The debate on whether Scotland can afford to be independent has been dominated by what appear to be two totally contradictory arguments and some of the arguments presented in this article have been specifically challenged.
Most of us have heard that Scotland is subsidised – that more is spent in Scotland than our population share in comparison to the amount spent elsewhere in the UK. There is some truth in this, but it only presents part of the picture. The 2011-2012 Government Expenditure and Revenue figures show that Scotland has 8.4% of the UK population and we receive 9.3% of UK public spending to run our services. However, what many people don’t know is that is that we generate 9.9% of UK taxes (up from 9.6% the previous year).
When we include all sides of the balance sheet - spending, tax revenues and borrowing - what this means is that, in the most recent year that full figures are available (2011-12), Scotland contributed £4.4 billion more in comparison to the rest of the UK.
The reason we generate so much extra tax is because revenues from things like fuel are much higher in Scotland. And we also generate more in VAT and corporation tax and in revenues from oil & gas (that is the tax paid by companies from the profits they make in Scottish waters in the North Sea).
2011-12 was a good year for oil revenues, so it is also necessary to look over a longer period.
30 years of figures published by the UK government, based on Scottish Government analysis, suggest that we’ve contributed an extra £19 billion over and above "our share".
Earlier this year the UK government published figures for a shorter time period - the years since devolution began in 1999 until 2010-11. On these figures, the difference between Scotland's finances and those of the UK amounted to just £1 per person each year. If the UK government were to rerun the same calculations in light of the 2011-12 figures, they would now show that Scotland's public finances have been stronger than the UK's looking at the whole period since devolution.
What we know, therefore, from the published figures is that over the past 30 years Scotland's finances have, on average been healthier than the UK's. If we look solely at the period since devolution our finances have more than matched the UK's but if we take just the past 5 years, including the most recent year, Scotland's 'national accounts' have, once again, been healthier than those of the UK.
However, to get the full picture, we need to look in more detail at the figures. For example, if we look in more details at the numbers for 2011-12, they show that we have a current account deficit of around £3.4 billion or 2.3% of our national wealth (GDP). You may have heard a larger number, but those higher figures deliberately exclude revenues from oil & gas, which would go to the Scottish Exchequer if we were independent. But, excluding revenues from the North Sea for Scotland would be like excluding revenues from the City of London from the UK – it just doesn’t make sense and is an attempt to mislead.
The current deficit is due in large part to the financial crisis and economic downturn. But this doesn’t mean that Scotland can’t afford to be independent because, at the moment, very few countries in the world are earning more than they spend. And the very small number of countries that do manage to run surpluses just now are small independent countries like Norway, Sweden and Switzerland.
Scotland has, in fact, had a current account surplus in three of the past seven years (we’ve been “in the black”). This is one of the best financial records in Europe. In contrast, the UK has had a current account deficit in each and every one of those years.
Financially, Scotland is also heading in the right direction.
When we look at revenue contribution v spend (including spending on defence and welfare), two years ago our current account deficit was 5.3% of our national wealth, whereas last year it was only 2.3%. In comparison, the UK deficit was 6.9% two years ago, and last year had only reduced to 6%.
What this means is that Scotland is in a stronger financial position than most other independent nations. That means we have strong enough financial foundations to become an independent country, if we so choose.