Latest data shows gap between income and spending is four times as much as UK as a whole

Scotland ran a narrower deficit last year as a stronger performance from the oil industry boosted revenues, but the gap between government spending and income was nearly four times higher than the UK as a whole.

The latest Government Expenditure and Revenue Scotland (Gers) data for Scotland shows that for 2017-18 overall state spending hit £73.4bn compared to tax income of just under £60bn, including oil revenues. That left a deficit for the year of £13.4bn, compared with £13.5bn the year before. Scotland’s deficit was equivalent to 7.9% of GDP, while for the UK as a whole it was 1.9%.

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Tax revenues for both the onshore economy and the North Sea oil and gas sector rose in the last financial year, by £2bn and £1bn respectively, as the country saw a series of more positive economic figures boosted largely by the oil and gas sector recovery.

The latest quarterly data for Scotland’s GDP showed a better than expected increase in output, with growth of 0.4% in the first quarter of 2018, twice that for the UK over the same period. Scotland’s employment rate was near record levels at 75.2%, while exports were at their highest recorded.

But the comparative figures set out in Gers showed overall spending by the UK and Scottish governments was £1,576 higher per head in Scotland than in the UK as a whole – the highest subsidy in recent years.

Scotland has 8.2% of the UK’s population but absorbed 9.3% of the UK’s total state spending while its share of tax raised across the UK stood at 7.8%. The UK government said this meant the Scottish deficit was equivalent to nearly £1,900 per head more than the UK’s deficit.

Nicola Sturgeon, the first minister, said the latest data showed the Scottish economy was emerging from its doldrums. “Gers comes against the backdrop of a run of positive economic statistics for Scotland which show, as the oil sector has recovered, the start of a recovery,” she said.

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Sturgeon said there was good reason for higher public spending in Scotland, including its dispersed rural populations, while higher oil and gas revenues in Scottish waters had in the past contributed heavily to the Treasury’s income.

She said the Gers report could not say much about the long-term finances of an independent Scotland. The Scottish National party’s recent growth commission report had shown the country could cut its deficit by 3% without hitting government spending, she added.

However she brushed aside questions on why the growth commission report’s controversial proposals for cutting the deficit, which the Institute for Fiscal Studies said would increase and extend austerity in Scotland, was not being debated at the SNP’s annual conference in early October. She said it was being discussed at party meetings.

The economist John McLaren said Scotland’s fiscal picture was slowly improving but said the report also included revised tax revenues figures for 2016-17. Those showed Scotland was £1bn worse off that year than had previously been estimated. Volatile oil revenues added to the uncertainty.

“The downward revisions to previous years are due to a lower share of onshore revenues being estimated, down from 8% to 7.8%,” McLaren said. “There is now a worrying trend of a declining Scottish share of UK revenues emerging.”

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David Phillips, an economist at the Institute for Fiscal Studies thinktank, said: “This year’s figures continue to paint a relatively weak fiscal picture that is likely to persist unless there is a strong rebound in oil revenues or a substantial increase in Scottish economic growth. Relying on the former would be a particular gamble, which is why the growth commission’s emphasis on boosting productivity growth is so important.”

Richard Leonard, the Scottish Labour leader, said these figures again undermined the case for independence and strengthened the case to use the UK’s spending power to invest more heavily in infrastructure and public services.

“These figures show that the real change Scotland needs isn’t to leave the UK – it’s a Labour government willing to end austerity and invest instead,” he said.

Murdo Fraser, the Scottish Tories finance spokesman, said the Gers figures underlined the importance to Scotland of the “union dividend”. He added: “If Nicola Sturgeon wants to continue her threat of second referendum, she has to come out and explain where she would find £13bn to fill this deficit.”