Two new research papers from Nuffield College, Oxford University, have been published following the release of this year’s GERS figures. The Gwilym Gibbon Centre for Public Policy Working Papers are authored by Professor Jim Gallagher.
“Arithmetic and Independence – GERS and the Scottish Constitutional Debate”
This paper examines the fiscal position of a putatively independent Scotland under the plans of the Scottish National Party in the light of the most recent data on taxation and public spending in Scotland within the UK, which confirms how Scottish public spending, like spending in other parts of the UK, is supported by substantial fiscal transfers from wealthier parts of the country.
It challenges the SNP’s conclusion that Scotland could achieve a sustainable fiscal position without immediate substantial spending reductions and instead projects how the SNP’s latest plans would result in a newly independent country amassing unsustainably high levels of debt, as it sought to borrow to make up for lost income from the UK. This, together with the assumptions that independence would have no negative effects on Scotland’s trade with the rest of the UK, result in the presentation (as the 2014 referendum) of a seriously over-optimistic prospectus for public services under independence.
“Pooling and Sharing – the United Kingdom as a Fiscal Union”
Fiscal transfers in the UK are very substantial, with the richest regions of the country pooling and sharing anything up to 10% of their GDP with the rest of the country. For recipient regions transfers are economically very significant, eg 20% of GDP in Northern Ireland. Transfers can be conceived of as making up for a relative shortfall in tax income or funding relatively higher spending. The former “resource equalisation” is by far the more significant, especially within England.
Scotland is not the biggest recipient part of the UK but is unusual in getting more of its transfer to support spending. This largely unacknowledged form of sharing results from the UK’s centralised tax and spending systems, and while it is not a substitute for a successful regional economic development strategy, it both transfers substantial resources (eg 15% of the GDP of the North East) and ensures at least comparable welfare and public services irrespective of local economic ability to support them.”
Pamela Nash, chief executive of Scotland in Union, said:
“These new reports add to the undeniable evidence that Scotland is stronger as part of the UK.
“All of us in Scotland are better off by being part of the UK, with each individual benefiting by £1,968 in the last year from the UK dividend.
“This analysis shows how resources are pooled and shared across the UK, including to Scotland but also crucially to regions of England – proving the UK works for everyone in the country.
“The SNP isn’t facing up to the reality of higher taxes and deeper spending cuts in an independent Scotland, and a steep and lengthy deficit that is likely to prevent a successful application to join the EU.
“Voters deserve the truth, not the unrealistic proposals of the SNP’s growth commission.
“It’s time for the SNP to drop its threat of a divisive second independence referendum and concentrate on improving the public services we currently enjoy, rather than planning to cut them.”