A post on Facebook claims that since 2001, Scotland has sent £900 billion in tax to “Westminster” but only received £447.5 billion in return, meaning that Scotland subsidises England.
It doesn’t. What this post fails to include is the amount of money that the UK government spends for or in Scotland.
How Scottish public spending works
Scotland’s tax revenues are collected and distributed in a few different ways.
Some revenue is raised, collected and kept for spending in Scotland (including council tax and some devolved taxes).
Income tax, with the exception of income tax on savings and dividends, is collected by the UK government via HMRC but then goes directly to the Scottish government.
Many other taxes (such as National Insurance, Capital Gains tax and VAT) are collected by HMRC.
Money is then given back to Scotland in the form of the block grant. This, along with the revenues retained in Scotland, is to fund areas of devolved spending (like housing and education).
Changes to the block grant year-on-year are calculated using something called the Barnett formula. What this does is essentially adjust the devolved administrations’ budgets whenever the UK government increases or reduces spend on devolved areas.
For example, health is a devolved area of spending. If the UK government decided to increase the NHS England budget, that money would come from taxes raised across the UK, not just England.
This might not be considered particularly fair, so what the Barnett formula would do is similarly increase the Scottish block grant by a share of the change in UK government spending relative to Scotland’s population.
The figures
Since 2001/02, Scotland has raised around £1 trillion in revenue, of which £143 billion was retained in Scotland.
That leaves around £900 billion (as claimed in the post) which was collected and reserved by the UK government (the exact figure depends on whether you apportion North Sea oil revenues to Scotland only or to the whole of the UK) .
The post then claims £447.5 billion of this money was returned.
It’s not straightforward to work out how much money comes back in the form of the block grant over such a long period. But as a proxy we can look at how much is spent in Scotland.
Since 2001/02 the Scottish government, local authorities and public corporations have spent £786 billion.
As mentioned, £143 billion of this would have been collected and retained in Scotland. This leaves a remaining £643 billion, most of which will be made up of revenues collected from across the UK which have been “returned” via the block grant in this time.
But whatever the amount of money which is “returned”, the post then suggests that the difference between what is raised in Scotland and what is “returned” is what England keeps, and that in essence Scotland subsidises English spending.
This is incorrect.
That’s because the UK government is also responsible for lots of spending in areas which aren’t devolved, like social security, defence and foreign affairs, and deemed to be for the benefit of Scotland and the whole of the UK.
The Scottish government estimates the UK government has spent £533 billion since 2001/02 in or for Scotland.
Since 2001/02, the Scottish government estimates the total amount of spending in or for Scotland exceeds revenues raised in Scotland by between £240 billion and £320 billion (depending on whether North Sea oil revenues are considered to be a Scottish-only or UK-wide revenue stream).
As we have written before, it is not correct to say that Scotland subsidises England.