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On the 18th of September 2014 the Scottish people will vote in a Referendum. The question:

"Should Scotland be an independent country?"

As you might expect the magnitude of this event has dredged up a whole load of wild claims from both sides of the argument. One of the most common is the question of tax revenue vs public funding.

The claim is that the percentage of all UK public spending that goes to Scotland is greater than the percentage of all UK tax revenue that Scotland contributes. And therefore the rest of the UK would have more money if Scotland were to become independent.

This claim can be seen all over the comments section of any BBC news article on the issue. Along with people claiming the opposite.

Oddthinking
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Ian
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2 Answers2

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The BBC's Economics Editor, Stephanie Flanders, summarised the situation in January.

Her article makes several points:

  • Yes, the coarse claim is correct:

Scotland 'got' £16.5bn more in UK public spending in 2009-10 than it contributed to total UK revenues - or a 'subsidy' of around £3,150 per head.

This is in line with a number of factors that give Scotland greater spending needs.

  • However, citizens in the whole of the UK, not just Scotland, are also being subsidised to a slightly smaller extent. The money is coming from the Budget Deficit.

Namely, that Scotland is not the only part of the UK that is currently spending more than it raises in revenues.

If you apply the same kind calculation to the UK as a whole, the net 'subsidy' for the average person was well over £2,000 last year.

  • Also, these figures ignore the North Sea oil, which is not normally considered part of Scotland's contribution. If this were challenged and assigned based on geography, the Scotland would be contributing more income to the UK Government than it spends.
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Oddthinking
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    Is there some cite for North Sea Oil paragraph? That seems to be the linchpin. – user5341 Mar 21 '13 at 21:00
  • @DVK: it is from the same article. I could excerpt another quote. Or are you (fairly) objecting to me quoting an authority who provides no references? – Oddthinking Mar 21 '13 at 21:08
  • counting oil rigs within the ADIZ of Scotland as compared to the entire UK would give a decent estimate of the percentage of UK crude production that should/would be taken as contributed to the UK GNP by Scotland. – jwenting Mar 22 '13 at 07:49
  • @Oddthinking - I didn't notice the article providing sources for that statement but could be wrong. If it does, you should cite them, if not, you shouldn't necessarily rely on that article for that point (and as I said, it seems the most crucial in the whole discussion) – user5341 Mar 22 '13 at 17:26
  • @DVK: I agree with you. I wrote this late at night and when I saw your first comment in the morning I could see the flaw. I need more references. – Oddthinking Mar 22 '13 at 22:23
  • Its interesting to come back to this answer several years on, as the North Sea oil argument is an interesting one - UK North Sea revenues collapsed to nearly nothing in 2015 have remained much lower than pre-2015 figures since, and yet Scottish expenditure remained the same. The SNP based most of its independent-Scotland budget on oil and gas revenues and would have been left in an 'interesting' position had they won the referendum in 2014. – Moo Jul 08 '19 at 01:22
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the percentage of all UK public spending that goes to Scotland is greater than the percentage of all UK tax revenue that Scotland contributes.

In the Barnett Formula

"no account is made of the amounts raised by taxation in each of the home nations"

So it is true that public funding is not proportionate to tax revenue. It was never intended to be.

However this question grossly oversimplifies a very complex situation and is likely to solicit debate, arguments and continued discussion.

RedGrittyBrick
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    "likely to solicit debate, arguments and continued discussion" which is exactly what happens. Hoping for an answer that explains why the claim is flawed and elaborates on some of the complexities. – Ian Mar 21 '13 at 15:43