The Scottish Government said on Wednesday that revenue generated for Scotland’s public services increased by £1.7 billion last year to £88.5 billion “driven by a strong labour market, progressive taxation and renewable energy.”

However, total spending for Scotland by the Scottish Government, UK Government and all other parts of the public sector increased to £111.2 billion “with additional funding for the NHS and Scottish Child Payment reflecting Scottish Government priorities of investing in public services and eradicating child poverty.”

The 2023-24 Government Expenditure & Revenue Scotland (GERS) statistics also show that Scotland’s onshore revenue grew faster than the rest of the UK’s.

This growth was partially offset by a decline of £4 billion in North Sea revenue.

Scotland’s notional fiscal deficit is estimated to have increased from £18 billion to £22.7 billion – or from 8.4% of Scottish national income to 10.4%.

According to the UK’s Office for National Statistics (ONS), only London and the South East of England have a positive fiscal position, with Scotland’s fiscal position better than most other parts of the UK.

Cabinet Secretary for Finance and Local Government Shona Robison said: “I welcome the fact that Scotland’s revenues grew last year, with those generated onshore growing faster than in the rest of the UK, thanks in part to our progressive approach to tax and the revenue from renewable energy.

“As the report makes clear, the notional deficit is not a reflection on the finances or policies of the Scottish Government – it is a reflection of UK Government choices.

“It is also important to emphasise that these figures reflect Scotland status as part of the UK.

“As figures from the Office for National Statistics show, the UK economic model is driven by London and the South East of England.

“The UK Government retains control of 40% of expenditure and over 70% of revenues in Scotland.

“Indeed, a significant portion of the spending allocated to Scotland relates to servicing UK Government debt, which is paid at a higher rate than our European neighbours.

“As an independent nation, we would have the powers to make different choices.

“As it is, we are using all the powers we do have to deliver our priorities of growing the economy, investing in net zero, eradicating child poverty and delivering strong public services.”

Internationally comparable figures from the UN’s A World of Debt Dashboard show that the UK government spent around 2.5% of GDP on general government debt interest payments in 2023, higher than Portugal (2.0%), Spain (1.9%), France (1.7%), and Belgium (1.5%).

Like the UK, all of these countries have general government debt of around 100% of GDP.

On the controversial GERS figures, the Scottish Government said the falling North Sea revenue led to an increase in the notional deficit on Scotland’s net fiscal balance, even as the performance of the onshore economy improved.

“The deficit on Scotland’s net fiscal balance has increased since last year, driven by falling North Sea revenue, which offset strong growth in income tax and onshore corporation tax,” said the Scottish Government.

“Spending has increased, driven by additional expenditure on health and social protection. Spending on reserved debt interest has fallen slightly and cost of living support payments have mostly ended.”

On the net fiscal balance — the difference between total revenue and total public sector expenditure including capital investmen  — for 2023-24, the Scottish Government said there was a deficit of 10.4% of GDP (£22.7 billion).

Scottish public sector revenue was estimated as £88.5 billion (8.1% of UK revenue). Of this, £4 billion was North Sea revenue. Scottish non-North Sea revenue was £84.6 billion (7.8% of UK revenue).

Non-North Sea revenue increased £5.7 billion in 2023-24 – an increase of 7.2%, with income tax and onshore corporation tax growing strongly.

Scotland’s illustrative geographical share of North Sea revenue was £4 billion in 2023-24, down from £7.9 billion in 2022-23, following falls in energy prices and production.

Total expenditure for Scotland by the Scottish Government, UK Government and all other parts of the public sector was £111.2 billion. Spending increased by £6.3 billion (6.0%), reflecting increases in spending on health and social protection.

REACTION:

David Phillips, Head of Devolved and Local Government Finance, UK’s Institute for Fiscal Studies: “Like nearly all economic statistics, GERS is subject to a degree of measurement error. The figures it contains are also backward- rather than forward-looking, and so do not, on their own, reflect how revenues and spending may evolve in future, or the different choices different governments could take.

