Scotland’s deficit has risen to nearly £2,000 per person after the gap between tax income and spending widened to become more than three times larger than the UK as a whole.
Data released on Wednesday showed Scotland’s fiscal deficit rose to £15bn in 2019-20, fuelling a row over the case for independence at first minister’s questions between Nicola Sturgeon and the Scottish Labour leader, Richard Leonard.
Sturgeon accused Leonard of “apeing the Tories” after he said the deficit figures showed why financial redistribution within the UK was needed. He challenged her to respond to the economic crisis caused by the coronavirus pandemic, by protecting wages and jobs. Sturgeon retorted that she had consistently called for extra borrowing powers and Treasury support to protect jobs.
“If we were independent we wouldn’t need to go cap in hand to the UK government pleading” , she said.
Leonard said his questions about spending were “reasonable and rational” since the annual government expenditure and revenue Scotland report (Gers) found Scotland’s fiscal deficit last year was 8.6% of GDP, up from 7.4% last year.
The difference between income and spending was nearly £2bn higher than in 2018-19. The gap for the UK as a whole last year was 2.5% of GDP, compared with 1.1% last year. The report said that gap was consistently 7% points larger in Scotland than for the UK as a whole.
Government statisticians calculated overall public spending was £1,941 higher per head in Scotland than the UK average, including spending elsewhere in the UK or overseas attributable to Scotland, and North Sea oil taxes. Tax receipts were £308 lower per head compared with the UK average, while spending was £1,633 higher per capita.
That gap increased to £2,064 once oil revenues were excluded; Sturgeon has previously warned that an independent Scotland should not rely on oil receipts to fund public services because they were falling and very volatile.
That was the largest since 2016-17, when the per capita gap was £2,037 excluding oil revenues and £2,008 including them. Tax receipts grew by £1bn last year but public expenditure grew faster last year in Scotland partly because the UK government had increased spending, the report added.
Alister Jack, the Scottish secretary, said the data proved Scotland benefited from the UK’s “pooling and sharing” of resources, which supported higher public spending for Scotland. Economists say public spending is also higher per head in Northern Ireland and some English regions.
“That has never been more important than it is right now. In the face of a global pandemic, the strength and experience of the UK Treasury is helping people in Scotland and across the rest of the UK,” he said.
The data covers the first few weeks of pandemic’s impact on the economy in March. Kate Forbes, the Scottish finance secretary, admitted the subsequent collapse in output over the summer and the heavy cost of the Treasury’s fiscal stimulus package would make this year’s deficit much worse.
In 2018, an expert commission set up by Sturgeon to investigate the finances of independence forecast it would take up to 10 years for Scotland to get its annual deficit below 3% – the target set by the EU for its members.
Despite warning about an impending recession, Forbes said the 10-year target to cut the deficit was still realistic. An independent Scotland would be able to design its own fiscal and spending policies both longer term and to meet its needs during the pandemic, she said.
“These figures demonstrate why the current constitutional arrangements are unsustainable and why if Scotland had the right fiscal powers we should do more. These figures are not a reason to celebrate the status quo,” she said.
The Institute for Fiscal Studies thinktank said Scotland’s spending deficit next year could be as high as 28% due to the fall in GDP expected from the recession caused by the pandemic.
David Phillips, an IFS associate director, said the figures were still uncertain but “far bigger increases are in store for the current financial year, reflecting the economic impact of and government responses to the Covid 19 crisis.”
• This article was amended on 27 August 2020 to clarify that the figures given for overall public spending in Scotland includes spending elsewhere in the UK or overseas attributable to Scotland.
