The Staggers

The New Statesman’s rolling politics blog

Enough of the Scottish subsidy myth 　

Scotland pays its way in the Union - it's time the London commentariat acknowledged that.

By James Maxwell Published 06 November 2011 10:05

The notion that Scottish public services are subsidised by English taxpayers has become so commonplace in UK politics that not even David Dimbleby, the supposedly neutral presenter of BBC Question Time, thinks twice about repeating it. During an exchange on a recent show with Liberal Democrat Jo Swinson about her decision to vote as a Scottish MP to impose tuition fees on English students, Dimbleby said, "You voted for England to have fees, whereas Scotland, as we know, with the amount of money that comes from England, doesn't need to have them."
　
This view is based on the discrepancy between levels of public spending per head of the population in Scotland and England. According to the Treasury's latest Public Expenditure Statistics, Scots gets an average of £10,212 spent on them every year by the UK government, compared with around £8,588 -- £1,624 less -- for people in England.

In line with narrative of the Scottish welfare subsidy, the extra cash allows Scotland to provide its students with free higher education, its elderly with free personal care and concessionary travel, and its sick with free prescription medication, while their English equivalents are forced to go without.
　
This so-called "Union dividend" is also used by many London-based journalists and politicians -- many of whom would describe themselves as social democrats -- who argue that current levels of public expenditure in Scotland would be unsustainable were it to break away and become an independent country.
　
Yet, if the London commentariat took the time to examine the figures a little more closely, they would discover what a large number people north of the border already know: not only does Scotland more than pay its way in the Union, but its overall fiscal position would actually be stronger as a fully sovereign nation.
　
Let's tackle the subsidy charge first. Scots represent 8.4 per cent of the UK's total population, but they generate 9.4 per cent of its annual revenues in tax -- equivalent to £1,000 extra per person. The remaining £624 is easily accounted for by decades of UK government under-spending in Scotland on defence and on other items which are not routinely broken down by region, such as foreign office services.
　
Second, there's the claim that Scotland's "bloated" welfare state could not be sustained outside the Union. This is nonsense. Including its per capita share of revenues from North Sea oil and gas production, Scotland's public expenditure probably does not exceed the OECD average and is almost certainly lower than that of the Scandinavian social democracies. The fact that the Treasury cynically refuses to class those revenues as part of Scotland's overall annual economic output inflates the level of public sector expenditure as a proportion of GDP relative to that of the private sector.
　
Finally, one of the most common -- and least well-considered -- claims made by supporters of the Union is that the 2008 global financial meltdown shattered the economic case for independence. How, they argue, would the economy of tiny, independent Scotland have been able to cope with the burden of debt needed to rescue its financial sector from collapse? It wouldn't, of course, but according to George Walker, professor of financial regulation and policy at the University of Glasgow, Scotland would only have had to take on a proportion of the total cost of the bail-out based on the subsidiaries and business operations of HBOS and RBS in Scotland. This would probably amount to no more than 5 per cent.
　
For the sake of argument, nationalists might also wish to note that Scotland's 2009 - 2010 deficit was, at 6.8 per cent of GDP, a full 3 per cent lower than England's, and that the likely defence expenditure of an independent Scotland would, at around $1.8bn per year in line with Nordic average, be roughly £1bn less than what the UK currently spends on its behalf.
　
But why should Unionists let the economic facts ruin the image they have built up of Scotland as a nation of selfish, indulged welfare "mendicants"?The subsidy myth is too politically useful to be simply abandoned. Of course, if they ever do come to terms with the reality that Scotland could survive on its own - and even prosper - it will probably be too late anyway.

Tags: Scotland

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121 comments

Thu, 2012-10-11 14:47 — BernieBBBB (not verified)

It would be a shame to have a complete split - I'm Scottish and lived in England for a long time and love both countries but don't like the way things are going.
I'd rather the UK pull out of Europe and England, Scotland, Wales and NI work together to make the UK great.

Sun, 2012-07-29 08:01 — rgkpeat (not verified)

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Thu, 2012-07-05 01:20 — vddfawm (not verified)

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Mon, 2012-06-25 13:40 — Nick Donnelly (not verified)

You can't include oil in this - that will run out - we're talking about long term sustainability.

You almost had me until you included that. Can we have an objective view please, someone?

