Why the GERS deficit doesn't matter
Every year there's a big stramash when the Government Expenditure and Revenue Scotland (GERS) figures are released. I am more guilty than most of wading into the online debate, furiously waving my graphs and obsessively correcting those who - whether with malign intent or through well-intentioned ignorance - fail to understand what the figures do and do not show.
So I get the detail, I really do. Hell I even went to the trouble of building the gers-explorer so that the genuinely interested can play with the data behind the GERS report themselves. But in amongst all the noise that's created around the GERS numbers I fear a very simple but important point gets lost: the GERS deficit doesn't matter.
Allow me to elaborate.
Under current constitutional arrangements, Scotland is not treated as a fiscally autonomous part of the UK. That means the scale of the Block Grant which determines the Scottish Government's budget is in no way influenced by Scotland's notional deficit as described in GERS. Neither are decisions around reserved spending in and for Scotland: the level of state pension, money spent on Network Rail, universal credit payments, energy bills support, renewable heat incentives, lottery grants, R&D tax credits, research grants - none of these are affected by the GERS deficit.
Bear that in mind next time you see somebody mithering about debt, defence or central government spending allocations in GERS: the amount of public spending Scotland will benefit from next year will be entirely unaffected by those figures.
So why does the GERS report exist? The Office for National Statistics already publish CRA data - the Country and regional public sector finances tables - which show not only Scotland's deficit1 but also the deficits of the other devolved nations and English regions.
The chart below shows the difference between each region's deficit per head and the UK average - Scotland is not an outlier.
The reason this CRA data exists is because it's useful to know how different parts of the country fare relatively in terms of revenue generating economic activity and their share of public spending. Whether it's branded as "levelling up" or "delivering growth in every postcode", reducing regional inequality is something that should matter to any responsible government (particularly if they hope to get reelected).
So mea culpa: if those CRA reported figures matter then I'm guilty of click-bait hyperbole when I say the GERS deficit "doesn't matter".
But the reason the GERS report exists - and the scale of the GERS-reported deficit gets so much attention - is that Scotland has been governed by an overtly separatist party for the last 19 years. The Scottish government wants Scotland to be independent and has repeatedly demanded full fiscal autonomy2 as an interim step. Their stated policy is one that what would turn that notional GERS deficit into one with very real fiscal implications.
That's not to say the GERS figures are those of a fiscally autonomous or independent Scotland - they can't be, they're historical actuals under current constitutional arrangements where the GERS deficit doesn't matter. But they do show how large Scotland's deficit would be if we continued raising revenue at current levels and continued to benefit from devolved and reserved public spending (including paying the equivalent of a population share for UK defence, debt interest, international services and central government costs).
All of the bun-fighting over what Scotland might reasonably expect to actually pay to service currently shared debt liabilities and whether Scotland would manage to replicate existing shared functions for more or less than the 8% population share of UK costs shown in GERS shouldn't distract from this simple truth: the GERS deficit fundamentally doesn't matter unless the SNP succeed in separating Scotland from the rest of the UK.
- they show a £25.9 billion Scottish deficit for 2024/25 vs the GERS figure of £25.3 billion - not materially different considering the CRA data is published in June and the GERS figures in August (i.e. the underlying data will be slightly more up-to-date for GERS, in addition to the minor well-documented methodological differences)
- SNP resurrects ‘reckless’ demand for full fiscal autonomy