The Union is more than a dividend

Covid brought four nations together in a common effort that was about so much more than fiscal transfers.

Image: geralt via Pixabay

It’s not often a dry compendium of fiscal data makes for inspiring reading.

The annual Government Expenditure and Revenue Scotland (GERS) report, laying out the state of Scottish public finances, is regarded as a national balance sheet of sorts. It is heavy on economic analysis and statistical methodology. The latest edition, published yesterday, was different from its predecessors in that it provided a glimpse into the financial mechanics of 2020, the year when Covid-19 arrived and upended many aspects of our lives. 

Amidst thickets of tables and percentages, there can be spied the outline of a dramatic campaign, on a scale unseen anywhere since the Great Depression, to prop up the economy and save jobs and businesses from the rough torrents of a ruthless pandemic. We have heard already about the UK Government support schemes for companies and the furlough system that kept almost one million Scots off the dole queue last year. But GERS gives us the first comprehensive survey of the extent of state intervention and prompts us to consider what might have been had Scotland no longer been eligible for cash transfers from the UK Treasury. 

Scotland’s public finances are in abysmal shape, a fact established by previous GERS publications, yet 16 months on from the beginning of the pandemic there are encouraging signs on the economic horizon as businesses begin to ring their tills again. In spite of a towering deficit, elevated public expenditure and a global oil price that hasn’t closed north of $100 in almost seven years, Scotland weathered the most unforgiving of storms. It did so all because of a much-maligned but enduring Union that, 314 years on from its formation, has proved itself to be more formidable and more necessary than ever. It is an extraordinary tale told in numbers. 

The numbers are extraordinary in themselves. They tell us that Scotland’s 2020 notional deficit — the gap between what an independent Scotland would have spent and the revenues it would have had at its disposal — was £36.3 billion. Or, put another way, more than twice the annual budget of Scotland’s NHS. It also represents a doubling in cash terms of last year’s deficit, but the relationship to GDP is the all-important figure. In 2019/20, Scotland’s notional deficit stood at 8.8 per cent of GDP. The GERS figures released yesterday now put it at 22.4 per cent. 

Not only is this far in excess of the UK’s deficit (14.2 per cent), it is the biggest deficit recorded since devolution. Further back than that, too. If you chart Scotland’s notional deficit for the past 40 years, it has never reached 22.4 per cent — or anywhere close to that — and this holds whether you include or exclude a geographical share of North Sea oil revenues. It is a figure that should disturb anyone who believes in sound finances. 

There are two key considerations here. One is how much revenue Scotland generates. GERS finds that, even taking into consideration a geographical share of oil and gas production, Scotland raised £382 less per person in revenue than the UK average. This is despite the Scottish Government being given the power to create a Scottish Rate of Income Tax and ministers using it to introduce a higher-rate band than the rest of the UK, so that top-rate payers are liable for 46 per cent in taxation. Handed a licence to print money, the Scottish Government has ended up bringing in less of it. 

There is another consideration: that Scotland’s deficit is so high because public spending is so high. GERS confirmed the long-running trend of Scots enjoying higher state expenditure than the UK average. In 2020/21, each Scot received on average £1,828 more than the average person did UK-wide, up from £1,754 the previous year. In all, the first year of the pandemic saw average public spending per head go from £13,250 to £16,316 across the UK and from £15,003 to £18,144 in Scotland. 

That’s a fair old flurry of numbers but there is one more to go: £2,210. That is the combined value of higher public spending on Scotland and the lower revenue take north of the Border and is what opponents of independence typically term ‘the Union Dividend’. 

That phrase simply does not do justice to what happened in 2020, and it is for this reason that even those who would ordinarily pay only cursory attention to GERS figures should stop a while longer and muse on them. The Covid-19 pandemic was the worst public health and economic crisis to hit the world in generations. It shuttered entire industries, threatened to put millions out of work, and confined us to our homes while we waited for a vaccine. For all its solemn tabulations of data and cautious analysis of a constellation of numbers, GERS is the story of a year like no other — and of a common endeavour to fight back, protect the vulnerable, tend to the sick and, above all, to survive. It is the story of how we got through it, and are still getting through it, together. 

The Year of Covid is when so much untethered political rhetoric was put to the test. The bitter talk about Westminster selling Scotland short, about how heartless the Treasury was to Scotland’s social and economic needs, about how the Union was a prison holding Scotland back from its true potential. The economic response to the pandemic revealed all those charges to be so much hokum, the baseless, grievance-mongering fictions of a political movement that could not convince Scots to sever ties with their friends, neighbours and compatriots and so resorted to inventing bogeymen versions of them. For so long Scots have been assured that the UK was either a neglectful partner or a callous oppressor but the finances say different. 

They say that, at a moment of abject crisis, the UK Treasury had Scotland’s back at least as much as it did the rest of the country. It didn’t matter whether you lived in Cambridge, Cambuslang, Caernarfon or Coleraine, resources were pooled and shared in an overwhelming effort of solidarity, cooperation and determination that comes far closer to capturing what the UK is really about than any separatist myth-making. Small businesses were backed, workers given furlough, money pumped into households in a unstoppable juggernaut of spending to exceed the political fantasies of even most red-blooded socialist. Economic gravity was suspended, whatever the cost, because the cost of not doing so would have been countless lives and livelihoods. Eventually, there came the vaccines and Scotland benefited from the speed and scale of the UK Government’s purchasing, receiving our first doses even as across Europe people languished waiting for the same.

To say that Scotland survived 2020 thanks to the Union is not, as Nationalists might charge, to denigrate Scotland but to acknowledge the strength that comes from this shared enterprise of four nations with a common purpose. As newspapers are skimmed today, some may skip over talk of GERS and fiscal balances and revenue shares, but behind the jargon lies a remarkable story of how 67 million people worked together and all of us came first. 

Originally published in the Scottish Daily Mail on August 19, 2021.

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