Tax receipts and deficit affected by pandemic.
Scotland’s tax revenues continued to increase in 2019-20, although they were impacted by the initial effects of coronavirus (COVID-19).
Today’s Government Expenditure and Revenue Scotland (GERS) publication shows that overall revenues, including North Sea receipts, increased to a record £65.9 billion. Onshore revenues grew by £1.1 billion to reach £65.2 billion.
These increases came despite the pandemic depressing public finances. Corporation and VAT receipts fell compared to the previous year and both the Scottish and UK Governments increased spending to tackle the virus.
As a result of this, plus a rise in UK Government spending on reserved matters, Scotland’s notional onshore deficit – the difference between income and expenditure - rose 0.6 per cent to 9.4 per cent of GDP - the same rate of increase as the UK.
Adding North Sea revenues which totalled £724 million - £642 million less than in 2018-19 - the notional overall deficit stood at 8.6 per cent of GDP.
Finance Secretary Kate Forbes said the figures emphasised how COVID-19 had fundamentally changed the fiscal landscape.
Mr Forbes said:
“The Scottish Government has responded swiftly to the challenges of COVID-19 and has worked hard to protect Scotland’s economy, providing over £2.3 billion of support to businesses.
“The public finances were already facing challenges this year due to the uncertainty caused by Brexit. We are now witnessing an unprecedented health and economic crisis. Countries across the world, including the UK, have increased borrowing to record levels and, as we emerge from the pandemic, high fiscal deficits will inevitably be one of the consequences.
“That is why the UK Government should prioritise economic stimulus over austerity. I will also continue to press for the Scottish Government to be granted additional financial powers to enable us to tailor a response that meets Scotland’s needs.
“Scotland, unlike most other countries around the world, large and small, does not currently have the full financial powers needed to chart a way to sustainable recovery from the economic impact of the pandemic. The current situation, with the looming withdrawal of furlough support by the UK Government, means it is now more urgent than ever that we gain those powers.
“Despite the pandemic, and the economic problems that inevitably will arise at the end of the Brexit transition period, we are determined that Scotland should emerge with a stronger, fairer, greener, and more resilient economy. We continue to invest to protect and create jobs, support businesses and strengthen communities, but our ability to do that is constrained by our lack of borrowing powers.
“It is important to stress that 40 per cent of spending and 70 per cent of revenue income in GERS, combined with key powers over the economy, are reserved to the UK Government and outside the control of the Scottish Government.
“An independent Scotland would have the power to make different choices, with different economic budgetary results.”
The full statistical publication is available on online.
The aim of GERS is to enhance public understanding of fiscal issues in Scotland. The primary objective is to estimate a set of public sector accounts for Scotland through detailed analysis of official UK and Scottish Government finance statistics. The report is designed to allow users to understand and analyse Scotland’s fiscal position under different scenarios within the current constitutional framework.
GERS is a National Statistics publication, which means that it is produced independently of Scottish Ministers and has been assessed by the UK Statistics Authority as being produced in line with the Code of Practice for Official Statistics. This means the statistics have been found to meet user needs, to be methodologically sound, explained well and produced free of political interference.