INTRODUCTION

The sep has carried out research on the 2004/05 edition of GERS, an acronym for "Government Expenditure & Revenue in Scotland", a document of breathtaking deception perpetrated on the Scottish people that has been published annually for nearly three decades, but well in arrears. GERS is a Year Book that purports to describe Scotland's fiscal position.  It is nonetheless a political publication, its purpose being to perpetuate the myth that Scotland is economically unable to survive as an independent state. The most recent edition of GERS was published on 3 January 2007, covering the fiscal period 2004/05, which as stated above is the edition we have been investigating.

We cooperated in the production of this analysis with a forensic accountant, Niall Aslen, who is the author for copyright purposes.  His research, carried out with some practical assistance from the sep, is based almost entirely on the UK government's own statistics, plus those on North Sea oil provided by the UKOOA - UK Offshore Operators Association (its then title). Where additional sources have been used these are cited.  The government's statistics were found to have been well and truly buried in obscure locations, but have nevertheless been tracked down.  The facts that have emerged have totally destroyed any vestige of integrity attaching to the GERS document, with the result that we are defining that document, with self-evident justification, as "The Great Deception".  This monstrous deception has in fact been perpetrated, not just on the Scottish people, but on everyone in the UK.  This has led people in this country as in England to believe that, for many decades, Scotland has been running a massive deficit, which is manifestly untrue.  Far from being the alleged "subsidy junkie", Scotland is awash with money, albeit briefly before it is stolen from us.

The central result of our analysis is that, in the fiscal year 2004/05, Scotland's balance of payments with the rest of the UK showed a surplus of £9,632 million sterling. This completely contradicts the official claim, made by Prime Minister Tony Blair to MPs at Westminster (Hansard), that Scotland was running a deficit of £11,200 million sterling (£11.2 billion) for that period.

This staggering discrepancy of more than £20,000 million between the official published information in the GERS Report and the result of our professional forensic analysis of the government's own financial documentation cannot be attributed to mere chance. It has clearly been part of a deliberate, long-term attempt to deceive the Scottish people and damp down their aspirations by convincing them that their country would be materially unable to stand on its own feet in a situation of independence.  Our researches have revealed that to be a palbable absurdity.

It is in no way possible to define these circumstances as other than lies and deception - in effect a fraud of breath-taking proportions, government-perpetrated, first by a Conservative Party Secretary of State for Scotland and the clearly complicit Conservative United Kingdom government.   Subsequently, this massive corruption continued annually on a truly prodigious scale with each edition of the GERS reports during the pre-devolution administration of Conservative and Labour Westminster governments, and then the eight annual GERS reports published subsequently by the devolved Labour-Liberal Democrat coalition administration in Edinburgh. It is anticipated that the report for the fiscal year 2005/06 will be a repetition of the same deception, and no doubt also that for 2006/07.

Professional accountants are free to check all of our information at source; indeed, they are positively encouraged to do so. We readily concede that there may well be scope for modest interpretation at some individual points, but the main conclusion is simply unshakeable.

Considerable UK government effort has also been expended in other ways to play down Scotland's massive financial surplus for political purposes. For example, Chancellor of the Exchequer Gordon Brown misled MPs in Westminster during his last budget speech in that capacity (Hansard) by stating that Scotland's oil wealth was due for a sharp decline, when he knew full well that this was not the case, because it is clearly set out in the 2006 annual report of the UK Offshore Operators Association. This organisation also stated that, due to heavy and in their view excessive taxation, the risk to reward ratio is such that their members are less likely to pursue exploration when they can do so more effectively and with better rewards elsewhere. 

These efforts have not been diminished by the embarrassment that the present sep analysis has caused.  To date, there has never been a single official or unofficial refutation of the facts that it has revealed.  Copies have been sent to all the relevant government departments and to every newspaper and broadcasting authority in the UK.  Despite its sensational news value - a gift to political and financial editors everywhere - there has been a total clamp-down on media coverage, and not a single report has appeared, not even an adverse one.  This is obviously centrally imposed suppression, which throws into perspective all claims that the UK enjoys freedom of the press.

One interesting reaction was, however, a letter in reply from the UK Treasury, which effectively disclaimed Treasury responsibility for the GERS figures, and passed the buck for the deception to the Scottish Labour and Liberal Democrat administration in St. Andrews House in Edinburgh. 

We know of no other democratic state in the civilised world in which such official manipulation, lies and deceit would be possible on such a scale.  Should anyone doubt that the whole business of the colonial-style exploitation of Scotland and its economic resources is entirely unacceptable, then we would urge them to study this report very carefully, because then they could arrive at no other conclusion than that the whole affair has been a monstrous and unprecedented Great Deception.

