GERS and the Long-Term Survival of the UK

     The common sense economic case for keeping the United Kingdom together was bolstered by yesterday's release of the latest Government Expenses and Revenues Scotland (GERS) report for 2014-2015.

     In summary, it showed that Scotland has a total budget deficit of £14.9 billion – the difference between public expenditure in Scotland (£68.4 billion) and revenues raised in Scotland (£53.4 billion). This amounts to 9.7% of Scotland’s GDP, as opposed to the overall UK deficit being only 4.9% of its total GDP, which means that Scotland runs a deficit two times higher than that of the UK as a whole.

     On a per capita basis, that deficit is £2800 compared to the £1400 per capita deficit of the UK overall, and this deficit gap amounts to £7.4 billion. If Scotland were to be independent, this would be the amount by which the Scottish deficit would get bigger in that scenario, and these figures get worse when North Sea oil is stripped away, so that the onshore deficit gap hits an eye-watering £9.2 billion.

     With the collapse of oil prices since the summer of 2014, Scotland’s geographic share of North Sea oil and gas revenues was £1.8 billion – a far cry from what the SNP said would be £7.9 billion with prices a 110+per barrelaccording to the white paper it released leading up to a vote.

     Indeed, that white paper, Scotand’s Future, has often been described has overly-optimistic in its prospectus for an independent Scotland – which touted the strength of Scotland’s finances and promised the maintenance and expansion of public services and the public sector in Scotland because there was untold wealth around the corner of separation became a reality. Now with the release of the latest GERS figures, STV’s Stephen Daisley has written that it looks “more like a piece of creative accounting, a 649-page confidence trick” because the SNP failed to come up with a credible economic plan which most voters could reasonably support, and that those who continue holding up the white paper’s contents engage in “downright dishonesty.”

     In response, some nationalists say that the numbers – produced by the Scottish Government – cannot be trusted because they don’t reflect the true wealth of Scotland and assume that with all “economic levers” at its disposal, it will follow the same economic course of the UK. The SNP itself does not dismiss the numbers in such a way, but does offer much of the same spin about the lack of powers and how an independent Scotland would do things differently (to overcome the financial challenges):

“GERS tells us about the status quo and very little about the opportunities of independence. Scotland is rich in human talent and natural resources. But what we lack are the economic levers to maximise growth in our economy, and invest according to our own priorities.”

     Again however, these are the numbers from their own government, and if they were good enough to argue the (nonexistent) case for separation (as indeed, was the case), then they are good enough to make the case against separation.

     Nationalists also interject that because UK and everyone else runs a budget deficit, why should Scotland be expected to balance its books? Here, this is a matter of scale and context. The United Kingdom as a whole runs a budget deficit that is larger than Scotland’s in terms of raw numbers, but the UK – being a larger and stronger country with a more diverse economy – is able to absorb and handle large deficits from year to year, and the same is true of the United States, France, and Germany. Scale matters, though it would be unreasonable for an independent Scotland to balance its books from Day One, it is reasonable for it to start life as an independent country with a smaller budget deficit that is in line with the size of its economy, which means cuts to services, tax increases, or both.

     Another response to these numbers is saying that “oil is just a bonus”, but this flies in the face reality when one notices that without oil, the deficit would be far worse and the scale of the financial challenge more daunting.

     In his column on GERS yesterday, Alex Massie makes it clear that the SNP government's own figures have destroyed its economic case for separation and that keeping the UK together was the good option back in September 2014. After all, each man, woman, and child in Scotland is better off by £1400 because Scotland is part of the United Kingdom and benefits from fiscal transfers via the pooling and sharing of resources, which is how the Union is supposed to work (and I recommend reading Kevin Hague’s thoughtful and thorough analysis on GERS).

     However, Massie also made it clear that sheer economics alone will not be enough to ensure the survival of Britain, not least because a day may come when the economic case could favor separation. “Numbers matter”, he said, “but they are not the only fruit. But this, again, must apply to both sides of the constitutional divide. Britain, and the UK, must be worth something other than £1,400 a year.”

     He further added:

“People are not, in any case, bloodless calculating machines. They appreciate that [the economic] arguments are, in the end and at root, about something more than that. They are about who we are, how we see ourselves, and what we intend to achieve together. They are arguments about where we have been and where we may yet go.”

     In this light, more of an effort must be made to communicate the social, cultural, and sentimental value of the Union - including the very idea of Britishness and living comfortably with more than one identity. It should not be about competing identities or pitting identities against each other, because for example, to be Scottish is also to be British, and you cannot have Britishness without Scottishness.

     Emphasis must be made on shared history, culture, heritage, society, and values. There needs to be an inclusive approach which recognizes and respects the distinctiveness among the peoples the United Kingdom while also encouraging commonality and cohesiveness.

     In effect, this effort must answer the following questions:

“Who is British?”

“What’s good about Britain and why should it exist?”

“What’s the UK’s purpose at home and abroad?”, and

“What does it mean to be British in the 21st Century?”

     This will not be easy, but with a little work from the ground up – starting with individual, and eventually national, efforts – a stronger, positive, and confident British patriotic identity combined with a competent economic case can be forged to withstand the forces of nationalism in the long-term.