The accounts don’t suggest Scotland is in debt at all. People just don't understand how to analyse the UK Government Expenditure and Revenue Scotland report (GERS).
Scotland has recently been granted very limited borrowing powers, but while the UK’s debt was being built up it had no borrowing powers. Scotland’s economy was either in surplus or had a lower deficit than the UK, so Scotland did not contribute to the creation of the debt.
How does a nation without the ability to borrow end up paying billions in interest on debt every year? Looking at 40 years of GERS, Scotland’s share of UK debt interest amounted to £133bn. Had Scotland been independent, its entire borrowing requirement over that time would have been zero.
Scotland’s accounts had £133bn of interest on debts that Scotland did not generate, nor benefit from, removed from them. Without that £133bn cost, Scotland’s finances would be in surplus today.
If we look back as far as reliable historical figures go we can see that in 1980/81, before UK debt started to spiral, Scotland was charged £3bn to service UK debt. But despite that, it managed to record a surplus of more than £1bn.
Indeed Scotland’s finances showed a surplus until 1990 when the cumulative surplus amounted to £38.8bn (£74bn surplus without debt loading).
Scotland was part of the UK and so Scottish surpluses went to the UK Treasury. Scotland was actually subsidising the UK. As a result the burden of UK debt payments on Scotland’s economy started to weigh it down. This meant the surpluses gave the false impression that they declined during the 1990s and the cumulative surpluses were eaten up by UK debt-related deficits.
The UK’s debts have grown steadily over those 40 years. Any budget allocated to Scotland in that time that is of a higher value than Scotland’s revenues is not a subsidy, it is a loan on which Scotland has to pay interest – a loan that Scotland only seemed to need because it was subsidising the rest of the UK.
It is a fact that as an independent nation Scotland would have possessed those cumulative surpluses of £74bn and could have chosen to re-invest in Scotland’s economy, which would have grown the economy faster. An independent Scotland would have retained the £133bn of debt interest charges as it wouldn’t have needed any debt of its own.
Open Minds on Independence #3