Scotland’s 2016-17 fiscal deficit falls to 8.3% from 9.3% in the previous financial year; still pretty huge

Government Expenditure & Revenue Scotland (GERS) 2016-17 was published this morning. It shows that in 2016-17 Scotland’s notional net fiscal deficit was 8.3%, down from 9.3% in 2015-16. The UK’s deficit for the same period was 2.4%.

The figures also show that non-North Sea oil and gas revenue increased by 6.1% on the previous financial year, and that public spending in Scotland is £13,175 per person, £1,437 per person greater than the UK average.

We reported back in May on experimental statistics by the ONS showing how Scotland compared with the other nations and regions of the UK in terms of public spending deficits. The Fraser of Allander Institute referred to this data in its analysis of GERS today, noting that “[t]he key reason for Scotland’s ranking behind other parts of the UK is not because of lower revenues, but higher levels of spending. Indeed only London, the South East and the East of England are estimated to raise more revenue per head than Scotland.” Scotland is second only to Northern Ireland in terms of public spending.

As for the next few years, the Fraser projects that Scotland’s deficit will be at around the 7% mark by 2020-21.

Finally, on the notion that GERS is unreliable, Dr Graeme Roy, Director of the Fraser of Allander Institute said the following1:

Some have dismissed GERS as it relies, in part, on estimating some Scottish tax revenues. This is unfair. All economic figures are subject to a degree of estimation, including GDP and unemployment statistics. So estimation is not unusual. Furthermore, radically changing the estimation techniques do not alter the headline conclusions of GERS.

It is important to remember that GERS takes the current constitutional settlement as given. If the very purpose of independence is to take different choices about the type of economy and society that we live in, then a set of accounts based upon the current constitutional settlement and policy priorities will tell us little about the *long-term* finances of an independent Scotland.

But GERS does provide a pretty accurate picture of where Scotland is in 2016-17. In doing so, it sets a useful starting point for a discussion about the immediate choices and challenges that need to be addressed by those advocating further constitutional change.

All countries face big fiscal challenges in terms of what will replace declining revenues in the face of rising spending pressures over the next few years. Changing the constitutional set-up doesn’t alter the fact that these fiscal challenges need to be addressed by all governments in all countries. But a more autonomous Scotland will be forced to meet such challenges sooner rather than later.

Fraser of Allander Institute publishes latest GVA growth predictions

The Fraser of Allander Institute has published forecasts for growth in the Scottish economy over the second and third quarters of 2017:

GVA growth in 2017 Q2 is estimated to be 0.49% which, at an annual rate, is 1.98%
GVA growth in 2017 Q3 is estimated to be 0.40% which, at an annual rate, is 1.62%

They add: “[W]e note that the UK economy — which had a surprisingly strong 2016 — has weakened in recent quarters. This will have an implication for Scottish trade with the rest of the UK and may therefore dampen growth in Scotland through 2017.”