A far more balanced piece by the BBC:
http://www.bbc.co.uk/news/business-16477990

Sun, 2012-07-22 23:28 — E Robertson (not verified)

Oh theres plenty, plenty as well as our tourism, fishing industries, whisky among many other things that will generate wealth in an Independent Scotland. Both our main cities Edinburgh and Glasgow generate such a lot. You really,really need to check out far more about Scotland and not believe the openly biased BBC. They are well known for not writing pieces with regards to Scotland as gospel....they tend to stretch the truth in favour of making Scotland look bad. We Scots have the side of truth, anyone south of the border gets a skewered version of the truth from BBC or English Tory papers.

Tue, 2012-10-02 16:21 — LeonSphinx (not verified)

You do realise Scotland is also basing its economic predictions on having the UK as its main export base?

Please, please, please maintain this anti-English rhetoric and watch as a population of 53 million refuse to buy anything Scottish.

It may surprise you, but the majority of English have no care what Scotland does. Your bigotry and hatred is beginning to portray you as the silly little man with a Napoleon complex.

P.S. Try asking Salmond what currency an independent Sctoland will adopt. If he says the Sterling, ask him what growth and stability pact he'll be forced to sign with Westminster. If he says the Euro, ask him what sovereign powers he'll need to hand over to the ECB in Frankfurt to ensure another Euro crisis doesn't happen. If he says you'll have your own currency, sit back and watch as businesses transfer their base to other parts of the UK in order to benefit from the BoE's lender of last resort policy with regards to the sterling currency.

You guys are talking about being economically superior, yet you don't even know what currency you'll be using. If you don't know what currency you'll be using, how the hell do you know the ramifications of voting 'yes' in the referendum?

Mon, 2012-10-29 09:34 — David Berry (not verified)

Only the English come up with the phrase "anti English rhetoric" to justify their argument. From my friends south of the border all I hear is scaremongering and threats of what England can do to Scotland which is surprising from a nation which claims it does not concern itself with what Scotland does.
I have not met a Scot yet who believes things will necessarily be better under independence and there is no widespread hatred of the English or any other nationalities for that matter. However, if the emails I read are a reflection of English opinion, then, to be fair to everyone, the partnership should be dissolved.
The Scots, if subsidised, do not wish to be subsidised by England. Why should they be scolded for taking the bold step towards relieving England of that perceived burden which is continually aired in Westminster and the English media.

Mon, 2012-06-25 13:40 — Nick Donnelly (not verified)

You can't include oil in this - that will run out - we're talking about long term sustainability.

You almost had me until you included that. Can we have an objective view please, someone?

A far more balanced piece by the BBC:
http://www.bbc.co.uk/news/business-16477990

Mon, 2012-06-25 13:40 — Nick Donnelly (not verified)

You can't include oil in this - that will run out - we're talking about long term sustainability.

You almost had me until you included that. Can we have an objective view please, someone?

A far more balanced piece by the BBC:
http://www.bbc.co.uk/news/business-16477990

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Thu, 2012-11-29 14:41 — Zorro (not verified)

Flashbuck does what exactly ?
Make a complete fool of himself - that's what !
Why did the US Fed have to stump up billions as its share of the RBS bail-out ?
Because every country is responsible for the proportion of losses incurred commensurate with the proportion of the bank's business conducted in said country.
SO... RBS bailout funding from an independent Scotland would have been of the order of 10% with much of the remainder coming from the rUK central bank (currently mis-named the Bank of England) because that's where the bulk of its business is conducted.
AND.. incidentally where the losses originated (in the City of London by so-called investment bankers - in reality mere gamblers)

What a clown you are to be sure.

Sun, 2012-10-21 16:53 — Molesworth (not verified)

How insulting! I'm a Londoner but I'm certainly not a tory. This view is as outdated as the notion that northerners all wear flat caps and own whippets. Yes, sadly we have a tory mayor but even so, his votes mostly came from the suburbs, not from London proper.

Scotland, if you want to go it alone, that's up to you. As for anti- English rhetoric, it would ring true if the rest of the world, and thousands of Scots, weren't so keen to live and work in London.

Now I must dash as the butler's just finished polishing the chihuahua.

