The Scottish fiscal deficit

A few weeks ago, the Scottish Government announced that they planned to give the National Health Service (NHS) staff a 4% pay increase. The announcement was on the back of the UK Government reporting just a 1% increase in NHS pay for England in the national budget. I read today that the Scottish National Party’s election manifesto plans ‘transformational funding‘ for the NHS if elected again. With investment in the NHS across the nations at record levels, the UK Government said that 1% was all the country could afford, so how can the Scottish government offer significantly more? The answer is dept.

The Office for National Statistics Country and regional public sector finances report for the financial year ending 2019 shows that Scotland has run a deficit since 2000. The nation has the second-highest expenditure per head of any other United Kingdom region at £14,497 with total annual spending of £78,838 million. 

The Scottish annual deficit is currently at £13,499 million or just under £2,500 per head. The English deficit in comparison is almost three times smaller at £4,954 million or just £88.50 per head. Scotland’s spending makes up 32% of the UK’s annual deficit but with just 8.2% of the population. 

One factor in the mismatch between debt and population is London and the South East’s effect on the UK financial performance as a whole, and England as a country. London, the South East, and the East of England run at a surplus masking the other regions’ lower performance within England, London alone producing a 60% surplus.

There are significant disparities in financial generation and spending across the UK regions, and more substantial expenditure in areas that present the greatest need. This prioritised spending would be understandable if the national regions followed similar spending rules. However, the Scotland Government is increasingly offering more generous expenditure and generating a more significant deficit while simultaneously seeking independence from the Union. 

It will be interesting to see what happens with the existing debt and the growing deficit if the Scottish National Party achieves its long-term goal.