The scrounging Scots myth just doesn’t add up
Often, when you see discussions about Scottish politics in UK newspapers, the comments section will have lots of opinions describing Scotland as a nation of scroungers.
In fact the idea that Scotland is a net drain on UK finances is often a common topic above the line as well.
The idea seems fairly common and probably seeps into the consciousness and confidence of many Scots. How accurate is it though?
The answer is not very.
We know this because of the work of Brian Ashcroft, Emeritus Professor in Economics, Fraser of Allander Institute, University of Strathclyde. In 2013 he published an article entitled, Has Scotland Already Spent Its Oil Fund?
This article looks at the taxes and expenditure of Scotland between 1980 and the end of 2012.
He calculated that in the period Scotland would have spent 15 billion pounds more than it had raised in taxes.
However, here is the important part. This 15 billion deficit includes paying off a population share of UK debt interest.
This is debt that Scotland didn’t need to borrow because oil revenues in the 80s generated a massive surplus. When professor Ashcroft adjusts for this he finds that Scotland would have had a very healthy surplus in 2013.
I estimate using 19 years of Government Expenditure and Revenues Scotland (GERS) that Scotland’s share of UK debt interest amounted to £83 billion at 2001-12 prices. Subtracting this from total estimated Scottish spend of £1,440 billion we get a debt interest adjusted estimate of spend of £1,357 billion. Total estimated tax revenues are £1,425 billion. This means that Scotland was in overall surplus by about £68 billion.
To put this another way Scotland had returned to it in spending for the Scottish people 95% of the tax revenues it generated.
This surplus could have been saved which would mean, even with a moderate interest rate, it would have been worth well over £100 billion in 2013. Or it could have been invested in jobs and infrastructure, or a bit of both.
Even if we adjust the figures based on a few factors we still have a surplus today. For instance, UK debt in 1980 was 100 billion pounds and since 2013 Scotland has run a deficit of approximately 42 billion pounds according to the GERs figures.
So, even if you give Scotland a population share of 1980’s debt and subtract the deficit of the last 3 years we would be still running a healthy surplus. Instead, we are currently £136 billion in arrears, a figure which accounts for Scotland’s population share of UK debt.
Now bear in mind that the deficit shown in GERs this last few years also includes Scotland paying off a population share of UK debt we didn’t need to borrow in the first place.
It also includes UK tax and spending commitments that we may not have chosen to follow had we full control over our financial levers. In short, GERs shows the finances of Scotland within the UK and doesn’t wholly reflect what our economy might have looked like had we full control. So, me subtracting the recent deficit shown in GERs is probably a bit unfair on the argument I’m trying to make.
However, if we pretend that the GERs figures are accurate, it is still hard to argue that Scotland has not contributed more than its fair share.
In fact it is hard to argue against the fact that Scotland would probably be in a much better position had it been independent since 1980.
That’s not to say independence would be easy as it is likely we would be starting off from a tricky position as our historical wealth has been squandered. However, these figures do put a lie to the scrounger myth. They also should raise concerns about how strong the much lauded union dividend actually is.