The Scottish economy suffered a financial deficit that was 40% higher than the rest of the UK last year, after falling tax revenues helped push Scotland’s overall deficit to £12.4bn.

The latest Scottish government data also showed that that deficit as a share of Scotland’s GDP was nearly 50% higher than the UK’s, even including a geographical share of North Sea oil revenues, because of far higher per-capita public spending.

Excluding North Sea oil revenues, the financial gap in Scotland’s net fiscal balance was larger still, at £16.4bn or 12.2% of the country’s GDP, even before the sharp plunge in oil prices down to $50 a barrel took effect.



The new figures from the Scottish government’s annual General Expenditure and Revenue Scotland paper sparked a fresh row between the Scottish National party administration, which is still pressing for full fiscal autonomy within the UK, and its opponents.

With the general election looming, Nicola Sturgeon’s government insists that Scotland should be given far greater control over its tax and spending. But Alistair Carmichael, the Scotland secretary to the UK government, said the new figures “put the case for remaining in the UK beyond all doubt”.

The headline figures showed that, excluding oil, Scottish onshore tax revenue was £50bn in 2013-14 – £300 less per head than the UK average at £9,400 per person. Including a geographic share of oil revenues, tax revenues rose to £54bn: £400 above the UK per capita average at £10,100 per person.

Total Scottish and UK government expenditure in Scotland, however, stood at £66.4bn – £12,500 per head.

Carmichael said these figures established the case that remaining in the UK allowed Scotland’s higher rates of public spending to be cushioned against fluctuations in oil income and onshore economic performance through the Barnett formula.

“It is concrete proof that Scotland’s public spending is protected and receives secure and stable levels of funding, alongside the ability to absorb economic shocks more effectively,” Carmichael said.

“These figures are based on a high oil price of over $100 rather than the current price, emphasising the need for us to pool our risk and resources in the future. [These] figures will force the long overdue retirement of a number of economic myths used by those who argue for Scotland leaving the UK. There is no way to avoid these hard facts and attempting to do so would simply be irresponsible.”

Sturgeon said the latest figures, which economists predict will be far worse in next year’s paper, proved why her government needed far greater economic independence, to allow it to increase growth while protecting public spending.

The first minister insisted that Scotland had a vibrant economy, saying overall tax receipts including North Sea oil were £400 per head higher from Scotland in 2013-14 than the UK average. That was the 34th year in a row where that was the case, she said, which was “testament to the inherent strengths of the Scottish economy.”



Fluctuating tax receipts and government deficits were “not uncommon”, she said, adding that, year on year, Scotland’s overall deficit was lower by nearly £2bn. “The fundamentals of our economy are strong. Scotland is, and will continue to be, a very wealthy country,” she said.

The first minister and her government’s chief economist, Gary Gillespie, were unable to offer any detailed projections of future tax revenues, how much growth in GDP would be needed year on year to protect Scotland’s £1,300-per-head-higher levels of public spending, or how it would cut the deficit with greater fiscal powers. Nor did Gillespie confirm that this analysis had been carried out.

Sturgeon said that the existing challenge to Scotland’s public spending came from UK government cuts, which could hit £14.5bn over the course of the next parliament if the Tories won power on 7 May. She has instead argued for a 0.5% increase in spending, to add £180bn to budgets in the next parliament.

“However, such analysis tells us very little about the choices and opportunities with greater autonomy. It shows Scotland under the status quo, without full access to the levers to grow our economy and use the proceeds to invest in public services,” she said.

“We have the capacity and the resources to grow our economy, address inequalities, grow small businesses and put more people back to work.”

In turn, the Labour leader, Ed Miliband, has also warned about the impacts on Scottish spending of a Tory victory, appearing to underline Sturgeon’s argument. In a speech to Scottish Labour last Saturday, Miliband warned the Tories could “wreak havoc” by cutting up to £2.7bn a year from Scotland’s budget.

Danny Alexander, the chief secretary to the Treasury, who is fighting to hold his Scottish Highlands seat after a surge in local SNP support, said: “Today’s figures show that Scotland’s borrowing was £800 per head higher than the UK average last year: that’s £800 more that an independent Scotland would have to tax every man, woman and child.

“They’ve also nearly doubled the 2012-13 figure from £500 per head to £900, meaning that [the SNP’s] own estimates were dangerously wrong throughout the referendum campaign.”