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Wings Over Scotland

Labour demand £19bn of cuts in Scotland

Posted on March 07, 2012 by

The desperate attempts of the Unionist parties to portray Scotland as a country too poor to survive on its own are nothing if not inventive. One might think that the publication of the latest GERS report, showing that Scotland contributes more to the UK Treasury than it receives back in public spending, would be pretty hard to turn into a plus point for the Union. But while Michael Moore’s strategy on behalf of the Con/Dem coalition has been simply to put his fingers in his ears and insist that Scotland would be poorer outside the United Kingdom in flat-out contradiction of the official facts, the Labour “opposition” are trying a rather different spin.

Scottish Labour’s finance spokesman and failed leadership contender Ken Macintosh issued a press release today in which he made the bizarre claim that the GERS figures somehow constituted a positive case for the Union:

“The GERS report published this morning demonstrates the significant benefit to Scotland of being part of the UK. The report shows that public expenditure in Scotland was last year between £11bn and £19bn higher than all the taxes generated in Scotland, including North Sea oil.”

But let’s look at that for a second, and generously gloss over the fact that Macintosh’s figures apparently have an 73% margin of error. (Is it £11bn or £19bn, Ken? That’d be a fairly important difference.) What Macintosh is actually saying is that Scotland, taken as part of the UK as a whole, ran a budget deficit in 2009/10.

Now, in itself (and leaving aside the comically wide range of Macintosh’s “figures”) that’s true. But then, almost every Western economy currently runs a budget deficit. The UK as a whole ran a vast budget deficit over the same period – just under £152bn – and has been doing so for many years, which is why we’re currently experiencing massive cuts, imposed by the Tories and Lib Dems but backed (and largely caused) by Labour. And since the Scottish Government has no borrowing powers and has to balance its own block grant, every penny of that £11bn (or £19bn) “Scottish” deficit in 2009/10 was actually run up by Labour, the Tories and the Lib Dems at Westminster.

What McIntosh is in fact saying, then, is that Scotland can’t afford to stay in the UK. The logic of his position is that he’s calling for a further £11bn (or £19bn) of public-spending cuts in Scotland – to be imposed by Westminster, as Holyrood’s budget is fixed and wasn’t responsible for the deficit – so that we’ll be living within our means.

The SNP, on the other hand, would prefer Scotland to control its own finances, make huge savings by cutting things that the Scottish people don’t want (like Trident and PFI), and take full advantage of the likely increase in oil prices over the coming years to pay down our debts and fund investment in renewable resources for the future.

We don’t think it’s hard to spot which of those is the “positive” option.

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8 to “Labour demand £19bn of cuts in Scotland”

  1. Peter A Bell

    The UK as a whole ran a vast budget deficit over the same period – just under £152m…


  2. RevStu

    Whoops. Fixed!

  3. Nothing less than expected,but if one came up with the truth not contaminated by their party politics,that would be real news,ha ha ha .

  4. Stevie Cosmic

    "The report shows that public expenditure in Scotland was last year between £11bn and £19bn higher than all the taxes generated in Scotland, including North Sea oil.”

    I have a few issues with this wilfully misleading statement:
    1. North Sea Oil revenues and taxes don't accrue to the Scottish account. They never have. They accrue to 'Terra ex Regio' , that other part of the UK that isn't on the map, and then duly flow to Westminster. Both John Jappy and Nial Aslen, whether you agree with their vastly different politics, have both shown (with references), that taxes, levies, CT et al collected from North Sea resources (even the the levies paid by Scottish refineries) are deliberately kept off the books, while somewhat bizarrely, the entire cost for the maintenace of Trident is charged to the Scottish account…..go figure Ken.

