Is Scotland subsidising the rest of the UK?

Reading the previous section this might seem a bizarre question. Obviously if Scotland would not be better off under independence then by definition Scotland cannot be subsidising the rest of the UK?

Well not exactly. It would be possible for both to hold true if the effects of independence (say higher Scottish interest rates) would eliminate any Scottish financial advantage in the UK. However as notedhere GERS does not take account of any independence effects therefore it is a bizarre contention to make.

That of course does not stop nationalists making the claim. Indeed some go so far as to argue that even without oil Scotland pays more into the UK than it gets back.

This claim is usually based on a quite obtuse and deliberate misreading of GERS and the block grant.

Quite simply in 2013-14 Scotland pays in tax, according to GERS, £50bn without oil or £54bn with oil (geographic share) and the Scottish Government received back in £43bn in devolved expenditure. Therefore Scotland is subsidising the UK to the tune of £7 or £11bn depending on how you count Scottish Revenue.

This is usually accompanied by a poorly designed graphic with a map and arrows to emphasise this loss of money to Scotland to the “greedy” Westminster. Alternatively it is just stated as fact by a SNP MSP who either does not know better or is outright lying.

A couple of seconds of thought would show that this equation doesn’t add up. Why use 100% of all Scottish revenue but only a proportion of Scottish public spending? The implication of the argument is that reserved expenditure does not benefit Scotland and therefore can be safely ignored? Can it?

The White Paper on helpfully provides a breakdown of this reserved and unreserved expenditure, and it can be broken down into three areas; defence, debt and social security.

To claim that Scotland gets no benefit from these areas is nonsensical. Scotland obviously benefits from defence and as noted here is actually allocated in these numbers less than it would have to spend as an independent member of NATO.

Scotland also benefits from debt interest payments seeing as it is these payments that are supporting the UK deficit which Scotland contributes disproportionately from and the low interest rates that Scotland benefits from as part of the UK.

In terms of social security the lion's share of this is pensions which are a clear and obvious benefit to Scottish pensioners, or anyone in receipt of most social protection payments.

It is possible to argue that Scotland is subsidising the UK, if you ignore debt, defence and pensions. Then again you could also just make up the figures and write them on a piece of paper with crayon, it would make about as much sense.