Sun, 2012-07-22 23:43 — E Robertson (not verified)

I am one such one........over 30 years voting Labour loyally as a member for many of them and working with the party at elections. I was very disillusioned at who they had become and came to conclusion they were as corrupt as Tories but the only difference was they pretended to be the good guys whereas the tories didn't bother making out they were. I was a unionist all those years but though I left Labour I sat on fence and thas where I read up a lot on Snp and Independence and was ashamed that I had not realised that there was one party that gave a damn about Scotland and that was SNP yet I had disliked Salmond for no reason other than he was leader of SNP. I worry that many others who still have the wool pulled over their eyes by Labour will miss the chance for us to be Independent and if they do what I did.........read up the McCrone Report to start then all the other real pieces outwith the biased media. You will soon see that Independence is very much viable and do-able and the sense of freedom will be wonderful We Scots are a different culture, a different nature and can and will dictate our future. Independence is not a party choice but a choice of Yes or No to Independence then its up to us to chose the party if one party is not doing what it says it will. Labour I hope would be reborn again,get rid of these treachorous Scot Labours like Jim Murphy, Douglas Alexander, Alistair Darling and Johann Lamont. The men know they'd lose their jobs at Westminster so thats where their loyalties are to....not the Scots. As for Lamont, she is like the bully in the playground and not a leader Scots deserve in Scottish Labour. A clean slate, a new Labour and id SNP does what they say then they win,at an election after Independence..if they don't then we vote in someone else.

Sun, 2012-07-22 23:33 — E Robertson (not verified)

Why dont you get of your lazy butt and go check to see that RBS is not owned by Scots, its been a long time since it was a solely Scottish owned bank. It is a UK bank....go check out wikepedia to be educated. So laugh all you want....we neither own RoyalBank Scotland nor Scotland Yard and our government has taken into consideration our part of paying what s owed to the UK Gov who bailed out this UK bank.

Sun, 2012-07-22 23:32 — E Robertson (not verified)

Mon, 2012-07-02 09:53 — willei789 (not verified)

Your navy will have to do the defending OUTSIDE territorial waters matey, or our nuke subs from faslane will eat them up for breakfast.

Mon, 2012-07-02 09:43 — willei789 (not verified)

The BRITISH government, with BRITISH taxes that the scots pay same as the rest of UK, as well as having all the oil revenue taken, why is it the small minded english seem to think all the money belongs to them, your not all bankers are you, (and yes i did spell it right, bankers)

Thu, 2012-05-03 00:38 — Canny Scot (not verified)

But if Scotland ends up with leaders the population does not like they can vote them out, unlike the present situation.

Tue, 2011-11-08 14:20 — Simon Hayter (not verified)

This is a great example of how the SNP's arguement has been put down for decades and because 99.9% of the media refused to even mention the word independence, not many believed it. Now the people of Scotland have had enough of being used as the personal piggy bank of England and they now want financial independence from Westminister. The Unionist parties need to accept that Scotland is a wealth nation and we will take back what is ours. They have to stop talking Scotland down as they have done for decades and decades or let us go it on our own. One wil or another we will be come the referendum.

Mon, 2011-11-07 02:06 — Flashbuck (not verified)

So who bailed out The Royal Bank of Scotland?

RBS cost billions to save, but you don't mention that in your ridiculous blog.

Flashbuck does it again! HaHaHa - busted!

Wed, 2011-11-09 15:27 — FA

"George Walker, professor of financial regulation and policy at the University of Glasgow, Scotland would only have had to take on a proportion of the total cost of the bail-out based on the subsidiaries and business operations of HBOS and RBS in Scotland"

LOL! Nice try. George is far from right on this point. And if Scotland wants to become independent it should take RBS with it.

Mon, 2011-11-07 07:54 — Stuart Eels (not verified)

Des Demona

Juststop calling the bloke English Dave all his grandparents are Scottish, you wouldn't call Alex salmond English Alex would you?

Wed, 2011-11-09 16:18 — Suzanne (not verified)

Scottish independence really has got nothing to do with dislike for the English or anything of the sort. From my perspective I believe the current UK political system to be rotten to the core and that the best way forward is for Scotland is to have a clear out and start again.
Now that is nothing to do with a dislike for any nationality but more to do with the current system and how badly it is infested with vested interests and people who are either unwilling or unable to govern in the true interests of the people. If independence were achieved I and most others know it's only the start and not the be all and end all.
In my opinion English people are also short changed but not by some benevolent favouring of Scotland but rather a corrupt, despicable political class.
Independence for me is about a fresh start as it could be for England if they so wished. The constant harping on about Blair being Scottish is particularly irritating though. The nationality thing is a red herring as it distracts from the issue of our politicians not having the best interests of ordinary people at heart.
Just an aside I have never met any other Scot with the same accent as Tony Blair. His nationality is ambiguous at best if it were important.

Fri, 2011-11-11 11:43 — TM (not verified)

Please refrain from confusing the North with the South in calling England a right-wing Tory nation. Tories are equally disliked in the vast majority of the North as in Scotland - while voting Tory is more acceptable in the North than Scotland, they are nevertheless the party of the Southern, English middle-classes only.

Mon, 2011-11-07 12:43 — PikeyMikey (not verified)

I wonder what they would call their currency?

