As readers of this site will be well aware, 40 years ago the UK government economist Professor Gavin McCrone analysed the effect of North Sea oil on the finances of a notional independent Scotland, which at the time seemed a real and possibly even imminent prospect. His assessment was so alarming to Westminster that its findings had to be kept secret from the Scottish public for over three decades.
With the information suppressed, Scotland remained in the UK (and was even refused modest devolution despite voting for it in a referendum), resulting in the imposition of a series of Conservative governments elected on English votes, beginning with Margaret Thatcher’s turning-point victory in 1979.
Ironically, we have Mrs Thatcher’s government to thank for the collation of the data which demonstrates the true state of Scotland’s finances within the UK, in the shape of the GERS figures (Government Expenditure and Revenue Scotland).
The data was subsequently collected into the Scottish National Accounts Project, which provides the figures (Excel document) for the following analysis. What it reveals provides a surprisingly unambiguous statement of Scotland’s financial condition, and one which is agreed across a broader political spectrum that you might imagine.
The chief difficulty in establishing Scotland’s position relative to the UK is that when ascribing income and expenditure to individual parts of the UK, a number of estimates and presumptions have to be made. For example, defence spending or foreign affairs are essentially non-geographic in the Scotland/UK context, and so spending in these areas is generally apportioned on a population basis.
North Sea oil presents a particularly sensitive issue, and the presentation of the data has been fudged for political reasons, obfuscating the reality by producing figures on an economically meaningless per-capita basis as well as the proper geographic basis which would in fact be the case upon independence.
The prominent feature of the UK data is the regularity of annual deficits. There’s nothing unusual in this – rather, it’s the norm among developed western economies. What’s more concerning, however, is the rapidly growing level of debt in recent years.
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