“However, their status as National Statistics means they have been independently assessed as being based on sound methods and being produced free from political interference. And they are widely recognised as a sensible starting point for assessing the kind of fiscal challenges and opportunities that an independent Scotland would initially face – for example by the Fraser of Allander Institute, and the SNP’s Sustainable Growth Commission of 2016–18.

“2023–24 saw the fiscal position of the UK as a whole improve slightly as the cost of energy bills support (such as the energy price guarantee capping average bills for households at £2,500 per year) fell from £28 billion to £4 billion. Debt interest payments also declined slightly.

“As a result of this, UK government borrowing declined from £128 billion in 2022–23 to £122 billion in 2023–24 – or from 5.0% of national income to 4.5%.

“However, if it were not for the reduction in the cost of energy bills support, UK government borrowing would have increased both in cash terms and (slightly) as a share of national income last year.

“In contrast, GERS shows that Scotland’s notional fiscal position weakened in 2023–24. This is because lower oil and especially gas prices that reduced the cost of support for households’ and businesses’ energy bills also reduced tax revenues from oil and gas production in the North Sea.

“These revenues halved from £9.9 billion to £4.9 billion. GERS estimates that around 80% of this revenue came from activities in Scottish waters. In contrast, Scotland’s share of the benefit from reduced spending on energy bills support and debt interest was close to its population share (8%).

“The disproportionate impact of the reduction in North Sea revenues on Scotland means that its notional fiscal deficit is estimated to have increased from £18.0 billion to £22.7 billion – or from 8.4% of Scottish national income to 10.4%.

“This deficit is substantially higher than the figure for the UK as a whole, with estimated borrowing per person being £2,357 higher than the figure for the UK as a whole (£4,164 versus £1,807) …

“While it was the decline in North Sea revenues that pushed up Scotland’s notional deficit relative to that of the UK as a whole in 2023–24, other factors explain the relatively high level of Scotland’s notional deficit.

“The main reason why Scotland’s notional fiscal deficit is larger than that of the UK as a whole is higher public spending: overall government spending in 2023–24 is estimated to have been £2,417 (13%) higher for Scotland (£20,418) than for the UK as a whole (£18,001).

“Most of this difference is due to the much higher levels of funding the Scottish Government receives to pay for devolved public services than is spent on comparable services in England.

“Scotland’s higher notional fiscal deficit also partly reflects lower onshore tax revenues (£15,527 per person versus £16,121 in the UK as a whole). But this is a much smaller factor than in the fiscal deficits of Northern Ireland, Wales, and the Midlands and North of England – as we have previously highlighted.

“Offsetting the higher spending and lower onshore revenues is much higher oil and gas revenues – estimated at £727 per person, compared to £73 per person across the UK as a whole. This reflects the fact that, as mentioned above, the vast majority of oil and gas revenues relate to activity off the northern and eastern coasts of Scotland …

“The deficit in any given year matters less than the long-run picture … as part of the UK, Scotland’s notional fiscal deficit is subsumed within the wider UK fiscal deficit. It is the responsibility of the UK government to borrow to fund this, not the Scottish Government. Under independence, that would change.

“The Scottish Government’s Medium-Term Financial Strategy (and our analysis of that report and Scotland’s longer-term funding outlook) show that Scotland faces tricky decisions on tax and spending within the Union.

“These GERS-based projections remind us that independence would be no panacea for this issue. Indeed, Scotland’s much larger notional fiscal deficit means that unless North Sea revenues rebounded or economic growth and hence onshore tax revenues were boosted, tax rises or spending cuts would need to be even larger in the years ahead in an independent Scotland.

“Faster growth is possible. And Scotland has previously experienced periods where growth in employment, earnings and the economy as a whole has consistently outpaced that of the UK as a whole – during the 2000s, for example, as our report last year highlighted – and could do so again in future, especially if longstanding issues with productivity and skills were tackled better in Scotland than in the rest of the UK …”