The State of Britain

Scotland’s fiscal deficit eases, no clear way to measure the value of City Deals and well-being vs GDP

Reading Time: 4 minutes

In the ONS’s estimate of regional public spending and regional tax revenues in 2019, Scotland had a deficit of £14.8bn, a smaller shortfall than the £16bn recorded in 2018. On a geographic rather than a population basis the deficit fell from £15.1bn in 2018 to £13.5bn in 2019. This compared with London, which had the highest surplus of £38.9bn.

On a per person basis, Scotland’s deficit was £2,713, lower than the £2,964 recorded in 2018. London had the highest surplus of £4,369 per person whereas Northern Ireland had the biggest shortfall at £4,978.

The only areas of the UK to run surpluses were London, the SE of England and the East of England. The West Midlands and the North East were the two regions in the UK to increase their net fiscal deficits over the year; the other seven regions reduced their shortfalls.

At a national level, the UK had a deficit of £623 per person which splits into deficits of £68, £2,713, £4,289 and £4,978 for England, Scotland, Wales and Northern Ireland respectively.

Public spending in Scotland was £78.8bn or £14,497 per head, an increase on the 2018 figure of £77.2bn. London had the biggest spend of £123.9bn or £13,826 per head whereas Northern Ireland had the lowest at £27.9bn or £14,821 per head. Total government spending was £853bn or £12,835 per head.

Scotland collected £65.4bn in taxes in 2019. London contributed the most to the Exchequer at £161.9bn, compared with the lowest contribution of £18.5bn which was from Northern Ireland. Overall the state raised £811.3bn or £12,213 per head in taxes, an uplift of £34.1bn or £461 per head compared with 2018.

More data from the ONS showed unemployment in Scotland fell by 7,000 to 105,000 between September and November 2019; the decrease of 0.3% took the overall rate to 3.8%. Northern Ireland had the lowest rate at 2.3% with the UK rate at 3.8%.

The South West had the highest employment rate at 79.8% which compared with 74.3% in Scotland. UK employment was estimated at 76.3%.

Scotland’s average property prices increased by 0.4% during November 2019, the uplift to £154,798, increased annual growth to 3.5%. In comparison, UK prices increased by 0.4% to £235,298 an annual growth rate of 2.2%.

Away from the stats, a report by Audit Scotland says there is no clear way to measure the success of Scotland’s £5.2bn city deals. City region deals are collaborations between the UK and Scottish governments plus local councils and are designed to promote economic growth and create jobs. Deals have been agreed in Glasgow, Aberdeen, Inverness and Highland, and Edinburgh and south east Scotland plus another eight deals are in development.

The watchdog says the Scottish government has not outlined how it will measure the programme’s value for money and it found that it was not clear why some projects were approved for funding over others.

One way value for taxpayers’ money can be measured is via improvements in GDP, however, quality of life should be as important as economic growth, according to Scotland’s First Minister. She argued in a speech in Edinburgh that creating an economy where collective wellbeing is as fundamental as GDP.

Scotland has fallen five places from 16th to joint 21st in the latest Scottish Trends Index Of Social and Economic Wellbeing. The index uses OECD data from 2006 to 2018 based on a range of measures.

Scotland and Wales were the joint biggest fallers over the 12-year period whilst the biggest risers were Estonia and Poland. The report said the fall in Scotland was mainly due to declining GDP and education scores.  

On interventions, the Scottish National Investment Bank should be operational by the end of 2020. The state bank is designed to make long-term investments in Scottish firms over a period of 10 to 15 years.

The Scottish government committed £2bn of taxpayers’ money to fund the bank over the next decade after MSPs passed the necessary legislation. Whether there is sufficient market failure to warrant state intervention in business finance on this scale remains a moot point.

Also on interventions, semiconductor manufacturer Diodes Incorporated, which took over Texas Instrument’s Greenock site last year, is set to receive a £14m taxpayer inducement from Scottish Enterprise. The funds form part of a £47m investment in upgrading the site and training the 300-strong workforce. The company has also received funding from Inverclyde Council to assist with the development of the site.

Robert Burns is worth £203m pa to the Scottish economy according to a Glasgow University study. Burns-related tourism brings in c£155m, largely benefiting Ayrshire and Arran where the poet was born and lived most of his life.

The V&A Dundee had a £75m impact on the Scottish economy last year, according to research by the museum’s consultants. Of this, museum visitors alone were found to have been worth £21m to the Dundee economy.

On jobs, a £2m Business Growth Fund investment in the Livingston-based Window Supply Company, a window manufacturer and supplier, should see its workforce grow from 40 to 125 over the next three years.

TSB and Tesco Bank will each create 100 new technology jobs in Edinburgh. Tesco is recruiting software and systems engineers, systems architects, solution designers, project managers, and IT and business analysts. TSB has announced a new IT centre in Edinburgh as part of a £120m three-year plan announced in the wake of the bank’s 2018 IT failure.

Administrators say c100 jobs have been saved following the purchase of car sales company Leven Car Company in Edinburgh. Twenty three staff at the Borders branches of the firm were made redundant last week.

But in Dumfries, 44 staff have been made redundant by administrators after armoured vehicle firm Penman Engineering folded; 17 workers have been retained to assist the administration process. The company dates back to 1859 and specialises in armoured military and security vehicles.