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THE ANALYSIS

The figures set out in this analysis can be checked by any professional accountant.  Our analyst has explained how he was able to source the information he has collated:  "The British Government have made vast improvements in the online services available for researchers using the Internet over the past 5 years. Most of the data is now online. The principal source of information has been located at http://www.hmrc.gov.uk/stats/ , and  links from this website provide additional information. The UK government's own statistics have been used for comparison with the GERS report, and where interpolation has been required the figures err on the conservative side, giving the benefit of any doubt to the UK statistics". For this information please refer to TABLE ONE below:

North Sea oil revenues were difficult to track down, since the UK Government regards these as special resources of the UK (Extra-Regio Territories) and not Scottish, even although the oilfields are in waters that come under the Scottish legal jurisdiction, they are policed by Grampian Police, and are supported by the infrastructure paid for by the taxpayers of North East Scotland with no financial support from Westminster. Following upon this UK government convention, the GERS report compilers have done likewise, thus North Sea revenues are EXCLUDED from the allocation of revenues received from Scotland. The UK government has created a new country named Extra Regio Territories in order to conceal the oil revenues from the Scottish account. Accordingly, this new fictional creation has been ignored in our analysis, and the North Sea oil revenues are included in the comparator TABLE TWO :

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                                                         TABLE ONE

                                   U.K. Treasury Taxation Figures 2004/05

Description of Tax                      U.K.  Whole    Percent          Scotland    Percent

                                                          £  Millions        100  %          £ Millions         %

Value Added Taxation                               73,058                                         6,997             9.6

Hydrocarbon Oils                                      23,438                                         4,664           19.9

Tobacco                                                    8,103                                         1,002            12.4

Spirits [inc Whisky]                                    6,100                                         1,600            26.2

Beer                                                          3,101                                            437            14.1

Wine and made Wine                                 2,233                                            192              8.6

Cider & Perry                                                157                                             14              8.9

Betting, Gaming & Lottery                           1,421                                            122             8.6

Customs Duties & Agricultural Levies           2,195                                            189             8.6

Air Passenger Duty                                       864                                              74             8.6

Insurance Premium Tax                              2,369                                             204             8.6

Landfill Tax                                                   674                                              69            10.2

Climate Change Levy                                     772                                              66             8.5

Aggregates Levy                                           335                                              29              8.7

TOTAL CUSTOMS & EXCISE               £124,820                                      £15,659            12.5

Income Taxes net of Tax Credits              122,920                                          8,606            7.0

National Insurance Contributions               78,098                                           6,404            8.2

Corporation Taxes (Non North Sea)           23,584                                           4,112           17.4

Corporation Taxes  Scot. North Sea            3,911                                           3,715           95.0

Petroleum Revenue Tax                             1,284                                           1,220           95.0

North Sea Supplementary Charge              1,010                                              960            95.0

Capital Gains Tax                                     2,283                                              370            16.2

Inheritance Taxes                                     2,922                                              258              8.8

Stamp Duties                                           8,866                                              433             4.8

TOTAL INLAND REVENUE                  £244,978                                        £26,078           10.6

Vehicle Excise Duties                               4,900                                              397             8.1

Business Rates                                       21,327                                           1,630            7.6

Council Taxes                                         17,614                                            1,441           8.2

Other Taxes and Royalties                        6,946                                               597            8.6

Interest and Dividends                               5,810                                              500             8.6

Gr's Operating Surp & Crown Est. Rents   21,036                                            1,809            8.6

TOTAL OTHER TAXATION                   £77,633                                            6,374            8.2

GRAND TOTALS                               £ 447,431                                       £ 48,111           10.8

Barnet Receipts from Treasury         £447,431                                        £ 24,003            5.4

Treasury Estimate of Scottish Population is that

of 8.6% of the U.K. Total. Therefore Tax Burden Calculation                         £ 34,479           8.6

SURPLUS GENERATED BY SCOTLAND ( all sources )                                £  9,632

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                                                           TABLE TWO

U.K. TREASURY - GERS COMPARATOR EXPENDITURES

DESCRIPTION OF TAX.    UK Total   %   Scotland   %    GERS UK      GERS     %     Variance

                                                 £ Millions   100    £ Millions             £ Millions      £ Millions            Gers v Act'l

General Public Services            13,428       100           886       6.7        13,247            1,476      11.1           590

