Daily Express claim on Scotland’s ‘deficit’ needs context

Under [Nicola Sturgeon’s] leadership, [Scotland] has run up one of the largest budget deficits in the developed world.

In a column about Scotland’s outgoing first minister, Nicola Sturgeon, the journalist Esther Krakue said that the country had one of the largest budget deficits in the developed world.

While it’s technically true that Scotland has a large deficit, this statement on its own is missing some important context because Scotland’s funding is set by the UK Government in a way that means spending there will generally be higher than revenues.

In other words, the size of this deficit doesn’t truly reflect decisions made by the Scottish Government.

The funding arrangements for devolved nations are complex, and often cause confusion in public debate. For instance, in the past we have fact checked the claim that Scotland receives no money from England, or that the UK retains a large share of Scottish revenue.

What is Scotland’s ‘deficit’?

In the latest accounts, for 2021/22, Scotland had a negative “net fiscal balance” of about £23.7 billion, when you include revenue from North Sea oil, or 12.3% of its GDP.

This has also been called its “deficit”, and described by the Scottish Secretary Alister Jack as “the shortfall between taxes raised here, including oil, and public spending”. The Institute for Fiscal Studies has also written about Scotland’s “implicit budget deficit”.

The UK as a whole had a budget deficit of about £125 billion in the same year, which amounted to about 6.1% of GDP.

These are both large when compared with other advanced economies.

However the claim that Scotland has “run up” this level of deficit “under [Ms Sturgeon’s] leadership”, is lacking context, because the Scottish Government effectively does not control it.

Scottish public spending comprises money spent not only by the Scottish Government, but also Scottish local authorities and the UK Government on behalf of Scotland.

The Scottish Government is largely funded by something called the block grant, which is given by the UK Government to fund devolved areas such as health and education. It is also funded by taxes that are raised and kept in Scotland (such as income tax).

The Scottish Government itself spends pretty much what it receives from these sources. It has very limited borrowing powers with an annual maximum of £600 million. In practice, it borrowed £319 million for 2021/22.

It could only prevent Scotland having a large overall deficit if it decided not to spend a large amount of the funding available.

Full Fact has approached Ms Krakue and the Express for comment.

Spending per person

The value of public revenue raised per person in Scotland is quite similar to the amount raised across the UK (assuming you count revenue generated by North Sea gas and oil as Scottish revenue).

But, Scottish spending per person is significantly higher than spending across the UK.

One of the reasons for this is that the amount of spending allocated to the Scottish Government via the block grant is based on historic spending decisions which allocated more money per person to Scotland than the rest of the UK.

So the gap between Scottish revenues and the money available for Scottish spending is largely due to decisions made separately on how to calculate Scotland’s block grant.

Image courtesy of the Scottish Parliament