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  By G.A.Ponsonby

It's the annual report that, when written of, compels the author to clarify he or she is not referring to the blue clad Glasgow based football team.
 
GERS is back in the news, and the colour is not blue but red.  Scotland's finances that is.  The latest Government Expenditure for Scotland Report showed Scotland in deficit for the first time in five years.

A fatal blow to the Yes campaign if you believed Better Together and their media allies.  Not at all said those on the Yes side, just look at the long term trend - Scotland is billions to the good when compared with the rest of the UK

It took centre stage at First Minister's Question's as Johann Lamont could barely contain herself.  Oh joyous glee!  We're too poor.  We told you so.  Salmond's game is a bogey.  Labour backbenchers punched the air and applauded rapturously.

But leaving aside this odd reaction from the self proclaimed 'proud to be Scottish' party of the poor, what was the real story of GERS and was it as black as it was portrayed by the media?

Initially it appeared there was little comfort for the Yes campaign.  A budget deficit of 5.9% and a fiscal deficit of 8.3% - both we were informed were worse than the respective figures for the UK as a whole.

However closer scrutiny revealed all was not as it first appeared.  The budget deficit was a mere 0.1% worse than the UK as a whole.  This, despite a fall in north sea oil revenue of over forty per cent.  The key factors involved in this drop were the closing down of the Elgin field for a year after a gas blowout and the tax-breaks given to oil companies who invested a record £14bn in the sector.

Both these events are unusual to say the least.  The Elgin field only resumed production in March 2013.

Elgin and the nearby Franklin field accounted for nearly 5% of north sea output and the shutdown knocked 0.2% off UK GDP that year - note not Scottish GDP but UK!  The field will return to its pre-accident production level – 120,000 barrels of oil equivalent (boe) per day – in 2015 and is targeted to reach 130,000-140,000 boe per day in 2016.

Of course by 2015/16 oil companies will also start to see the returns on their record investment in the sector, which means of course parallel increases in revenue for the exchequer.  We should have been seeing the increased revenue now but for a catastrophic decision by UK Chancellor George Osborne who in 2011 hit the sector with an unexpected 12% tax hike.

Osborne's tax raid hit investment in the sector badly.  One company, Statoil halted work on two oil and gas fields worth more than £6billion.  Who knows if the investment may have improved maintenance and prevented the blowout that hit Elgin.

The irony of course is that Osborne's idiotic decision has ensured that the improved north sea production has been delayed for two years.  Media coverage of the GERS report merely presents the figures, but not the story behind them.

The other aspect of GERS not covered by the media is the public spending difference.  In 2012/13 total Scottish public sector revenue was estimated at £53.1 billion, which is 9.1 per cent of the UK total.  Total public sector expenditure was £65.2 billion, equivalent to 9.3 per cent of UK total.

Clear cut, Scotland - at least in this one year, received more than it generated.

But take a closer look at how public sector expenditure is defined and we begin to see a different picture.  The £65.2bn total includes spending 'for the benefit of Scotland' by the UK Government.  This includes areas like defence, border control and ... the House of Lords.

This year Scotland was 'charged' £3bn to help pay for the UK's defence budget, however only £2bn was eventually spent in Scotland, so £1bn included in the GERS report as Scottish spend never actually made it north of the border.

But perhaps one of the most controversial areas of 'Scottish spending' is our bill to help service the UK debt which was sitting at close to £1.2 trillion in 2012/13.  Scottish spend to help deal with the aftermath of the Brown/Darling boom/bust double act is an eye watering £4.02bn.

Like the oil investment, hit by Osborne in 2011, Unionists are benefitting from the hangover created by the worst Prime Minister and Chancellor in post war history.

Remove the costs of the defence spend that is never actually spent in Scotland, and the costs of the UK debt most of which was accumulated when Scotland was in fiscal surplus and we see a different picture.  Scottish spend as a percentage of UK GDP drops to 8.8% and that's without deducting all the other areas of spend allocated to Scotland for which we never see any benefit.

