What does GERS tell us?
The publication of GERS – an assessment of Scotland’s nominal public finances – is by common consent the most tedious event in our political calendar. Unionists and nationalists alike spin the figures for cheap political points. Currently, the unionists are winning: GERS 2015-16, released today, show Scotland with a net fiscal deficit (the annual gap between what we raise in taxes and what we spend on services) of 9.5 per cent of GDP. That’s bad. For context, the UK’s net fiscal deficit is 4 per cent of GDP. What it’s not, though, is a terminal challenge to the economics of independence.
Scroll past the GERS executive summary and you will find a list of Scotland’s spending commitments as part of the UK. In 2015-16, we spent £3billion on defence. As a small country on the secure northern periphery of western Europe, an independent Scotland would not need to commit 4.4 per cent of its total expenditure to defence. If we cut this aspect of our spending by two thirds, we would reduce the Scottish deficit to a more manageable – albeit still unsustainably large – 8.2 per cent of GDP.
There are other basic revenue-raising measures Scotland could take to tackle its deficit. We could scrap the small business bonus scheme, which will cost £175million in 2016 alone and yet – according to the STUC – “can demonstrate no tangible outcomes in terms of jobs, investment, innovation or productivity.” We could impose a new levy on whisky production, which Commonweal research suggests could raise up to £1billion. We could restore the 50p top rate of income tax, which SPICe estimates would raise around £50million annually.
There is also the possibility of an ‘independence dividend’ – a boost to Scottish growth generated by better management of Scottish economic resources under independence. From 1977 to 2007, average annual Scottish growth was 1.9 per cent. By contrast, average growth over the same period in Ireland, Iceland, Norway, Denmark, Finland, Sweden and Austria ranged from 5.4 per cent to 2.4 per cent. You’d have to be daft not to see a link here between Scotland’s relatively poor economic performance and its lack of autonomy.
None of the measures cited above would eliminate Scotland’s deficit. But they do (crudely) illustrate some of the options that would be available to an independent Scotland in the face of significant budgetary challenges. As it stands, Scotland operates according to the economic priorities of a rightwing UK government it didn’t elect. With independence, it could set different priorities under a parliament it did.