Fri, 2011-11-11 11:49 — Drew Edward (not verified)

@PikeyMikey, The SNP's stance on Europe since the 1980s has been Independence within the EU. Many commentators and legal experts are currently questioning whether this would be automatic.

My own view with the current issues in the EU is that I would favour a looser arrangement within say EFTA, than a fuller EU intergration. But I'm fairly relaxed about the whole thing. The current crisis has shown that inside of the Eurozone, outside or even outwith the EU, any crisis has a knock on affect over the globe in some capacity, it is unavoidable in a globalised world. My main priority is independence would mean hopefully withdrawing from NATO and the UN Permanent Security Council as this is where you have to spend billions on nuclear weapons and get dragged into illegal wars, costing lives and resources.

Tue, 2011-11-08 16:36 — Drew Edward (not verified)

PikeyMikey, my view is most people in Scotland cetainly no longer fear independence and many are curious as to what it would mean. I know life long Labour voters who voted SNP for the first time in May and are now asking, 'OK, show us what independence would look like'. Most are reasonably asking if Scotland is so poor and a burden to English taxpayers, why are the Westminster elites so desperate to hang on to us? Scots are cautious of change and far too canny in my view to believe the bluff of any politician, Salmond or Westminster. So devolution was the first test and despite what the media said the sky didn't fall in. So devo max may be the next step.

I have always thought like devolution, the independence referendum will take 2 attempts. Irish independence took the creation of the Irish free state 25 years or so before the Republic of Ireland was created albeit in more tragic circumstances. I'm impatient however, and if Westminster and the media blundering into a debate they don't really understand fully helps speed up the process then I'm all for it.

For me, the case is simple. Westminster has to manage the wants and desires of four nations. I want Scotland to be top priority every time in every decision and in the current system that can never be the case.

The thing that should send alarm bells ringing for the unionists is in the closing days of the May elections, the Labour leader Iain Gray stated 'a vote for the SNP was a vote for seperation'. The result was a majority vote in favour of the SNP. So either the voters didn't hear Gray, didn't understand him, didn't fear what he said, or they want seperation. Time will tell.

Thu, 2011-11-10 16:32 — T Max (not verified)

"I have the figures but I would like to see what you come up with"

Yeah right. If you really had the figures, and they proved you right, you would be happy to post them.

Mon, 2011-11-07 13:59 — Drew Edward (not verified)

I find the 'Scottish subsidy' articles in the media pretty useful as someone who supports independence. I'd be a bit concerned if they ever stopped getting trotted out. I know plenty of people who have started voting SNP who would have never considered it in the past and that can't all be down to Labour's problems. If I were the SNP I would pay big bucks for the commentators in the London media to come up and do speaking tours of Scotland. Jeremy Paxman, David Dimbleby, Kelvin Mackenzie, David Starkey and Boris Johnston are worth 100 Alex Salmonds in terms of the potential of pursuading non SNP voters about the merits of independence.

Mon, 2011-11-07 14:20 — PikeyMikey (not verified)

@Drew Edward, so what you're saying is that the SNP's argument for independence isn't attractive enough to gain mass support on it's own merrits

Sat, 2012-01-21 10:39 — Stuart Eels (not verified)

Aethlstan The Mighty

Love the name, the King who finally united this the oldest Kindom in Europe, pity we still haven't got our Parliament like the rest of the Western World.

The reason they don't want to give us the English a Parliament is that it will end their gravytrain, what need of a massive UK Parliament with fao too many backbenchers even now.

Wed, 2011-11-09 18:20 — douglas clark

I am with Suzanne on this. The current political system is corrupt. I have absolutely no dislke of English people though the ease with which English regions particularily in the North are content to subsidise London does astonish me somewhat. The arguements are not about nationality, they are about taking control of our own destiny.

Tue, 2011-11-08 17:14 — sonzhou12

@Gallach
I make it Tory majority of 42 in 2010 (for E&W)
CON: 298 in England,8 in Wales = 306
LAB: 191 in England,26 in Wales = 217
LD: 43 in England,3 in Wales = 46
GREENS: 1 in England
So...
Opposition: 264
Tory Govt: 306 = majority of 42

Wed, 2011-11-09 18:33 — PikeyMikey (not verified)

@Suzanne
@douglas clark
Would you envisage an independent Scotland joining the EU?

Tue, 2011-11-08 17:20 — BigK (not verified)

What the article boils down to is Scottish independence is financially viable if it gets custody of the north sea oil and gas revenues. I think we already knew that. In any divorce of the union that would be the biggest issue.

