September 22, 2012 by Nash Riggins
Scottish First Minister Alex Salmond blasted Work and Pensions Secretary Iain Duncan Smith this week after asserting that an independent Scotland would be financially unable to maintain many of its current welfare programmes.
According to Mr Duncan Smith, the Scottish government would be unable to meet the cost of adequately supporting those who cannot work without cutting social services or raising taxes. Mr Salmond, on the other hand, dismissed the claims as “offensive, nonsensical rubbish.”
“The man responsible for that has got the audacity to come to Scotland and tell us we couldn’t afford to have a compassionate and proper welfare protection,” Salmond countered. “We could have less borrowing, more spending and we would certainly be able to sustain a position where we didn’t reduce people with blindness to penury, as Iain Duncan Smith is currently doing in Scotland.”
Yet regardless of Mr Salmond’s anecdotal evidence that a blind man was ‘reduced to penury’ as a direct result of Duncan Smith’s welfare cuts, the facts and figures may rule in favour of the Work and Pensions Secretary.
According to the UK’s Treasury Public Spending Analysis, the Scottish government shells out £9,940 every year on each of its citizens – which is a whopping £1,409 more per head than in England. Scottish Nationalists counter that this figure is an unfair argument to bring forth, as ‘the public sector’ in Scotland includes water and sewage, more spending on education, a greater reliance on agriculture, free four-year university tuition for residents and dozens of public services that are unavailable in England.
According to the Government Expenditure and Revenue Scotland (GERS) report for 2010-2011, the consequences of these additional services have not gone unnoticed:
“In 2010-11, the estimated current budget balance for the public sector in Scotland was a deficit of £14.3 billion (12.0 per cent of GDP) excluding North Sea revenue, a deficit of £13.6 billion (11.2 per cent of GDP) including a per capita share of North Sea revenue or a deficit of £6.4 billion (4.4 per cent of GDP) including an illustrative geographical share of North Sea revenue.
In 2010-11, Scotland’s estimated net fiscal balance was a deficit of £18.6 billion (15.6 per cent of GDP) when excluding North Sea revenue, a deficit of £17.9 billion (14.7 per cent of GDP) when including a per capita share of North Sea revenue or a deficit of £10.7 billion (7.4 per cent of GDP) when a geographical share of North Sea revenue is included.
In 2010-11, the equivalent UK position including 100 per cent of North Sea revenue, referred to in the UK Public Sector Accounts as ‘net borrowing’, was a deficit of £136.1 billion (or 9.2 per cent of GDP).”
Unfortunately, these figures clearly unfold the tale of a devolved government facing substantial deficit – although perhaps not a deficit proportional to that of Westminster. In fact, First Minister Alex Salmond recently countered to the BBC that Scotland contributes “9.6% of the UK’s taxation, with 9.3% of the spending and just over 8% of the population. That is a relative surplus of about £2.7 billion in 2010/11, or £500 for every man, woman and child in the country.”
Are these numbers indeed accurate once general taxation has been factored into the equation? Absolutely so. What’s more, it cannot be denied that an independent Scottish government would find itself with a whole lot of pocket-money should a portion of its people’s taxes no longer be deferred to Westminster; however, unionists suggest the introduction of those funds should be deemed irrelevant. The Scottish government needs an average of £9,940 per person in order to provide its current level of public amenities – not a measly £500. As a result, it’s fair to say that, as matters currently stand, the Scottish government relies almost entirely upon financial subsidies from Westminster with regards to maintaining the majority of all public welfare services.
Yet even if all public tax revenue was sent directly to an independent government at Holyrood, said output would undeniably fail to pay for all current public expenditures. GERS figures indicate that in past years, the UK Treasury has regularly spent around £54 billion per year on Scotland, but only receives £43.5 billion in Scottish revenue; therefore, how would an independent Holyrood scrounge up the additional £10.5 billion in tax revenue that would ensure a continuation of its currently enviable level of public services? A noticeable rise in government taxes, full stop.
Like it or not, the Work and Pensions Secretary knows more about work and pensions than does Alex Salmond. Mr Duncan Smith is absolutely correct in his assumption that an independent Scotland will face either a substantial rise in taxation or a decline in public services – because at the end of the day, money doesn’t grow on trees.
“Due to the reliance on the old heavy industries in many parts of the country, it makes perfect sense that we need to spend more money per head of population on welfare support in Scotland. I have no problem with that,” Duncan Smith explained yesterday. “Thankfully, due to the United Kingdom and the commitment of the Westminster Government, we are able to ensure that money brought in, whether it be from the City of London or from North Sea oil, can be pooled and directed to wherever it is needed most.”
Indeed, Scotland receives a lot of financial help from Westminster by way of funding its public welfare services – and, because Mr Salmond has so gingerly asserted that those public amenities are funded purely via general taxation, reason tends to suggest that a financially independent Scotland cannot have its cake and eat it, too. This shouldn’t be an argument for or against Scottish independence, because true nationalists should maintain that higher taxes are a small price to pay in order to make Scotland a better nation. Yet in the meantime, Alex Salmond would do well not to publicly embarrass himself by ignoring facts and statistics whilst arguing with other politicians who are vaguely familiar with the nature of addition and subtraction.