There is an expenditure line in GERS called Public Sector Debt Interest (PSDI). It’s the fifth-largest expenditure of the Scottish Government and a larger spend than Scotland’s allocated share of the UK Armed forces expenditure. Historical analysis of GERS reports demonstrates that every year since records began, Scotland has been paying interest on a population share of the UK’s debts. In 2019-20, PSDI added £4.5bn to the cost of running Scotland.
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That’s not paying back the capital on any debt, it’s just the interest on the UK’s debt. Scotland has recently been granted very limited borrowing powers, but while the UK’s debt was being built up Scotland had no borrowing powers. In fact, Scotland’s economy was either in surplus, or had a lower deficit than the UK, so Scotland did not contribute to the creation of the debt.
How does a nation without the ability to borrow end up paying billions of interest on debt every year? It does so because the allocation of the debt is not related to the UK region or nation which generated the debt, nor where the money was spent or the economic benefit felt. The UK’s debt is allocated to Scotland’s accounts on a population percentage basis, even though Scotland did not generate that debt.
Looking at Scotland’s GERS reports (and earlier historical data) that go back 40 years, Scotland’s share of UK debt interest amounted to a staggering £133.4bn.
367 However, analysing those figures also demonstrates that, had Scotland been an independent country, its entire borrowing requirement over those 40 years would have been
zero. Let me be clear: nothing, not one penny.
Scotland’s accounts have had £133bn (one-hundred and thirty-three thousand million pounds) of interest on debt removed from them, despite the fact that Scotland did not generate, nor benefit from this spending. This has happened simply because it is not an independent nation and had to chip in to service the rest of the UK’s rising debts. Without that £133bn cost, Scotland’s finances would be in surplus today.
If we look back as far as reliable historical figures for Scotland’s revenues and expenditure go, we can see that in 1980-81, before the UK debt started to spiral, Scotland was charged £3bn to service the UK debt. Despite that, it managed to record a surplus of more than £1bn.
368 Indeed, using GERS, Scotland’s finances showed a surplus until 1990, when the cumulative surplus amounted to £38.8bn (£74bn surplus without debt loading).
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It is undeniable that in an independent Scotland those surpluses would either have been invested to grow Scotland’s economy or possibly put into a sovereign wealth fund, similar to Norway’s.