    2. The true figures for North Sea Oil and Gas are difficult to come by. They  are out there though…..if you know where to look. So, Ken, mate, if you are implying that Scotland's budget deficit would cripple this small country of 5 million people if it were independent, have a gander at the following figures from a Commons debate last November, courtesy Nicholas Soames. They paint an altogether different picture of an independent Scotland with control over it's geographical share of North Sea Oil revenues:

    "The taxes forecast to be raised from the industry in 2011-12 include some £6 billion in income tax, national insurance contributions and corporation tax paid by the supply chain companies, with an additional £11 billion from taxes on production itself. That amounts to 25% of all the corporation tax received by the Exchequer. The production of indigenous oil and gas improved the balance of payments by £35 billion in 2011, thus halving the trade deficit, and the supply chain added another £5 billion to £6 billion with exports of oilfield goods and services. Incidentally, that is an aspect of the industry that is doing extremely well here and overseas, and it is flying the flag for Britain effectively."
    I can only imagine that folks like Macintosh make this stuff up because they truly hate Scotland. Why else would they attempt to hobble their own country at every possible opportunity just to keep themselves in a job?

  5. MajorBloodnok

    Looking at Ken McIntosh's press release it is so full of misrepresentations it's difficult to know where to start.
    The £11bn and/or £19bn disparity between all public expenditure (which includes Scottish and UK government expenditire in Scotland, as well as our per-capita share of UK debt servicing) and the revenues raised in Scotland depends on whether you include our geographical North Sea Oil revenues (i.e. £8bn oil revenue for 2010/2011).
    But as you indicate it's actually about the deficit; and the important conclusion of GERS is that Scotland's deficit, if allowed a geographical share of the oil revenues, would be LESS than the equivalent UK deficit which absorbs ALL of the oil revenues (e.g. 4.4% as opposed to 6.6% for current budget balance).
    So yes, Scotland runs a deficit, but which, if we are allowed to have the oil revenue, is not as big as the UK's deficit (a fact which he conveniently didn't mention).
    Perhaps that's what he means by a "redistributive UK" – redistributing Scottish revenue to the UK and redistributing UK debt to Scotland.
    GERS therefore demonstrates that Scotland would be better off Independent with the oil revenues to play with, than in the Union without control of these revenues.  Simple – and look I'm not an accountant or economist but even I could work that out!
    And yes, the oil will run out eventually – but we'll have (at least) 30 years to plan what to do when that happens.

  6. MajorBloodnok

    Re Stevie Cosmic – I should have refreshed the page before posting!  So that means the £8bn extra revenue identified in GERS could actually be a very conservative underestimate.  Even better!

  7. daretodare

    Unionists always forgot to mention that in 1979, the last time Scotland held a referendum, UK national debt was £84 billion. Today it is over 520% of UK National Income or £1.004 Trillion Pounds. Thats right £1004 billion – that is staggering economic incompetence 

    Also another point often conveniently forgotten is the full effect of the Scottish block grant – currently around £30 billion.  

    The block grant is subsequently distributed across various devolved responsibilities like SNHS, Local Authority funding – Education, Housing and Infrastructure. As this £30 billion is distributed and spent around £10billion is returned to Westminster in the form of VAT, PAYE/National Insurance and other indirect taxes. There is NI on wages to teachers, nurses and other public sector worker, all the VAT on material purchases, bought in services, infrastructure contracts etc, all returns to Westminster. In an independent Scotland the headline budgets could remain more or less the same but the tax take and funds available for redistribution would in effect increase 20+% because direct and indirect tax receipts would remain with the Scottish Treasury.         

  8. daretodare

    Good point – that perhaps that’s what he means by a “redistributive UK” – redistributing Scottish revenue to the UK and redistributing UK debt to Scotland. The truth is always simple – strip away all the spin, negative propaganda and we find the actual facts and evidence support your astute conclusion. 
    Separately, oil will not run out in 30 years or anything like it. Including reserves west of Shetland – think 70 – 100 years minimum. Peak oil east of Shetland may have occurred (may!) but peak oil from all Scottish waters? Not a chance – we are no where near it! The total oil recovered west of Shetland will in time equal “all the oil” east of Shetland: that’s “all the oil” of the UK, Norwegian and Dannish sectors combined. It is not by accident that only the fields east of Shetland were ever allowed to be developed by the UK treasury.   

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