There are days in the Scottish political calendar on which, if you want to retain your sanity and some semblance of respect for politicians whom you like, you should stay off social media. The annual publication of the Government Expenditure and Revenue Statistics (GERS) is one such day.
As the Fraser of Allander Institute made clear in its pre-emptive strike earlier in the week, GERS tells us only three things: all revenue raised in Scotland, from devolved and reserved taxation; all public spending in Scotland by the Scottish and UK governments; and the difference between those two figures, also known as the ‘net fiscal balance’.
If you think that sounds like an innocent statistical publication, then of course you would be entirely wrong. It is, in fact, an unmissable opportunity for all political parties to make the points they need to make about unionism and nationalism, about remaining part of the UK or opting for independence.
Like a box of Celebrations, there is something for everyone in GERS (so much so that everyone can conveniently ignore the Bounty). The Scottish Government got in with the predictable line that revenues have increased to a record £98.3 billion. Just wait until next year, when we’re likely to go over £100 billion - there’ll be a rally on Calton Hill.
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In a none-too-subtle rebuke of the globally respected tax expert Dan Neidle (who last week surmised that the Scottish Government’s decision to hike income tax rates on upper earning Scots might have led to a reduction in revenue as a result of behavioural change), the government decided that the Income Tax growth was a result of its wise and prescient decisions on tax rates and bands.
The net fiscal balance improved too, don’t you know? It’s now less than 11 per cent of GDP (the press release did not mention that the rules of membership of the European Union include a core limit of a maximum of three per cent, with an Excessive Deficit Procedure requiring emergency corrective action when a country exceeds that limit).
Unionist parties love GERS day too. The UK Government, through the Scotland Office, pointed out with not insubstantial glee that the net fiscal balance of over £25 billion is a gap filled by the UK Government, and equates to £2,720 per head of population in Scotland. No Britain, no schools and hospitals in Scotland. The Tories love GERS day even more than Labour, giving them a wonderful reason to liberally use the phrase ‘Union Dividend’ and “stick it to the Nats” in a well worn strategy which has had a self-evident level of success over the last two decades.
One of the most delicious ironies of GERS day is the role played by the revenues generated by oil and gas. This is the day when the parties most in favour of the extraction of hydrocarbons from the North Sea, Labour and the Tories, pray that receipts from oil and gas are low, in order that the net fiscal balance increases. Conversely, the parties most antagonistic towards continued extraction from the North Sea - including half the Cabinet - pray for a temporary oil boom to boost domestic revenues.
In amongst all of this waffle, there are facts in GERS. They are important, and I will again take the opportunity to jump on my annual high horse to appeal for a more sensible discussion about them.
The net fiscal balance in itself is not an indicator of the strength or otherwise of the case for independence versus remaining in the UK. The UK also runs a gigantic budget deficit. The UK national debt is £3 trillion (not a typo). We spend as much on servicing debt in this country as we do on education. Scotland may be a little more pregnant than the UK, but they are both pregnant.
No, there are more important facts to discuss. Primary amongst them is that the gap between expenditure per person and revenue per person, in Scotland versus the UK, has never been higher. This is a problem, because it tells us in essence that Scotland is not paying its way anymore (in the early part of devolution expenditure per person was higher, but so was revenue per person). It is also the case, though, that the revenue raising structures proscribed in the Scotland Act and the Fiscal Framework make it exceptionally hard (perhaps impossible) for the Scottish Government to increase tax revenue in any statistically significant way. That is the debate we should be having.
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Is the Scottish Government fiscally irresponsible? Absolutely, yes. There is vast, almost unimaginable waste in Scottish Government expenditure. The public sector is unproductive and inefficient on a widespread scale. But is fiscal irresponsibility an inevitable result of our system? Also yes.
The Scottish Government spends almost £70 billion a year but raises less than £30 billion. Furthermore, the Block Grant Adjustment mechanism of the Fiscal Framework effectively renders Scottish Government decisions on taxing and spending moot. There is no meaningful incentive to run a tight ship - either way, we get the money. There is a place for debate on GERS day, but it should focus on the merits of all levels of government being responsible for raising what they spend.
Want to pour money into a health service you know isn’t working? Want to turn state benefits into a free for all? Want to dish out grants to every Tom, Dick and Harry in return for a press release and a photo? Crack on, but you have to work out how to pay for it without anyone else’s help.
Decisions should have consequences - economic and political. With that in mind, full fiscal responsibility would be good for nationalists and unionists alike. There is no better way for Scotland to proclaim itself ready for independence than for the SNP to prove itself capable of running a country in which its Budget has a real consequence. It is highly legitimate for the Scottish Government to claim that, without power over taxes such as Corporation Tax, Capital Gains Tax and a range of others, as well as full control of welfare, they are hamstrung by the decisions made at Westminster.
Full fiscal responsibility would remove this barrier.
For unionist parties, they would be presented with an opportunity, finally, to put forward a meaningful alternative programme for government starting from a blank sheet of paper.
There is no better way to take charge of your future than being required to fund it.
Andy Maciver is Founding Director of Message Matters, and co-host of the Holyrood Sources podcast
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