Scotland in £12.6bn ‘black hole’ despite North Sea tax receipts

Scotland had a £12.6bn deficit last year despite more than £1.4billion in North Sea receipts, according to new tax and spending figures.

The Government Expenditure and Revenue Scotland (GERS) report has been published for 2018-19.

Scotland’s net fiscal position, including North Sea taxes, was a £12.6bn loss – about 7% of gross domestic product (GDP) – but that shortfall has dropped by £1.1bn compared to 2017’s figures (8%).

This compares to the UK’s deficit of 1.1% of GDP.

Political opponents described the shortfall as a “black hole” at the centre of the country’s finances.

However, the Scottish Government pointed to “record” onshore revenues which increased by £3bn to £61.2bn.

Scotland’s illustrative geographic share of North Sea revenues was £1.43bn, £4million higher than last year, which is 115% of total UK revenues of £1.24bn.

The report’s authors said this reflects the fact that Scotland’s share of petroleum revenue tax, which is currently negative, is lower than its share of the more lucrative North Sea corporation tax.

In the previous year, Scotland’s share of offshore revenues increased by more than £1billion off the back of a surge in oil and gas production which was described as a “striking transformation” for the industry.

Figures for 2018 noted there was an overall increase in North Sea production, with strong output from established fields, as well as new production from BP’s huge Clair Ridge project west of Shetland, which began in November.

Crude oil and natural gas liquid production increased 10.3%, but annual gas production dropped by 3.6%.

Without North Sea revenues, Scotland’s deficit would be even wider at £14bn, 8.5% of GDP.

The UK Government’s Scottish Secretary Alister Jack said: “Today’s GERS figures show clearly how Scotland benefits from being part of a strong UK with every man, woman and child in Scotland receiving a ‘Union dividend’ of nearly £2,000 a year.

“These Scottish Government figures also show there would be a £12.6 billion black hole at the centre of an independent Scotland’s finances. Real questions need to be asked about the First Minister’s stewardship of the country’s economy.”

In response, Scottish Finance Secretary Derek Mackay said Scotland’s “strong performance” was threatened by the risk of a no-deal Brexit.

He added: “With record tax revenues, strong economic growth and near record low unemployment, Scotland’s economy and public finances are strong.

“Today’s figures show overall revenue in Scotland reached £62.7 billion – exceeding £60 billion for the first time – reflecting the strength of our economy.

“Our notional deficit has fallen while public spending has increased thanks to our efforts to grow the onshore economy and the strong performance of taxes in Scotland. The Scottish Government’s choices on taxation are helping to create a more progressive tax system.

“A ‘no deal’ Brexit could reduce revenues in Scotland by around £2.5 billion a year, holding Scotland back and demonstrating why people in Scotland increasingly recognise the importance of making our own decisions.”

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