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It's the Gers

Brian Taylor | 13:13 UK time, Wednesday, 23 June 2010

Let's talk about Gers.

No, not the footballing outfit defeated by the mighty United on their way to triumph in the Scottish Cup.

Rather we are concerned with Government Expenditure and Revenue Scotland, the annual estimate of how much is spent and raised north of the Border.

This is an official document, prepared by Scottish government economists and statisticians.

But, from its foundation by the Conservatives, Gers - or, rather, the interpretation placed thereon - has been sharply political.

In Tory days, the aim of ministers was to demonstrate that self-government would be a fundamental mistake.

How things change. Now the ministers in St Andrew's House are Nationalist and their aim is to show that Scotland could run her own economy, including full control of tax and spending.

Budget surplus

John Swinney believes that today's official report, which covers 2008-09, proves just that.

You will, I feel sure, be astonished to learn that Labour's Andy Kerr places exactly the opposite interpretation upon the selfsame figures.

How so? Let us dip a toe into the sums. For 2008-09, the official calculation is that Scotland had a current budget surplus of £1.3bn or 0.9% of GDP.

That includes, as in the past, a geographical share of North Sea oil revenues being allocated to Scotland.

For the same period, the UK had a current budget deficit of £48.9bn or 3.4% of GDP.

That includes the allocation of 100 per cent of North Sea oil revenues.

QED, says John Swinney. Scotland was in a stronger position in that year - and the three preceding - than the UK as a whole.

Investment spending

Aha, say critics, but that doesn't tell the full story. How about capital spending? Why is that not included?

Andy Kerr is in trenchant mood. "Are the SNP proposing to close down the NHS and educate children at home?"

No, say ministers, they are not. As in the past, capital and investment spending is listed in a separate section.

Taking that into account, Scotland had a net fiscal deficit of £3.8bn in the year in question, some 2.6% of GDP.

Does that prove penury? No, say ministers. The comparable figures for the UK as a whole are £96.1bn and 6.7%.

Further, they say the Scottish figure compares favourably with OECD nations as a whole.

More criticism. Andy Kerr says Gers calculates oil on a geographical basis - but only allocates a share of the banking bail out to Scotland on a per capita basis, "effectively denying the central role of RBS and Bank of Scotland in the crisis".

Banking bailout

In other words, Gers substantially underplays the value of the UK bank rescue to Scotland.

No, say ministers. Oil is rightly allocated on a geographic basis. It is a naturally occurring asset which benefits those where it is found.

The per capita calculation for the banks is entirely in line with other such sums.

For example, Scotland is only allocated a per capita assessment of corporation tax while RBS was contributing hugely to the UK Treasury during its years of plenty.

Plus, say ministers, the banking bail out was not Scottish. It included the Halifax bit of HBOS plus Northern Rock.

It was done to benefit the UK economy. Per capita is right.

Criticism number three. It is wrong, says Andy Kerr, to "mortgage Scotland's future on the price of oil".

Bolster economy

He notes that global oil prices were at a record high in 2008 but have since fallen back.

Scotland could not found a stable economy on a fluctuating and, by definition, wasting asset.

In response, SNP ministers say that an independent Scotland, like Norway, could have invested oil revenues in an account to bolster the economy long-term.

Even now, they say, such a move would be possible although, self-evidently, far more limited than would have been possible in the past.

Further, they argue that the picture painted by Gers as a whole - including a share of oil - contrasts with the poorer figures for the UK.


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