Kate Forbes: record deficit 'strengthens' case for independence

Ms Forbes was speaking after the annual Government Expenditure and Revenue Scotland (GERS) report laid out the impact of the lockdown on tax and public spending.

It showed that as tax revenues fell and Treasury-funded spending to cope with the pandemic surged, Scotland had a notional deficit of 22.4 per cent of GDP in 2020/21.

That compared to 8.8% of Scottish GDP the year before, and a previous post-devolution record of 10.4% in 2009/10 after the global financial crash.

The UK deficit was up from 2.5 to 14.2% last year, as the Treasury borrowed to fund £300bn of Covid-related spending, including furlough and other business support.

Spending increased by 21% during the year in Scotland, while average public spending per person rose to £1,828 above the UK average.

Opposition parties said the GERS figures damaged the case for independence, arguing Scotland would face years of austerity cuts and tax rises to bring its deficit back under control.

Ms Forbes said the pandemic had “fundamentally shifted our fiscal landscape”, but denied it had set back the debate around independence.

She said: “I think the arguments for independence are strengthened through the pandemic.

“Three years ago, when the figures for the notional deficit were around 7 or 8%, similar questions were asked around whether or not Scotland could truly be successful as an independent country.

"The UK’s deficit right now, as a result of an unprecedented shock, is about 14%, the highest in Europe.

“The fundamental difference is that we all assume the UK Government will manage that position down because of the levers at its control - partly growing the economy and parly managing its finances in a prudent and sustainable manner.

“That is what countries around the world are doing.

“So, yes, there is a strengthened argument for us to grow our economy and my position is that I can only go so far without the full levers at our control.

“I’ll again repeat, 70% of taxation powers are reserved in those GERS figures, 40% of spend is reserved. So right now the status quo is undefendable as far as I can see.

“That is why I believe these figures, but also the pandemic, strengthens our hand. 

“We would have been able to use these resources in a more tailored fashion.

 “Yes, the landscape has changed, but I think it’s strengthened the argument for tailored powers to ensure Scotland’s economy can grow, and we can manage the situation.”

Asked if there was no level of deficit which would give her pause about making a transition to independence, Ms Forbes said: “I’m arguing that a few years ago you would have told me that 14% was an unsustainable level of deficit, which is what the UK Government currently has.

"Back then the Scottish Government would have had an 8% deficit two or three years ago.

“The fundamental difference between the UK Government and ourselves is that the UK Government will be able to manage that… but those levers are denied to us.”

Asked later if the £36.3bn deficit was an obstacle to making the case for independence, Ms Forbes said: “It is not an obstacle to making the case for independence, because deficits across the world have risen exponentially and having the highest deficit in Europe does not seem to be an obstacle to the UK government being independent, and the same argument would apply to us.

”This is a case for having the levers, the full control, to manage our fiscal sustainability.

“Nobody is defending those figures, but I do think they come after a year in which workers, businesses, and householdss have benefited from a significant increase in spending to save lives.”

Asked if it was still the Scottish Government’s goal to hold Indyref2 in the first half of the current five-year Scottish parliament, Ms Forbes was non-commital.

She said: “We have said that once the crisis is passed, we will turn our minds to independence, and that remains our position.”