Tax and Fiscal Policy

Scotland’s share of the national debt could be £110 billion


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Examining the potential impact of the national debt on Scotland, Dr Richard Wellings, Deputy Editorial Director at the Institute of Economic Affairs, said:

“At the end of 2010, official UK general government debt was £1,106 billion, equivalent to 76% of GDP. A reasonable way of dividing the national debt to work out Scotland’s fair share might be to base it on the proportion of total public spending devoted to Scotland. Since Scotland currently receives almost 10% of total UK public spending, a figure of around £110 billion could be appropriate.

“Worked out based simply on population Scotland’s share would be £93 billion, but as the government spends more per capita in Scotland and borrowing is a method of financing spending, using population would be an unfair way of calculating their share of the debt. Better still would be an estimate that also took account of the share of UK tax revenues generated in Scotland, but such a calculation is complicated by significant fluctuations in North Sea receipts from year to year.

“These estimates show an independent Scotland could face a very severe public debt burden, particularly since North Sea revenues are likely to diminish in the medium term. Unless urgent steps were taken to curb government spending, Scotland could end up like Greece or Portugal. This further underscores the need for greater fiscal restraint both from Westminster and the devolved regions. Alex Salmond is being irresponsible in ignoring the impact of this debt on future generations.

“A greater degree of fiscal decentralisation could prevent the devolved regions from maintaining high levels of public spending that are economically damaging and unsustainable in the long term.”

Notes to editors

To arrange an interview with Dr Richard Wellings, IEA Deputy Editorial Director, please contact Stephanie Lis, Communications Director, 077 5171 7781, 020 7799 8900, [email protected].

The mission of the Institute of Economic Affairs is to improve understanding of the fundamental institutions of a free society by analysing and expounding the role of markets in solving economic and social problems.

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