New figures on spending and revenue yesterday showed Scotland’s budget to be in surplus, despite the bailout by the UK of two big Scottish banks.
However, at Holyrood, Nationalist ministers faced damaging accusations that they had “skewed” the statistics. The controversy centred on the Scottish government’s assertion that despite the bailout in 2009, more money was gathered in tax north of the Border than was spent — thus, they said, making the case for independence.
The SNP’s case rested on the assumption that when a geographical share (of about 91 per cent) of North Sea oil revenue was factored in, Scotland in 2008/09 had a £1.3 billion surplus, or 0.3 per cent of gross domestic product, compared with a UK-wide deficit of £48.9 billion, 3.4 per cent of GDP.
However, opponents at Holyrood pointed out that SNP ministers had not used the same approach to the bailout.The statistics, they said, ignored the £70 billion of taxpayers’ cash spent on rescuing the Royal Bank of Scotland and HBOS, featuring only £700 million of that sum. This was Scotland’s population share of UK spending in the banking bailout of £8.3 billion — the difference between the price paid by the UK government to buy bank shares and the lower market price of the shares.
The Scottish government maintained, though, that they were following the approach towards the bailout of the Office for National Statistics, an approach backed by successive Chancellors of the Exchequer.
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However, the statistics clearly stated that when North Sea oil revenues were excluded, the Scottish public sector budget was running a deficit of £10.5 billion, 9.1 per cent of GDP, up from a £6.9 billion deficit the previous year.
Labour accused the government of exploiting the Government Expenditure and Revenue document for political advantage. “They have skewed the figures and denied the full role of Scotland’s banks in the financial crisis. The SNP should accept that a separate Scotland would be facing a fiscal disaster on the same scale as Iceland”, said Andy Kerr, Labour’s finance spokesman.
The Scottish government, however, said the figures showed that the public finances were in a healthy position, with the country generating more income than it spent even in a period of recession. “This is the fourth year in a row that Scotland has generated a current budget surplus, compared to a UK-wide deficit over the same period”, it said in a statement.
The government added that across the Organisation for Economic Co-operation and Development countries, the average net fiscal balance was 3.3 per cent of GDP in 2008.
John Swinney, the Finance Secretary, described the Government Expenditure and Revenue report as “extremely positive” and said it demonstrated that Scotland was in a far stronger financial position than the UK as a whole. “These figures reinforce the case for Scotland determining its own tax and spending decisions, and managing other key economic levers, with the powers of financial responsibility and independence”, Mr Swinney claimed.
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Financial responsibility and independence, he said, would provide the platform for long-term economic prosperity and social justice in Scotland.
However, Mr Kerr said it was “wrong to mortgage Scotland’s future on the price of oil”. He said: “These figures show that a separate Scotland would be dangerously dependent on volatile oil prices. Even on the most generous assessment, there have only been 10 years in the last 28 when Scotland’s finances were in surplus — and none since 1988.” Mr Kerr added: “It is also clear from these figures that there is only a surplus if you don’t include spending on schools, hospitals and roads.”
Meanwhile, in a statement to MSPs on George Osborne’s Budget, Mr Swinney said Scotland was facing an “unprecedented challenge”.
Yesterday, The Times in Scotland reported that experts were forcasting that, as a result of the Chancellor’s cuts, the Scottish Budget could fall by £5 billion over the next four years.
Mr Swinney said yesterday that it was clear that spending on public services was going to “fall sharply”. He added that announcements in the Budget meant that the total UK departmental expenditure limit would fall by 3.5 per cent a year in real terms over the next four years.