Cashing in on discontent? National gripes, public finances and a fractured Union

Nations are as liable as humans to squabble over money, and the four countries of the United Kingdom are no exception. Arguing over GERS in Scotland is one example; moaning about Barnett in England is another. Part of our problem is that these things are hard to measure. Another is that, as ever with money, all sides have an axe to grind.

So inevitably, our press loves stories implying that one country or another has its hand in the till. The Times ran a particularly good example a couple of weeks ago. The central claim was as follows:

Government efforts to reduce the budget deficit since the financial crisis have been delivered almost exclusively by England, which is on track to balance its books this year, while the devolved administrations continue to borrow heavily, according to official figures.

This is deeply misleading. For a start, devolved administrations mostly don’t control how much revenue is raised in their areas. With major exceptions in Scotland and moderate exceptions in Wales and Northern Ireland (mostly recent), they’re funded by block grant. They have very limited borrowing powers. The Times’ ‘borrowing’ is really the gap between UK and devolved spending and revenue. That gap has been mostly controlled at UK level throughout this period.

Still, it’s true that the gap in England has narrowed much faster (a 92.2% drop) than it has in Scotland (3.1%), Wales (16.6%) and Northern Ireland (9.9%). So have the four countries been getting radically different spending settlements since 2009/10? The figures for total public spending show they haven’t.

Chart derived from Office for National Statistics ‘Country and regional public sector finances’ data.

England has actually had the highest percentage rise in public spending, at 11.2%. Scotland came in at 11.0%, Northern Ireland went up by 10.6% and Wales rose by 9.6%. Leaving aside whether that’s fair for reasons of population growth or relative need — and differing spending among the regions of England — this is not where our ‘England is paying off the deficit’ story comes from.

The story seems very different when we look at government receipts. Here we do see some major differences. England’s revenue growth (36.4%) is somewhat higher than Wales’ (30.5%), quite a bit higher than Northern Ireland’s (26.7.%) and over double Scotland’s (15.2%). What’s going on here? The first clue comes from which regions of England’s receipts are growing fastest.

Chart derived from Office for National Statistics ‘Country and regional public sector finances’ data.

The wider south east of England is, as you’d expect, way out in front. Wales isn’t out of step with most of England; only Scotland seems vastly out of kilter. So the story isn’t one of Westminster largesse flowing to the devolved nations at all. Instead, it’s one of UK growth being greatest in London and the south east, as it usually (and worryingly) is. To paint this as the former rather than the latter is strikingly unhelpful.

Some may wonder why Scotland is so far behind. It isn’t usually the worst performer in the UK by any means, so what’s happening here? But again, the answer is mostly pretty clear. These figures include a geographical share of North Sea revenue — Treasury gains from oil and gas — most of which is allocated to Scotland. And, famously, oil and gas prices have plummeted in recent years. Strip out the oil and Scotland’s growth looks much more normal. That’s especially true when you remember England’s population is growing faster.

Chart derived from Office for National Statistics ‘Country and regional public sector finances’ data.

So The Times’ story of England tightening its belt while the rest of the UK lives high on the hog makes no sense at all. Public spending has gone up by fairly similar amounts in the four countries, southeast England’s economy has grown the most, and Scotland’s tax take was hit hard by a collapse in oil and gas prices. And anyway, the other three countries’ fiscal envelopes were mostly set by Westminster.

Does this matter beyond due concern for fair reporting? I think so. Were I to single out one thing which could unravel the UK, I might well choose competitive grievance. PG Wodehouse’s unkind quote is often echoed for English audiences, in varying levels of poor taste. The SNP’s opponents in Scotland regularly accuse it of hunting for grievances — sometimes fairly, sometimes less so. But if we diagnose a grievance culture in Scotland, we’ll have to diagnose one in England too. It’s often aimed at Scotland, but also at the rest of the UK more generally.

This is a serious problem for the UK. A multinational Union needs give and take and general reasonableness to work well. That’s especially true for a Union made up of one very large nation and three much smaller ones. Constant diatribes about how hard done by England or Scotland (or Wales or Northern Ireland) are do nothing to help and much to hinder that process.

Since 2014, Scotland’s public debate has demanded much of the rest of the UK while paying relatively little attention to its views. England’s public debate, such as it is, always seems to reduce in moderation as it gains in prominence. Wales and Northern Ireland struggle to be heard, and the latter often attracts ill-concealed irritation when it cuts through. It may or may not prove sustainable: it definitely isn’t healthy.

Not all the UK’s gripes focus on cash, but quite enough do to be going on with. We could improve our public discourse by at least giving a fair picture of the sums. As it stands, unionists may well live to regret letting our four countries regard each other as burdens rather than partners.

This post was originally published on on 1 October 2018.

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