E.U. Transactions                         - 799         "             - 69       8.6          - 799             - 316      39.5         - 247

International Services                 5,564         "             486       8.6         5,564               480        8.5           - 6

Debt Interest                              24,543         "          2,110       8.6        24,543            2,086       8.5           - 24

Defence £28,622 Bn

      less Trident £1.7 Bn             26,922         "             954       3.5        28,622            2,431       9.0         1,477

Trident Nuclear Det. Force          1,700         "             146       8.6                                                           - 146

Public Order & Safety                28,747         "          2,481       8.6        28,748            2,317        8.1         - 164

Enterprise & Economic Dev.        7,177         "            516        7.2          7,178              679        9.5           163

Science & Technology                2,432         "            281      11.6           2,432              295       12.1            14

Employment Policies                  3,661         "            711      19.4           3,661              803       21.9            92

Agriculture, Fisheries & Forestry 5,441         "            728      13.4           5,442              666       12.2          - 63

Transport                                   16,059         "         1,413        8.8         16,060            1,702       10.6          289

Environment Protection              6,872          "           639        9.3           6,872               825       12.0          186

Housing & Community Amenity  7,869          "           893       11.3          7,869             1,279       16.3          386

Health                                       82,564          "         7,919        9.6        82,564             7,737         9.4         -182

Recreation, Culture & Religeon  6,886           "           746      10.8          6,887                950       13.8          204

Education & Training                65,421           "        5,675        8.7        65,421             5,892         9.0          217

Social Protection                    163,868           "       15,281       9.3       163,868            15,457        9.4          176

TOTAL                                   £486,265          "       £41,797       8.9     £468,759          £44,759       9.6      £2,962  

DIFFERENCE between ACTUAL and GERS          - £ 2,962

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Just before the Scottish Parliament was re-established in its truncated form, the UK Government annexed 6,000 square miles of Scottish waters rich in oil, gas and fish and transferred them to the English legal jurisdiction.   Fisheries had already been handed over to the EU as part of the UK's price for entry.  In these cases, this area's tax revenues have been re-allocated to the Scottish Tax Revenue account on the basis of the original international boundary.   Also re-allocated are the Scottish operations proportion of the corporation and other taxes paid by the international oil companies based in London whose taxes are credited to the London account. These would naturally accrue to the Scottish Treasury if Scotland were independent.

Niall Aslen is still not wholly satisfied that he has gained a true picture of North Sea oil and gas revenues as he feels certain that some of these have been allocated to Gross Operating Surplus and Crown Estates Income.  In this event, they may well be understated for the Scottish North Sea Tax Revenues, but he has found it next to impossible at present to penetrate the veil of obfuscation from HM Treasury that surrounds this heading.  The UK Government uses the figure of  8.6% (Red Book 2004) to express the ratio of the Scottish population to that of the UK population as a whole, and he has used this percentage in Table Two where it was impossible to ascertain the correct percentage. (Comparator of Taxation Revenue and Percentages). It should be noted that the least ambiguous site was HM Customs and Revenue, the worst being that of the Treasury.

GENERAL NOTES and OBSERVATIONS

It is suggested that you print off a copy each of Tables 1 and 2 to cross check with the figures. It will make this section easier to follow.   It is interesting to note the clear disparity between Income Tax receipts in Scotland and those of  South East England. Scotland's share of UK income tax and national insurance contributions is 7.2% and 8.2% respectively, which reflects the lower incomes of Scots in general.

Inland Revenue figures strongly suggest that there is a higher proportion of Scots whose earnings fall below the minimum tax level and therefore pay no tax at all as compared with the rest of the UK In itself this can be taken as a pointer to the relative level of poverty in Scotland. Another anomaly is the number of people of pensionable age who continue to work.   This would naturally be expected among hill farmers and crofters, whose incomes are desperately low, but it actually extends right across the board.  In the UK the average number of pensioners working is 6.6% of the total.  In Scotland, however, the figure is 9.4%.

 Also included in the figures are Council Tax and business rates, quite properly, since these are taxes that have to be taken into account. Council Tax at 8.1% is lower than the population percentage of 8.6%.  There are reasons to suspect that the real figure is considerably higher in that a proportion of the Social Protection account has been used by the Department of Work and Pensions to pay the Council Tax bills of those on benefits.