Mon, 2012-01-02 13:55 — Hal (not verified)

Yes, I think the Scottish Nationalists think they can take the UK's oil resources but expect the rest of the UK to maintain a navy to defend it for them.

Well, that's no deal. They'll have to come up with a more attractive offer if the rest of the UK is going to agree.

Wed, 2011-11-09 19:00 — Suzanne (not verified)

@PikeyMikey Probably yes. The EU isn't perfect, has plenty of problems burr can also bring certain benefits in terms of commerce. I believe the SNPs formal position is that they would seek EU membership.
As it happens, alot of the regulation around employment law and Human Rights that seems so offensive to certain sections of the media I happen to agree with though I accept there are serious issues about how it works.

Tue, 2011-11-08 17:36 — Stuart Eels (not verified)

Just hurry up and do it I'm sick of all the anti-English comments on here your chip on shoulders widen to make up for your lack of brain power.

Home Rule for England!

Thu, 2011-11-10 17:38 — Suzanne (not verified)

Ask yourself one question T Max. Why on earth would people like David Cameron be so keen for Scotland to stay part of the UK if it were really a drain on resources?

Wed, 2011-11-09 19:09 — Libby Smith (not verified)

People in England would rather lose Scotland from the Union.

People like myself in Scotland would rather stay in the Union.

These two simple facts tell you everything you need to know about the dire state of our Scottish society.

Also, most of the gas is legitimately England's to do with what it will as it is in its line of sight, as per accepted international guidelines.

Fri, 2011-11-11 14:00 — Suzanne (not verified)

Did someone say that? Not sure I caught that. If it's cards on the table time I'll be honest and say I absolutely despise right wing politics and Scottish independence seems the best way to ensure it's influence is drastically curtailed in Scotland. That's my main reason for wanting independence.
That said, that doesn't mean that I don't know that there is plenty of progressives in England who hold similar views to my own. From a pragmatic point view it just seems like the best way forward then eventually there will be end to arguments about who subsidises who.

Mon, 2011-11-07 18:04 — Flashbuck (not verified)

The best way for Scotland to get their so-called independence is by making sure the English also have a vote in the referendum. When that happens it'll be good riddance and hasta la vista Scotland for sure!

Tue, 2011-11-08 18:17 — Marbles McMoon (not verified)

@Chrisso "I make it Tory majority of 42 in 2010 (for E&W)"

If Scotland becomes independent, the UK would still have Northern Ireland. I haven't done the sums myself, but you have to take that into consideration for Westminster majority purposes.

Wed, 2012-02-29 00:02 — AlFee

Apologies, I'm late.
Subsidies ? The Treasury releases public spending figures, per capita, region x region x country annually. Last figures I have are for 2009/10.
Every Scottish resident (5.2 million) received £10,400.
Every Londoner (8 million)got £10,655
Who's the 'subsidy junkie' ?
People in the English regions should be asking why London - the wealthiest region in the UK, gets more than anyone else on the Mainland. £1,000 more than those in the NW (£9,657), £2,300 more than the SW (£8,310), and £2,400 more than the E Midlands (£8,283).
Now you know why the London media ALWAYS use the distilled 'England v Scotland' figures.
http://www.hm-treasury.gov.uk/d/pesa_2011_chapter9pdf
Table 9.4 for the full table.

Mon, 2011-11-07 19:06 — Suzanne (not verified)

We'll see in a few years. In a round about way Drew was saying the sight of reactionary establishment figures like the above spouting nonsense about the issue actually does alot of good for the independence cause.
Judging by the tone of your posts I would imagine you would be quite pleased. The status quo is unsustainable as England and Scotland seem to want very different politics.

Thu, 2011-11-10 19:12 — Hmm (not verified)

I'm tired of this debate. Scotland will initially deflate, and eventually collapse when it leaves the Union. The numbers cited don't matter, because they will change substantially.
It will also be bad for the Union, so anti-Scottish comments are equally as foolish. No good will come of this.

Wed, 2012-02-29 00:12 — AlFee

In addition, a few weeks ago in the Commons, David Mowat MP asked about Osborne's proposed Capital Spending budget of £30 BILLION.
He'd looked at the detail and the plans, and discovered that 84% of that £30 billion had been earmarked for capital projects in London and the SE (the richest and second richest regions), with London getting around 70%.
He stated that every one of London's 8 million residents would be getting the equivalent of an additional £2,700 each for capital projects, while people living in the NW would each get £134, and those in the NE a fiver(check Hansard).
Something wrong there..... especially the deafening silence from the London media - again.