The Strength of the Union

By Gramus

v2-Scottish-Money-Rex-v3.jpgScotland in the main runs at a deficit. The following is a passage from GERS 2012-13. It gives the Scottish Government’s own figures on revenue and expenditure for that year.

Image by Independent.co.uk

‘In 2012-13, total Scottish non-North Sea public sector revenue was estimated at £47.6 billion (8.2% of total UK non-North Sea revenue). Including a per capita share of North Sea revenue, total Scottish public sector revenue was estimated at £48.1 billion (8.2% of UK total public sector revenue). When an illustrative geographical share of North Sea revenue is included, total Scottish public sector revenue was estimated at £53.1 billion (9.1% of UK total public sector revenue).

In 2012-13, total public sector expenditure for the benefit of Scotland by the UK Government, Scottish Government and all other parts of the public sector, plus a per capita share of UK debt interest payments, was £65.2 billion. This is equivalent to 9.3% of total UK public sector expenditure.

In 2012-13, the estimated current budget balance for the public sector in Scotland was a deficit of £14.2 billion (11.2% of GDP) excluding North Sea revenue, a deficit of £13.6 billion (10.6% of GDP) including a per capita share of North Sea revenue or a deficit of £8.6 billion (5.9% of GDP) including an illustrative geographical share of North Sea revenue.’

If Scotland were to become independent, this deficit would probably increase. Oil revenue has fallen dramatically. The financial sector, which provides 20% of Scotland’s revenue, began to show signs of flight at the idea of a Yes vote last year. The well-documented phenomenon of the ‘border effect’ would kick in, especially as there would be border controls between the rUK and Scotland; and Scotland does 70% of her trade with the rest of the UK. In Independent Scotland, taxes would have to go up; the last of the Scotland Analysis papers estimated a basic rate of income tax at 26% and a VAT rate of 25% (including on food), just to maintain what already exists. To improve it, and to provide for an ageing population, would require sources of revenue which the SNP has not identified. 

Yet at the moment Scotland flourishes in the main, with standards of living rising, unemployment falling, and with more money spent on Scots per capita than in the rest of the UK. This does not mean to say that Scotland is living beyond her means – she is not. She has another source of income, the nature of which may be seen below in a table which is a snapshot of the UK’s finances taken from the website of the National Audit Office (NAO):

Gramus_table_scotland-in-union.jpg 

It will be noted that underneath the figures for all taxation collected are two further rows - Revenue from sales of goods and services, and Other Revenue.

This is not tax money. It is UK earnings. Sometimes they are referred to as the UK’s invisible earnings, and it is not money out of your pocket. If you do some adding up, then in 2009-10 Britain earned 51.0 + 47.1 = £98.1bn. In 2010-2011, she earned 49.8 + 48.8 =  £98.6bn. In 2011-2012, she earned 41.8 + 51.1 = £92.9bn. In 2012-13, she earned  42.7 + 53.6 =  £96.3bn. The total amount from invisibles over 4 years = £385 billions. Average earnings from invisibles per annum over 4 years = £96.47bn.

By comparison the total revenue from North Sea oil in 2013-14 was £6.6bn. It is forecast to fall for the last fiscal year to £4.1bn. 

The United Kingdom derives its invisibles from innumerable sources: consultancy fees, legal fees, arbitration fees, money transfer fees, interest on foreign investments, transaction fees, education, advice – the list is almost endless. The teaching of English alone is worth £9bn a year annually and generates £500 million for the British Treasury. If a foreign country asks for British advisers to train their troops, they pay. If the government sells off surplus warships, planes, computers or other hardware, they generate cash. Further, people want to invest in Britain because she is seen as stable and safe – and their money in turn generates interest for British companies. Tourism puts vast amounts of money into circulation- and tourists spend on many goods and services. The City of London and the UK generally have always been good at this and they are consistently the largest generator of invisible earnings in the world.

With such a pot of money, it could be argued that the UK taxpayer (never mind the Scottish taxpayer) does not pay a penny for Trident - the invisibles pay for it.

Scotland had a deficit of £8.6 billion last year.

So what? 

It will be filled – not as a subsidy but with Scotland’s just and fair share of the earnings of our pooled economies. Scotland is not a serf or second class, but an equal shareholder in a large and profitable economy. It is not perfect and maybe never will be – but the Nationalists wish to break away from the UK. If they do that then they break away from the invisible strength of the UK – the money it creates. They would cut themselves off from a stream of revenue that dwarfs North Sea oil.

And fill it with what, exactly?

If the Nationalists could demonstrate that the Scottish economy could generate, pro rata, the same amount of cash from Scottish invisibles as the UK provides, then they would win the economic argument. But they can’t. They have not even come close. So the pensions, the NHS, the services, the free medicines, University places, parental guardians, Gaelic road signs, aid to Malawi, money to buy trews and stay in posh hotels - it all comes from a source of cash that is consistent and as reliable as it is invisible.

Can the nationalists replace it?

On their showing so far, if you think they can, then get you to a casino and gamble all your money away. Because that is all they offer you.

Don’t take the Union for granted.  We need it.

All of us.

Without those invisibles, the cash for the UK would run out – and quickly too.

Gramus is the nom de plume of a Scot living in the north of England who is an historian.

 

 

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