Business rates are even higher at 9.6%.  In Fraserburgh one high street shop has a rates bill of a similar size to that of a shop in Regent's Street in London! One would expect rural areas to have higher charges than urban areas, but this does not account for the difference, which may relate to the high costs of providing the infrastructure for the oil industry on the east and north-east coasts, but in the central belt it is more likely to be a function and reflection of the endemic bad management and incompetence of Labour-dominated councils showing up in inefficiency and profligacy. Before we reach the concluding part, it would be a good idea to acquaint oneself with the various taxes, therefore readers should turn to TABLE  ONE for a quick tour.

Please note that the expression Billion is not used in this analysis.   Under the Euronorms, and also the ISO global norms, a Billion retains its original meaning of a million millions.   This usage is standard within continental Europe, where a thousand millions are referred to as a Milliard(e), an expression that is also used in the Oxford English Dictionary.  Since the SEP website is consulted by a wide international range of users, it is desirable to avoid confusion in this important respect.  Our statistics are therefore expressed in Millions throughout, and thousands of millions where appropriate.

REVENUE

VALUE ADDED TAX:  We start with our old friends from Customs and Excise, and the most easily recognised tax of all: Value Added Tax, Scotland's share being £7,497 million or 10.3% of the UK total. One would expect it to be lower than this due to the lower levels of personal spending, as reflected in the GERS report, which only highlights household expenditures at 8.1% and does not include business VAT contributions.  This 10.3% distortion is due to the fact that VAT is charged on bottled whisky and hydrocarbon fuels as soon as they leave the distillery bonded stores or the refinery gates. It should be noted that Scotland has a higher production ratio in these commodities.  Therefore, GERS comes below 8.6% in line with the population percentage.

HYDROCARBON OILS:  Income from hydrocarbon oils at £4,389 million or 20.8% is strictly speaking not a tax but an excise duty. Excise duty is payable when the fuels leave the refinery gate, and the high percentage reflects the dominant position of the Grangemouth refinery within the UK.  It should be noted that GERS only allocates £1,313 million or 5.6% of duty to Scotland and this could well be the result of the refinery's owners having their head offices in London where the excise duties are paid, thus distorting the true picture. In an independent Scotland these revenues would of course be paid to the Scottish exchequer, so to correct this anomaly the amount of fuel duty has been calculated from the production figures.

TOBACCO DUTY:  Tobacco Duty at £1,002 million or 12.1% is higher than the UK average, but reflects the increased level of imports and manufacturing in Scotland. This figure may alter in later years because of the ban on smoking in public places causing more people to give up smoking.

ALCOHOL DUTIES:  The GERS report lumps four separate duties together at £703 million or 8.9%.  On investigation, however, this figure turns out to be a gross under-estimate of alcohol production in Scotland, which produces over 35% of all spirits distilled in the UK.  Thanks to figures produced by the Scotch whisky industry a fair calculation of the duty generated can be arrived at.  This is still understated, however, since much of the production is credited to the London account by the fact of company head offices being located there.  The breakdown is as follows : Whisky at £856 million or 35.9% reflects the high output of whisky and other spirituous distilling in Scotland. Beer at £437 million or 14.1% again reflects the fact that Scotland produces more than its population would suggest. Just under one half is exported either to the rest of the UK or overseas.  Wine and Made Wine at £192 million or 8.6% may well be overstated, even although large quantities of wine are imported into Scotland. There is insufficient information to comment further.  The same applies to Cider and Perry; although foreign imports are increasing the figure is £14 million or 8.9%.

BETTING AND GAMING:  Taxation of Betting, Gaming and the Lottery brings in £122 million or 8.6%. There is no regional breakdown of these receipts, so the Scottish national average of 8.6% has been applied.

AIR PASSENGER DUTY:  Air Passenger Duty represents £74 million of receipts which is equal to the Scottish national level of 8.6% of UK totals. This is probably overstated, because most air travel takes place from English and not Scottish airports. Hard figures are not available.

INSURANCE PREMIUM TAX:  Insurance Premium Tax is a nice little earner for the Chancellor.  Although the Scottish national population percentage of 8.6% is used, it is believed that the revenues raised, £204 million, are understated due to the strength of the Scottish insurance companies.

LANDFILL TAX:  Landfill Tax at £69 million (10.2%) is slightly higher than the UK average. However, figures are available for Scotland. The GERS report only allocates £57 million (8.5%) so guesstimates must have been used or a straight national percentage applied.

CLIMATE CHANGE LEVY:  It has proved impossible to apportion this by actual revenue raised in Scotland, so the population percentage of 8.6% has been applied.

