Stephen Daisley Stephen Daisley

The economic case for the Union isn’t enough

(Getty images)

There is a certain kind of critic of independence who hears the news that public funding for Scotland is 30 per cent higher than for England and sits back thinking: ‘Job done’. The latest analysis from the Institute for Fiscal Studies does indeed confirm that the Union is a bargain for Scotland. It finds that, while real-terms resource funding for the Scottish Government is two per cent lower per capita than in 2010 (the beginning of the Tories’ austerity experiment), the spending drop is lower north of the border than in England. Scotland gets more than £1.30 per person for public services for every £1 spent in England.

Almost all of that, the IFS tells us, ‘is explained by relatively high levels of funding from the UK government via the Barnett formula’ while net revenues from Holyrood-collected taxes ‘make only a marginal contribution’. Their economists say ‘Scotland’s underlying income tax base has performed relatively poorly compared to the rest of the UK since the devolution of income tax powers, reflecting slightly weaker economic growth’. Thus, although SNP income tax rates are expected to raise £456m, the Scottish Government will gain only £117m in funding thanks to the devolution of income tax.

The especially high level of support Rishi Sunak has given Scotland to fight Covid-19 — almost £10bn so far — means ‘the Scottish Government will almost certainly receive more funding per person to address Covid-19 over these two years than is spent in England’. However, since the SNP administration has chosen to use some of this money to fund non-Covid priorities (free school meals, bus passes, public sector pay rises), Scotland’s budget will be under greater pressure once the extra Covid cash comes to an end. If the Nationalists do the same with future Barnett consequentials (additional spending for Scotland triggered by spending in England), the IFS forecasts Holyrood will have to raise taxes or cut public spending.

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