Scotland's fiscal position worsened in 2012–13 as North Sea revenues fell

News
12 March 2014 | 00:00–23:59

Today, the Scottish Government published the latest version of its annual Government Expenditure and Revenues Scotland (GERS) publication covering 2012–13. The IFS will be publishing a full report on these figures and the last pre-referendum update of our assessment of Scotland’s fiscal position next month. But what are the key findings that jump out of the latest year of data?

For the first time in 5 years GERS suggests that Scotland's net fiscal balance, or budget deficit, was worse than that of the UK as a whole even when allocating North Sea revenues to Scotland on an illustrative geographic basis. Until now these revenues have been enough to more than outweigh the fact that public spending per head is significantly higher in Scotland than in the rest of the UK whilst non oil revenues have been much the same. But not in 2012–13.

Two things appear to have happened that explain a large part of this. First, total UK-wide North Sea revenues were substantially lower than in the recent past (£6.6 billion compared to £11.3 billion in 2011–12, for instance). Second, a smaller proportion of North Sea revenues have been allocated to Scotland in 2012–13 than 2011–12, although there have also been downward revisions to the estimated share in 2011–12’s compared to last year’s publication.

As we have said before it is important to think of oil revenues differently to other revenues because they are so volatile (and likely to run down in the longer term). These figures reaffirm the fact that an independent Scotland, like the rest of the UK, would have a substantial fiscal deficit. But higher spending in Scotland makes that deficit bigger than in the UK as a whole if oil revenues are not high enough to compensate.

Read the full report on the IFS website

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