Is Scotland Bankrupt? Part 1: Oh yes, it is.

Waiver: I’m not an economist. But I can read a balance sheet, do arithmetic, and create nice graphs from government spreadsheets.

Every so often a set of economic performance figures is published which attempts to give us indication of the health of the nations of  Scotland, Wales and Northern Ireland. The Scottish ones are referred to as GERS. No, nothing to do with fitba’ or Ibrox. GERS stands for Government Expenditure and Revenue Scotland. I expect the Welsh equavalent is GERW which does at least have the merit of looking like a Welsh word. Are the Northern Irish ones called GERNI,  I wonder.

So GERS is like our own bank statements where it says this is how much we’ve spent this period and this is how much we’ve earned. As fans of Dickens will remember from Mr Micawber 

“Annual income twenty pounds, £20, annual expenditure nineteen pounds, nineteen shillings, and six pence, £19 19s 6p, result happiness.  

Annual income twenty pounds, annual expenditure twenty pounds ought and six, £20 0s 6p, result misery.”

Sorry, Mr Micawber was pre-decimalisation of the currency.

According to GERS for 2015/16, a 21 century Scottish Mr McCawber is currently in the position of:

“Annual income  £53.7 billion, annual expenditure £68.6billion, result misery. Whit? we’re £15 billion in the red? Michty me, as Ma Broon would say.

You’ll probably have heard of this dire situation because certain news media outlets, well most of them actually, quote these figures to their wee hearts’ content to show once again that we’re too wee, too poor, and too stupid to be our own independent country. Although another way of putting it is that these figures show how badly our economy is doing under Westminster control.

Here is the overall position summarised in Table E.3 of GERS:

GERS budget balance 1998-2015

Here are the detailed figures which the above graph is based on. You can get the complete set here on ScotGov website.

GERS Budget Balance 1998-2015

It’s clear what happened in 2008-09. The banking industry crashed and so did the UK’s budget balance. Since then UK is showing a steady recovery. And so did Scotland till about 2011-12 from where we’ve apparently been going downhill. Why? Just been looking at some North Sea oil & gas stats. 

UK North Sea Oil Production

Ah, the 1980s….. Mrs T in charge and the oil revenues rolling into the Exchequer. Of the 2012 annual value from North Sea oil production of £25 billion according to the graph, Scottish revenue from that was about £10  billion according to the GERS table.

Look there’s no getting getting any from it, we’re bankrupt, right? 

Of course, the same could be said of the UK as a whole. I mean if Scotland was bankrupt with £12 billion in the red in 2014-15, then the UK must have been bankrupt with £60 billion in the red, eh? Though mostly the meeja don’t seem to clock that.

But, but, but … our redness is about 7.8% of our current annual GDP, or 9.8 without the help of the North Sea, while the UK’s redness is only 3.5% . 

I don’t want to argue that Scotland should rely on fossil fuel income to help keep us afloat economically for more than the very short term but it’s clear from these figures that it has been helping us significantly since the 1970s even if that help is much less now. Same for the UK. And it’s contribution is going to continue to decline according to HMRC.

HMRC Oil % Gas Revenue Forecast

Misery it is then. Michty me. What a good job we didnae vote for independence, eh?

 

 

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