The Government Expenditure and Revenue Scotland (GERS) report was released today.
Published annually, the report details the difference between Scotland’s tax revenues and its public service expenditure. This is used to calculate a net fiscal balance, which in recent years has been a deficit. This year’s report found Scotland’s deficit to be 22.4 per cent of Gross Domestic Product (GDP)
Each year, the report generates a great deal of noise in Scotland’s political debate, and is widely reported on in the media.
Ferret Fact Service took a look at what GERS can tell you, what it can’t and what it means for Scottish independence.
How is GERS calculated and who is behind it?
It is a National Statistics publication which means it is assessed by the UK Statistics Authority to ensure it is independent of Scottish Ministers, meets user needs, is methodologically sound and produced free of political interference.
The methodology is publicly available and regularly assessed.
Many of the numbers in the report are not based on estimates. The spending statistics are from local and Scottish Government services, as well as spending from the UK Government which is for Scotland.
The report provides 95 per cent confidence intervals for each of the major revenue estimates. The overall margin of error for revenue estimates in the last GERS report was calculated as 2.2 per cent.
For the UK Government, the report splits up identifiable and non-identifiable spending. Identifiable spending is specific, such as reserved spending on social security, while non-identifiable spending includes UK-wide expenditure which affects Scotland such as defence.
Where only UK-wide data is available, the statisticians produce estimates to allocate a portion of this spending to Scotland.
When was it created?
The figures were first published in 1992 under John Major’s Conservative government. They have been published by the Scottish Government since devolution.
What can GERS show you?
The report gives a picture of Scotland’s current public sector revenue and expenditure.
It tells you how much money was raised by the Scottish Government, how much Scotland paid for the services it used and how well the revenues raised covered these costs.
In recent years, the headline figure reported from GERS has been Scotland’s national deficit – essentially how much more Scotland spends on services than it raises in tax.
While Scotland does not technically have a deficit as it is part of the UK, this figure shows an estimate of Scotland’s fiscal position at the current time.
What about North sea oil?
The potential value of the North Sea’s oil and gas reserves has long been part of the debate around GERS.
Revenues from the oil and gas industry are included in the GERS report. They are estimated in two ways: by population share and by geographical share.
The population share gives Scotland a North sea revenue allocation based on its relative population compared to the UK, while the geographical share is an illustrative measure that creates a boundary between Scotland and the rest of the UK and gives a geographical share of revenues.
How does this all relate to Scottish independence?
The annual controversy when GERS is released is down to the constitutional debate ongoing in Scotland.
The report is used by different sides of the debate to bolster their case, and it has featured regularly in reports by both the Scottish and UK governments attempting to promote their differing positions.
GERS shows Scotland’s notional deficit, and so is often used as a sort of starting position for Scotland’s financial position should it become independent of the UK. Respected analysis group The Fraser of Allander Institute says the report “presents a useful starting point for a discussion regarding the challenges and opportunities that Scotland would face”, but stresses that it is based on current constitution arrangements and previous statistics.
The report tells us little about Scotland’s long term financial prospects after independence as it does not model the societal, economic and structural changes that an independent Scotland would cause. GERS gives us a snapshot of Scotland’s current financial position, and should not be used to project into the future.
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