Economics

Sturgeon scunnered: Scotland’s deficit more than double that of UK

BY Iain Martin | iainmartin1   /  24 August 2016

Thank goodness Alex Salmond and Nicola Sturgeon lost the Scottish independence referendum. If they had succeeded in separating Scotland from the UK the country would be beginning its journey as a new state with the economic equivalent of a knackered engine, four missing wheels and rain pouring in through the broken sunroof.

Today’s publication of the GERS figures (Government Expenditure and Revenue Scotland) shows that the country is running a deficit of £14.8bn, or 9.5% of GDP, more than double the UK’s 4% deficit. The numbers demonstrate just how reckless were Alex Salmond, the former First Minister who lost the referendum, and his successor Nicola Sturgeon, when they promised a bountiful land in which there would be endless free money to go around.

In their independence White Paper SNP ministers anticipated oil revenues for 2015-2016 of £7.9bn. The real figure turns out after the oil price collapse to be £60m.

The only cause for celebration here is that because Scotland remains part of the UK it benefits from the pooling of resources, meaning that public services to do not need to be savaged.

Needing to create a diversion from a fiscal horror show, the SNP leadership is responding to the latest figures by trying to claim not remotely convincingly that the real story is Brexit. That will make the situation even worse, is the suggestion. This is a nice try – like shouting squirrel to try and divert the attention of a dog – but it won’t work.

After a long period in which the normal rules of political gravity did not apply to the SNP, there are the first stirrings of a change. They are being found out. They have been in charge of Scotland now for nine years, but rather than getting on with fixing Scotland’s struggling state education system or health service, they have preferred at all times to indulge in constitutional games and play hunt the grievance.

For all the chuntering of the more dim-witted SNP MPs going around gagging journalists, it should be clear in the light of these figures that the SNP is entering a tricky period that is going to require some reflection and recalibration. The gloss is starting to come off; Sturgeon’s problems are mounting.

The SNP offer to voters in a new referendum would be currency chaos squared, with a new currency the most likely policy. That would leave Scotland with a different currency from that used in England, where 60% of Scottish export go. Borrowing costs for a new state would also be high. And Scotland would stand to lose its funding advantage, the full extent of which is made clear by those GERS figures. In addition, the chances of an independent Scotland getting into the EU with a deficit that size are zero. A brutal programme of deficit reduction would be required.

With its case shot to pieces the SNP should be rethinking, pushing for a federal UK and acknowledging honestly to Scottish floating voters the extent of the difficulties involved in full independence. That is not, though, what the party’s membership or the most committed nationalist voters will want to hear.

Brexit actually makes winning Scottish independence much more difficult not easier. It is not impossible, of course, but it is a much more difficult sell to voters. The First Minister’s stalling, and her amusing repeated promises to examine all options and keep Scotland in the EU while the UK leaves it, are really about delaying a further independence referendum that the leadership is rightly worried about losing.