SCOTLAND’S notional fiscal deficit is expected to increase to 21% of total economic output in the year to April 2021, according to one of the country’s leading economic experts.
Mairi Spowage, director of the Fraser of Allander Institute at Strathclyde University, made the forecast in an article published on Tuesday, ahead of Wednesday's publication of Scottish Government figures.
Last year the annual Government Expenditure and Revenue Scotland (Gers) report put the notional deficit at 8.6%.
“What are the latest figures likely to show?” asked Spowage on the Fraser of Allander website yesterday.
“The 2020-21 financial year was an unprecedented one in terms of public spending: the coronavirus pandemic and associated lockdowns have had a heavy toll on the public purse as the UK and Scottish governments support businesses and individuals through the pandemic.”
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She added: “Typically, when considering the difference between the onshore Scottish net fiscal balance (excluding oil revenues) and the UK figure, there is around a seven percentage point gap between the UK and Scottish figures.
“In recent years, oil revenues have declined to the extent that they are not hugely significant in closing this gap: oil revenues are likely to be around £300 million in the latest year, compared to a high of around £10 billion in 2008-09.
“The latest figures for the UK for 2020-21 is a deficit of 14% of GDP, so all else being equal we can expect that the figure for Scotland will be around 21% of GDP.”
The figures will be seized on by the pro-Union parties to argue Scotland cannot afford to be independent, while the SNP say they illustrate that the country is underperforming in the UK.
“Scotland has a fundamentally strong economy, underpinned by healthy and diverse sectors,” said SNP MSP Fiona Hyslop.
“However, the country is being held back by a Westminster system that treats Scotland as an afterthought at best, and which is actively undermining our economy on a range of fronts.”
She added: “Westminster is actively harming Scotland’s economy through policies like Brexit and the massive hit to our food and drink sector.”
She added: “Opponents of independence will, as ever, try to exploit today’s Gers figures to support their arguments – the reality is very different. Whatever today’s figures show, Gers does not represent the finances of an independent Scotland – it shows the situation now under Westminster control.
“And, as we seek to recover from the economic crisis of the pandemic, it is more essential than ever that we have independence to maximise our potential.”
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