WHEN the best news from the latest Government Expenditure and Revenue Scotland (Gers) figures is that the country did not go as deeply into the red as the rest of the UK and this coincides with a downgrading of the economic forecast by academics, there is little basis for optimism.
The Gers report shows that Scotland's spending outstripped income by £7.6 billion in the financial year 2011/12. The translation of this by Finance Secretary John Swinney into Scots being better off by £824 per person, compared with those in the rest of the UK, offered cold comfort even without the claim by Scottish Secretary Michael Moore that the economy of an independent Scotland would be reliant on volatile oil revenues.
The fluctuating nature of oil prices makes long-term forecasts particularly difficult but the fall in North Sea revenues is expected to continue despite continued exploration and the Office for Budget Responsibility has forecast a steep yearly fall up to 2017-18.
In the last financial year, Scotland achieved a stronger fiscal position than the UK as a whole due to £10.6 billion from oil and gas taxes. The £64.5 billion of public spending in Scotland amounted to 9.3% of total UK public spending for 8.4% of the population, substantiating the claim that Scotland more than pays its share. However, public spending per head not only remains higher but the gap between Scotland and the rest of the UK was the largest for five years. This is partly due to factors such as population density, but there are important implications in the biggest single expenditure being the £21.7 billion cost of welfare and pensions payments in Scotland. The cost of pensions will rise as more of the baby-boomer generation reach state retirement age, but unemployment payments can also be expected to rise. Today's commentary by the Fraser of Allander Institute at Strathclyde University predicts another 24,000 people out of work in Scotland in 2012 and 2013.
Even if the recovery finally takes hold in 2015 as it predicts, measures to boost growth will be crucial. On this, the Scottish Government and Professor Brian Ashcroft of the Fraser of Allander Institute are agreed. While the full impact of austerity measures, including benefits cuts, has still to take effect, it is also true that all the jobs in the infrastructure projects commissioned by SNP Government have yet to come on stream. Nevertheless, with such small growth, an increase in unemployment seems inevitable.
The prospects for the Scottish economy, whether within or outside the UK, must remain a cause for concern and a case for resuscitation.
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