Why does the Scottish Government publish a report on Government Expenditure and Revenue in Scotland (Gers)?
Some supporters of independence see this as a form of masochism and wish ministers could devise a way to publish figures alongside him that would make the prospect of independent control over public finances a little more appealing.
We were promised such a publication, but it is difficult both politically and economically. Everything in it will depend on many policy decisions of the future Scottish Government.
Any such choice would be open to hostile scrutiny and criticism from other supporters of independence who might wish for a different choice.
The official answer to the question 'why publish this?' is that it is intended to help the public understand Scotland's public finances. And at a time when the prospect of a referendum seems more remote, there are some elements of it that cast an unconstitutional light on tax and spend.
So what can we learn? One of the lessons is that pandemics and energy crises are affecting public finances.
Each country faced much higher spending on health and economic support during the two years of Covid.
A Gers publication two years ago showed a notional deficit twice the size of what it stands today - £38 billion, or 23% of total economic output, while the UK as a whole achieved 15%.
Last year, covering 2021-22, Scotland's notional deficit fell to £25bn and almost 13% of gross domestic product (GDP).
Taxes and spending are much closer to balance according to the latest figures, with the cost of Covid all but ruled out.
Volatile oil
However, the final year 2022-23 is feeling the impact of a sharp rise in energy prices.
This meant it spent a lot, most of it by the UK government, to support households and businesses through much higher bills. Scotland has its share of this.
These higher bills fueled price inflation, which in turn provoked the Bank of England to try to dampen inflation with higher interest rates.
The cost of servicing Scotland's share of this debt also weighs on the Scotland-only figures. More on that later.
On the other hand, the increase in energy prices that followed the Russian invasion of Ukraine was good for oil and gas producers. Their profits soared, taxes rose commensurately, and then two tranches of windfall tax were applied, bringing in nearly £5 billion.
The Gers gives Scotland a geographical share of 89% of oil and gas revenues in UK waters.
So tax from this source has soared from £750m two years ago to £2.4bn last year and £9.4bn according to the latest figures.
This is the most volatile part of UK taxation and its volatility affects the calculation for Scotland even more.
Tax base
Another lesson is how Scotland's tax base is estimated to differ from that of the UK as a whole. It has long been the case that Scotland pays more than its share of the population in taxes on vices: alcohol, tobacco and gambling.
This also applies to environmental charges and business rates, which Scottish business groups will cite as a signal that the Scottish Government is somewhat less helpful or more hostile to them than firms south of the border.
The categories where Scots pay less than their share of the population should come as no surprise; capital gains tax on less than half of the population and similarly low levels of inheritance tax. Unsurprisingly, less wealth is taxed here than in England, specifically the South East of England.
Income tax, although largely devolved to Holyrood, raises 24% of all taxes raised in Scotland and linked to this is National Insurance which raises 20% of the total.
Income tax is only 6.7% of the UK total, despite higher rates for higher earners, while National Insurance, which is collected by the Treasury, is 7.5%, with a population share of 8.2%.
This reflects lower average earnings. Rather than accepting that much, it can be seen as a central challenge to the Scottish Government's finances. If it is to raise income tax revenues to provide the higher level of public services it seeks, it is not enough to raise tax rates: it also needs to strengthen the tax base.
Cheap finance
On the spending side, Gers highlights how much of total spending goes to the state pension and earmarked social benefits, which is more than a quarter of total spending. Health takes up more than 16%. The health budget has been slashed after a two-year surge in spending due to Covid, but is still almost a third higher than in 2019.
One of the biggest claims on the public purse last year was £10.9 billion, or almost one-tenth of spending, in Scotland's share of interest payments on public sector debt.
This is more than double the amount spent on transport or credited to Scotland for defence. It is almost three times the amount spent on public order and security (police and justice). It is more than education and training.
As borrowing and interest rates have soared, the cost of servicing the debt has more than doubled in the past two years, from £4bn, taking away a huge tranche of funds that could be spent elsewhere.
Borrowing to finance infrastructure and get the economy on a faster growth path can pay off. It is an essential part of state finances. But when interest rates rise and bills arrive, the Gers are a reminder that we have reached the end of a historic 14-year era of cheap finance.
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As discussions over the possibility of an independent Gers continue to draw public attention, it is essential to look beyond the heated debate and delve into the multi-faceted implications of such a significant move. This article takes a comprehensive approach to explore potential scenarios and implications, shedding light on the economic, social and political aspects that would shape the landscape of an independent Gers.
Economic Outlook:
The economic viability of an independent Gers is a central consideration in this debate. By exploiting its natural resources and promoting strategic industries, the Gers could create a more self-sufficient economy. This article assesses the potential for greater trade partnerships, foreign investment and the development of specialized sectors to support economic growth, providing readers with a comprehensive overview of the financial opportunities an independent Gers can offer.
Social implications:
In addition to the fiscal implications, the social structure of a nation plays a vital role in its development. A sovereign Gers may have the opportunity to adapt policies and initiatives that reflect its unique cultural heritage and societal values. From education reforms to healthcare systems, this article delves into how independence could allow the Gers to shape their own social policies and foster a sense of identity and inclusiveness among its citizens.
Political landscape:
An independent Gers would undoubtedly reshape its geopolitical relationships and alliances. This article examines the potential implications for international diplomacy, security arrangements, and regional cooperation. By providing insight into how an independent Gers might navigate the complex global arena, readers can better understand the political dynamics at play.
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Amid growing concerns about climate change and sustainability, the independent Gers could seize the opportunity to establish itself as a leader in environmentally conscious practices. This article explores how the nation could prioritize renewable energy, conservation efforts and eco-friendly policies, and paints a picture of Gers committed to a greener, more sustainable future.
While the debate over Gers' independence continues to spark heated debate, it is vital to go beyond the surface arguments and explore the complex layers that define this monumental decision. By analyzing the economic, social, political and environmental prospects of an independent Gers, this article equips the reader with a holistic understanding of what lies beyond the independence debate. As the nation stands at a crossroads, the potential to create a clear path forward that is shaped by careful consideration and a comprehensive perspective beckons.
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