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Scotland's 'Union dividend' rises to almost £2,000 per person in 'hammer blow' to Nicola Sturgeon

Nicola Sturgeon's government has published figures showing Scotland's notional deficit has increased again - PA
Nicola Sturgeon's government has published figures showing Scotland's notional deficit has increased again - PA

Nicola Sturgeon's economic case for separation has received a "hammer blow" after her chief economist published figures showing Scotland's "dividend" from being part of the UK has surged to almost £2,000 per person.

The General Expenditure and Revenue Scotland (Gers) figures for 2019/20 showed each Scot received £1,633 more than the UK average in public spending thanks to the Barnett Formula. This is the equivalent of 9.2 per cent of UK total spending.

But tax revenue north of the Border was £308 less than the UK average, including a geographic share of North Sea oil, accounting for only 8 per cent of the UK total.

The Scottish Tories said that together this meant the "Union dividend" per person has increased to £1,941, up from £1,805 the previous year, and separation would require spending cuts equivalent to the entire NHS budget.

Scotland's notional deficit - the difference between spending and tax revenue - surged by £2 billion to £15.1 billion last year.

This was the equivalent of 8.6 per cent of GDP - more than treble the UK figure of 2.5 per cent and nearly three times the 3 per cent required for EU membership.

But the figures only included the early days of lockdown and the respected Institute for Fiscal Studies (IFS) think tank predicted Scotland's deficit could surge to between 26 and 28 per cent of GDP this year.

In an analysis of the report, the IFS predicted it would still exceed 11 per cent of GDP in 2024/25, the highest level since the Second World War apart from the current financial year.

David Phillips, the think tank's associate director, concluded "the need for tax rises or spending cuts would be starker" under independence and spending restraint would likely be more "stringent and / or long lasting".

Kate Forbes, the SNP's Finance Secretary, denied the figures demonstrated the fantastic deal Scots get from the Union and insisted they showed the "status quo" could not continue.

She blamed Brexit and an "unprecedented health and economic crisis" on the ballooning deficit and noted a separate Scotland could make different economic choices from the UK Government.

But, when repeatedly pressed on what she would do differently, she cited higher growth without stating how this would be achieved and more borrowing.

But Alister Jack, the Scottish Secretary, said: "The Scottish Government’s own figures show clearly how much Scotland benefits from being part of a strong United Kingdom, with the pooling and sharing of resources that brings.

"People in Scotland, year after year, benefit from levels of public spending substantially above the United Kingdom average, with a Union dividend of £1,941 per person in Scotland.

“That has never been more important than it is right now. In the face of a global pandemic, the strength and experience of the UK Treasury is helping people in Scotland and across the rest of the United Kingdom."

Murdo Fraser, the Scottish Tories' Shadow Finance Secretary, said: "“The SNP and Nicola Sturgeon herself used to hail Gers figures as all the evidence Scotland needed to separate from the UK. Now, nationalists will spend the day denying facts from their own government.

"This doesn’t even take into account the blockbuster support from the UK Government throughout the pandemic, including one of the largest and most generous job-saving schemes in the world.

“This is a hammer blow to the SNP and a massive setback for separation. Nicola Sturgeon would have to throw away Scotland’s entire NHS, every nurse and doctor, just to come close to balancing the budget in her separate state."

The Gers report found Scotland's tax revenues increased by £436 million last year to almost £65.9 billion, although the amount provided by North Sea oil and gas halved from £1.4 billion to £0.7 billion.

But spending rose over the same period by more than £2.4 billion to £81 billion. This meant Scotland's notional deficit increased from 7.4 per cent of GDP to 8.6 per cent. Across the UK, the figure rose from 1.9 per cent to 2.5 per cent.

Only two of the EU's 27 member states had a deficit of 3 per cent or more last year and Scotland's figure is twice that of the worst performing country, Romania (4.3 per cent).

Ms Forbes said: "Countries across the world, including the UK, have increased borrowing to record levels and, as we emerge from the pandemic, high fiscal deficits will inevitably be one of the consequences.

"The current situation, with the looming withdrawal of furlough support by the UK Government, means it is now more urgent than ever that we gain those powers."

But Richard Leonard, the Scottish Labour leader, said: "With billions draining from the Scottish economy in the event of separation, Scotland would be thrust into years of savage and unrelenting austerity."

Tracy Black, the CBI Scotland director, said: "An increase in tax revenues, including onshore, is clearly welcome however Scotland still lags some way behind the whole of the UK when you look at the deficit as a percentage of GDP.

"Even without considering the impact of coronavirus it’s clear that Scotland continues to spend significantly more than it raises in tax."

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