The final point of course is that this is a snapshot of a Scotland stuck in the straitjacket of the UK.  An independent Scotland freed  from the dead weight of Westminster will be unrecogniseable to the one we see today.

If you really want to have a look at the fiscal sleight of hand being applied by Westminster as it tries to convince Scots we really are too poor to pay our way in the world then the take a look at the Business for Scotland website.  Surely one of the most impressive and effective pro-Yes organisations to appear in this referendum campaign.

Comments  

 
# Hugo 2014-03-14 01:36
Don´t forget the cost of the Scottish Office which is about 2bn each year.
 
 
# willie boy 2014-03-14 04:48
Two factors from what I can see.

First is that tax and raid by the UK government has caused a hiatus that in truth will only serve to dislocate income to a slightly later period

Second, the short term shortfall in tax revenue in the very recent period to facilitate the current record investment of £14bn is but a prelude to future returns.

Put simply the oil is still there and the investment is now in place to get it out.

Maybe just a coincidence that Westminster taxation policies have occasioned this dislocation just as we approach the referendum.

Too poor, too stupid, too dependent etc as this shows. Or am I missing something.



r review
 
 
# Diabloandco 2014-03-14 07:13
An excellent saving Hugo and may I add Trident? And any other foreign game Westminster may be playing at the moment?

Och the savings we could make without the House of Lords and its nearly 900 parasites ,and Westminster's 650!
I feel the glow of wealth on Scotland's wee face already.

I missed FMQs but I can visualise the sour pusses delight in telling Scots that they're too wee, too poor and too stupid - where does the pride go?
 
 
# Breeks 2014-03-14 07:42
But isn't GERS just the epitome of Neo-liberalism? Everything boiled down to it's cost, and the cost of investment painted as bad news? It's crazy!!!

Break out of this people! You can read GERS all day long and it won't tell you how or why Norway with it's ever so strong Kroner and first class welfare also has 56 shipyards. How the f...? Why didn't they succumb to competition from Asia? What's going on???

It's not complicated, they just look at the bigger picture for their whole economy and plan ahead for the future and how they'll get there while living within their means. They don't have every action distilled down to binary code simple enough for a financier to understand.

Please, let us move beyond judging every mortal thing by it's loss or profit. It matters, yes, but it's just one cog in a bigger and better machine. We need a holistic program of management for our economy - take account of everything. Screw GERS.
 
 
# Spirtle 2014-03-14 11:55
Spot on Breeks. I only hope that most folk wae a vote have a similar view.

The BBC are offering these rather pessimistic bits of analysis.

bbc.co.uk/.../...

Not being one who is so conversant on issues relating to the economics of oil how much of a distortion of the GERS figures is there going on here? I find it a challenge tae face off such analysis and am interested to know how the BBC's spin is in anyway wide of the mark.

It has tae be Yes
 
 
# tartanfever 2014-03-15 09:25
Of course the GERS news depends on how you read it.

Unionists - too wee, poor etc

For us on the Yes side, it illustrates perfectly why we need an oil fund, so that the 'false' bumper crop of last year would see us saving a few billion for investment during leaner times. Westminster just squanders it every year.

I say 'false' because it was a tax hike that brought in revenue, not increased oil production.
 
 
# creigs1707repeal 2014-03-15 14:15
I must've missed something with all these figures.

Tax raised in Scotland = £53.1bn.
Expenditure in Scotland = £65.2bn.

The £65.2 bn includes Scotland's share of the UK debt interest of £4bn. Let's assume this is 10% of the UK total of 40bn annual interest paid on the £1.2 trillion debt.

The annual deficit (borrowing) is around £121 bn. Surely then if Scotland pays 10% of the interest then we should receive 10% of the capital we borrow set against our balance sheet i.e. £12 bn? This then brings Scotland's annual revenue to £65bn. We break even.

Imagine paying 10% of a friend's loan interest and not receiving 10% of the capital they borrowed. That's what is going on here. The UK is charging Scotland interest on a loan but they are keeping all the capital.
 

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