Scotland is not subsidised by other regions of the UK – this is an indisputable accounting fact.
One of the major faults of macroeconomic discussion around GERS is the narrow focus on just one sector of the economy, that being the government sector. Political and economic commentators often ignore, intentionally or mistakenly, two other vital sectors that must be included in any serious analysis of Scotland’s fiscal position – the private and foreign sector. Ignoring these other sectors is the equivalent to describing a football match as “Celtic – 1” without any commentary on the other team. Therefore, the best accounting framework to analyse these sectors is the Stock-Flow Consistent (SFC) model by British economist Wynne Godley.
When considering all sectors of the economy, the SFC model presents an accurate and detailed account of all flows and stocks in the economy. This framework means the net sum of all equity of the economy is equal to zero (whilst equity remains).