 10 year agenda of economic transformation to help seize Scotland’s potential and deliver a more prosperous, fairer and greener economy.

“The GERS figures reflect Scotland’s position within the UK, under which 40 per cent of spending and 70 per cent of revenue income is reserved to the UK Government. The pandemic has clearly demonstrated the need for fiscal reform and that the Scottish Government’s financial powers are insufficient to deal with the new economic reality.

“We once again urge the UK Government to engage positively with us to devolve additional borrowing powers which would allow the Scottish Government to work with business and the public sector to build a recovery that works for Scotland.”

The Tory shadow Cabinet Secretary for Covid Recovery, Murdo Fraser, said: “These new figures demonstrate the strength and security that we gain as part of the United Kingdom.

“In times of crisis, when a pandemic hits, Scottish jobs and public services are safer because we act together.

“The UK Government has delivered a war chest to fight Covid, back our NHS, and support Scotland’s economic recovery.  

“The Union dividend has increased and now every man, woman and child in Scotland is £2,210 better off within the United Kingdom.

“We are back on the road to recovery faster than anticipated because of the world-leading vaccine scheme and thousands of jobs have been protected by Rishi Sunak’s furlough scheme.

“As we start to move on from Covid, it’s vital that both of Scotland’s governments now focus 100% on rebuilding Scotland and delivering our economic recovery.”

Christine Jardine, the LibDem Treasury spokesperson said the figures showed "just how economically valuable the partnership across these isles is.”

She said: "Spending big to protect lives and livelihoods was the only option but the cost to government has been enormous.

"What we've seen in the UK is we're stronger when we pull together. The broad shoulders of the UK economy and a strong central bank have provided the financial muscle to rapidly expand public spending and keep it going.

"These blistering figures drive home just how economically valuable the partnership across these isles is.”

Scottish Labour deputy leader Jackie Baillie said the figures "plainly show how the people of Scotland benefit financially from being part of the United Kingdom." 

She added: "Nothing illustrates the importance of this relationship more than the response to the pandemic, where this additional funding has been key to the protection of the NHS and other public services that have kept the people of Scotland safe.
 
“The additional £1,828 spent per person in Scotland compared to the rest of the UK is what goes to maintaining the schools, transport and NHS on which we all rely.
 
“The ongoing economic fallout of the pandemic and the unanswered question of separation remain the largest long-term economic threats to Scotland's prosperity.
 
"That is why it is reckless beyond imagining to pursue a divisive and economically catastrophic referendum during the recovery. 
 
"No credible politician can look at these figures and believe Scotland would be anything but weaker outside the union."