Monday, June 13, 2011

Cost of the Union to every Scot - £2, 413 each year

Published during my tenure as Chief Editor of Newsnet Scotland. I will resume publishing under the title Scottish Times in due course:

Scots must pay £12.546 billion every year just to stay in the Union according to Office of National Statistics (ONS) information. UK public sector net borrowing (excluding financial interventions) was £139.4 billion in the year 2010/11 and so Scotland's share based on 9% population amounts to £12.546 billion.

This is at least the annual cost for Scots of remaining within the Union as Scotland's national accounts show a surplus meaning none of the debt is accrued in Scotland.

According to world-renowned economic expert Professor Andrew Hughes Hallet Scotland's economy, unlike the UK economy is in robust shape:

“Scotland’s accounts, rather than those compiled in London, show that Scotland has a small net surplus, rather than being a net beneficiary from the UK."

The bad news for Scots is that the UK treasury is accruing debt which is accelerating owing to bad house-keeping south of the border and dragging the Scottish economy down with it.

Think Tank statement

An analysis from the right-wing think tank - the Institute of Economic Affairs (IEA) - shows Scotland's share of the UK's skyrocketing public debt will be a staggering total of £110 billion by the time it is likely to become independent.

This sum is startling and, to make matters worse, is set against official UK Government figures which forecast unprecedented levels of UK debt which will surge past £1.1 trillion this year.

Perhaps not surprisingly these figures will be used by pro-independence supporters to show that Scotland must get out of the sinking UK ship as quickly as possible.

There's no cause for alarm though as Scotland will have the ability to escape this problem if it votes 'Yes' in the forthcoming independence referendum. The real problem facing the budgets of Scots families, institutions and businesses is that the SNP Government may wait too long to call the independence referendum while each year Scots have to pay £12.5 billion and rising - merely to be ruled from London.

Based on the official figures it costs every single Scot £2, 413 per year to pay off a debt they didn't cause. This debt could be avoided if Scots vote 'Yes' in the referendum and so would be an 'independence dividend'.

With full independence Scotland will control its oil and gas reserves and so have no problem picking up this 'Union tab' but how much longer will Scots tolerate austerity and benefit cuts designed for a plummeting UK economy?

Scotland's share of UK debt is unlikely to be as bad as the analysis by the IEA's Richard Wellings suggests as it bases its figures on Westminster public spending figures which are exaggerated. For example the entire cost of maintaining Trident is classed as a Scottish expense rather than a UK one. Wellings' analysis though does say that there is a preferable method of estimating Scotland's share of debt:

"Better still would be an estimate that also took account of the share of UK tax revenues generated in Scotland, but such a calculation is complicated by significant fluctuations in North Sea receipts from year to year."

As we know Scotland is in surplus and that is calculated based on our population share of North Sea oil and gas reserves. An independent Scotland would be entitled to far more of those resources than its population share and so it reasonable to assume that Scotland's share of the debt will be estimated downwards during independence negotiations with London.

Certainly, whatever Scotland has to absorb from the UK's debt mountain will be manageable - once Scotland is independent - as when oil and gas revenues are added to a Scottish exchequer our debt to GDP ratio will be far less than England's.

At the moment exports from Scotland's huge financial services sector are credited to London which means Scotland's current GDP is hugely underestimated. Post-independence this picture will become clearer and Scotland will look in much better shape to face the future.


News Scotland

8 comments:

Moose said...
This comment has been removed by the author.
Moose said...

You know the bank of scotland is one of the main reasons the uk government is in the red... But if you scots want to split off EXCELLENT! You can take that debt and also you can fund your own tuition fees being nothing!

Anonymous said...

The 'Bank Of Scotland' is owned by the Halifax (English bank) and has been for some time so bore off you buffoon.

Kyle said...

And what government was responsible for banking in the run up to the banking crisis?

Not the scottish government.

Anonymous said...

Haha moose get some facts

Siônnyn said...

How long will you continue to put up with these English subsidy Junkies? Just tell them to go, and within 5 years, when it hasn't worked out, they will be back, cap in hand, begging to be let back into the union.

Anonymous said...

GDP is the value of goods and services produced. What is it that RBS produces that is not being "credited to Scotland" I support independence, but you are a bit of an idiot

sewa elf said...

Very nice article, thanks for sharing.