Scotland: Spoiled, broke and angry

The Scottish National Party is staging its annual conference this week amidst renewed calls for a 2nd Scottish independence referendum. Nicola Sturgeon is of the opinion that if the Westminster government leads the UK down the road of a ‘hard’ Brexit, the right thing to do to ‘protect’ Scotland is to campaign for independence and retain EU membership by seceding before the British exit from the EU is effectuated.

But, as research published by The Taxpayers’ Alliance shows, Scotland has a few issues with its public finances. In fact, it is far from being able to live up to the EU’s (often abused) 3% deficit ceiling. And the problem is not only down to the low oil price, but largely down to good old-fashioned overspending. Scotland has run a deficit every year since devolution in 1999, and though that hardly sets them apart from the UK as a whole, public spending in Scotland is 20% higher per capita than in England. Taking account of estimated oil revenues, the public deficit was a whopping 9.5% in 2015-16, outdoing even Greece. A fiercely left wing electorate is unlikely to look kindly at any remedies besides confiscatory taxes on the wealthy, but as the UK’s flirtation with 50% marginal tax showed, these kind of policies are at best revenue neutral. Only taxes on the middle classes can make up the shortfall. The TPA calculates that the basic rate of income tax would have to rise from 20% to 39% to even make it to the 3% EU deficit target.

The oil price may rise, but it is not the saviour it was once proclaimed to be. In the last 5 years, Scottish oil revenues have fallen by no less than 99%, due to a combination of falling prices, reduced output and increased production costs.

The SNP may not like it, but Scotland is like a spoiled teenager, screaming at his parents while happily spending his pocket money. The Scottish economy illustrates once again what happens when spending decisions are left to people who do not pick up the bill: from education to pensioners to prescriptions, the Scottish government is more generous than the English. The latest example is incredibly a proposed  ‘baby-box’, a gift to new parents with clothes, nappies and other goodies. The English taxpayers, via the so-called Barnett formula, pay for the generosity to the tune of GBP 1600 per Scottish citizen. Scotland has had since devolution in 1999 to prove that it can stand on its own two feet. It hasn’t passed the test. Nicola Sturgeon has no intention on reining in public spending, quite the opposite, and so is a far greater threat to future Scottish prosperity than Brexit will ever be.

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