Government spending in Scotland

The highly respected Institute of Fiscal Studies has produced a useful briefing on public spending in Scotland.

If we ignore the spin both sides of the referendum campaign have put on the report, it does give us a better understanding of Scotland's financial position. Some of the key points include:

Government spending in Scotland is around 9.3% of government spending in the UK, substantially higher than Scotland’s 8.4% share of the UK population. This means that spending per person in Scotland (£12,629) was 11% higher than for the UK as a whole (£11,381).

Spending as a proportion of GDP in the UK is 45.5%. Scotland ranges from 50.6% down to 42.7%, depending on how you allocate North Sea oil revenues. While this shows that Scotland more than pays its way in the UK - Scotland is also very sensitive to the level of economic output generated in the North Sea, which does vary significantly over time. The report highlights the OBR projections of falling oil revenue and a consequential £5.9bn 'black hole', equivalent to a 15% spending cut. However, oil revenue projections are notoriously unpredictable.

Household income in Scotland is a little (4%) above the UK average, but with wide variations between high and low income areas.

Spending on public services was £7,932 per person in Scotland, 16.6% (£1,128) higher than the £6,803 spent on average across the UK. In contrast, spending on benefits and tax credits was only a little higher per person. The higher spending is largely on devolved services. Revenue spending is 12.5% higher than the UK as a whole, whilst capital is 48.2% higher. This reinforces the point we were making to the Economy Committee this week on the risks of shifting revenue to capital.

There are significant differences in spending patterns in Scotland compared to the rest of the UK. We spend twice as much on agriculture and three times as much on enterprise and development. Ten years ago the pattern of spending was similar and this reflects different spending priorities in Scotland. Health and education have had smaller than average increases.

Since the introduction of austerity in 2010, Scottish cuts have been in similar areas to the rest of the UK. One exception is spending on housing and development.

Overall, a very useful study.