Scotland is facing a £26.5 billion black hole

Spectator

14 hours ago

It's that time of year again: GERS day – when Scotland's annual fiscal health is laid bare – has come back around and the figures paint a pretty bleak picture for the Scottish government. There is a £26.5 billion black hole in public finances (don't fall off your chair, Rachel Reeves) while the country's deficit has grown by more than £5 billion. With a Scottish parliament election just around the corner – and the party of government on track to lose seats – it's more bad news for First Minister John Swinney's SNP.
Swinney's administration appears to have buried its head in the sand over the figures – with an earlier press release choosing to overlook the headline figures and boasting instead that Scotland's revenue was up by 1.5 per cent on the previous year. This addresses only part of the picture. Scotland's total public spending has outpaced the money brought in via taxes – resulting in a deficit of 11.7 per cent of GDP, or £26.5 billion – leaving Scotland £5 billion worse off than in 2023-24. Startlingly, the black hole widens to more than £30 billion if North Sea oil revenues are excluded.
The Scottish government has tried to point to some more positive aspects of the data, noting that the money it has raised grew to £91.4 billion this year. This managed to cover public expenditure on day-to-day devolved services (while spending grew by 6.8 per cent, devolved revenue grew more). But that doesn't change the broader picture, which shows that the country's deficit is only getting worse. Scotland made up 8 per cent of all the money collected by the UK government – matching its share of the population – but this is down a little on the previous year. Excluding North Sea oil and gas would see Scotland raising just 7.7 per cent of UK revenue, also down on last year.
Increases seen in income and inheritance tax (which grew in part due to inflation) have raised money. Less was collected from national insurance, however, with employees now paying lower rates, while fuel duty also fell thanks to more people opting for electric vehicles. The reduction of student loans has also seen the revenue generated from interest fall, as rates on student loans have been slashed.
Public service spending remains higher than before the pandemic, currently at 52 per cent of GDP – or £117.6 billion – with more money going on devolved social security programmes and benefits in Scotland compared with the UK's welfare spending in 2024-25. This was balanced a little by inflation falling from 2022-23 highs, resulting in less paid out as public sector debt interest. And spending related to Brexit also fell as the UK's exit from the EU recedes into the distance.
There is some good news for Scots, however. A greater sum is being spent per head in Scotland compared to the UK average, with those living north of the border receiving £2,700 more from Westminster than their British counterparts. Not that Labour necessarily sees things this way, with the Scottish party's finance spokesperson Michael Marra fuming that the SNP has 'squandered' the UK government's block grant. He added that while Scotland benefits 'disproportionately' from investment in public services, its growing deficit demonstrates how 'the SNP has blown a hole in Scotland's finances'.
Today's GERS stats raise questions about the SNP's full fiscal autonomy idea, too. Despite not having made an appearance in more recent manifestos, Shona Robison told the Scottish Affairs select committee in January it was her 'preferred option' within the current constitutional arrangement. The Scottish government also noted in a recent Freedom of Information response that this had been its policy for over a decade, after it was first alluded to in the SNP's 2011 election programme. Yet there remain serious question marks over how it would work in practice – with the latest figures suggesting, Scotland secretary Ian Murray says, that a shift to this approach would cost the public purse more than £14 billion a year. Today's figures suggest there is a long way to go until that fantasy could become a reality.