AGGREGATES LEVY:  Due to there being a higher production of aggregates in Scotland the revenues collected are higher than the norm at £47 million (14%) . The GERS compilers obviously had access to the same data. This levy is due to increase, because the Chancellor's budget in March 2007 raised the levy to £1.92p per metric tonne.

INCOME TAX:  Our old nemesis Hector the Tax Inspector holds out the Inland Revenue collection plate, and takes £8,906 million from our hip pockets, or 7.2% of all UK income tax. As mentioned earlier, this is an indicator of the relative wealth of Scotland by comparison with the UK as a whole. If we take the Treasury population figure of 8.6% as being accurate, then this would indicate that wages and salaries are some 16% lower in Scotland than they are in England.

NATIONAL INSURANCE CONTRIBUTIONS:  Scottish national insurance contributions, which are effectively a tax, contributed £6,410 million or 8.2% of the UK total.  This heading reveals the same disparity between the earning power of the Scots and the English respectively.  See the earlier comment on the Introduction page.

CORPORATION TAXES (non-North Sea):  Non-North Sea Company Corporation Taxes follow on at £4,611 million or 15% of the UK Total.  This higher average is due to the relative profitability of Scottish companies and firms and is especially true of banking, finance and insurance.   It should be noted that the GERS report shows a figure of £2,422 million or 7.9%, which is far too low, considering that the Royal Bank of Scotland alone paid £2,380 million in Corporation Tax. Are the authors of GERS seriously telling us that only the Royal Bank paid Corporation Tax?  According to data for the top 500 Scottish companies (Insider Magazine, January 2007, Page 22) the top 500 companies made taxable profits of £18,500 million.  This yielded tax revenues of £5,550 million, of which £941 million is credited to the North Sea oil account.  The figure of £4,611 million takes no account of taxes paid by smaller Scottish companies. A conservative figure for the quite significant share of Corporation Tax paid by smaller Scottish companies would be in the region of £400 million. http://www.hmrc.gov.uk/stats/corporate_tax/table11_1.pdf

CAPITAL GAINS TAX:  Capital Gains Tax at £370 million or 16.2% of the UK total is a reflection of of the booming housing and property market, which is fast catching up with English prices. It should be noted that the GERS report only shows £186 million or 8.1%. The more reliable figures given here are from the Oxford Economic Review: Regional Contributions to UK Public Finances, January 2007. http://www.oxfordeconomics.com/Free/pdfs/regcont.pdf

INHERITANCE TAXES:  Inheritance Tax at £258 million or 8.8% are nearly double the figure in GERS. Once again we have used the more reliable data in the Oxford Economic Review: Regional Contributions to UK Public Finances, January 2007. http://www.oxfordeconomics.com/Free/pdfs/regcont.pdf   Table P. 22.

STAMP DUTIES:  Stamp Duties levied in Scotland account for £433 million or 4.8% actual, which is well below the UK average, reflecting lower house prices in Scotland and the fact that Scots have fewer opportunities for amassing wealth. However, the GERS report shows £720 million or 8.0%. This is clearly incorrect, as the Oxford data shows. Oxford Economic Review: Regional Contributions to UK Public Finances, January 2007. http://www.oxfordeconomics.com/Free/pdfs/regcont.pdf   Table Page 22. There may be a case for assuming that Stamp Duty paid by the Scottish financial sector on bonds, shares and other transactions are credited to the London account. There is no means of telling, but this is a possibility which would mean the Scottish revenues are understated.

VEHICLE EXCISE DUTIES:  Vehicle Excise Duty, at £384 million or 8.1% slightly below the UK average, reflects the income from New Car and Road Fund duties.  However, due to the considerable number of company vehicles purchased outside Scotland by companies registered elsewhere, but used on Scottish roads, the vehicle excise duty is clearly understated.

BUSINESS RATES:  Business Rates of £1,813 million or 9.6% are a regressive tax on profitable businesses.  They are abnormally high in Scotland, because the mostly Labour-run local authorities never implemented the Standard Business Rate Laws brought in by the last Conservative government. Too many Labour councils regard the business sector as a milk cow to be exploited ruthlessly to make good their shortfalls in local taxation. This fact has led to far too many companies and small businesses shutting up shop for good or moving south or onto the continent where rates and taxes are much lower. Scotland has the unenviable reputation of having some of the highest business rates/taxes in the Western world.  This situation will probably change as a result of the parliamentary election in May 2007.

COUNCIL TAXES:  Council Taxes of £1,615 million or 8.1% reflect the cost of local council services in Scotland.  Something that is not listed separately is the water charges, which are almost double the privatised English and Welsh averages. In Scotland, The councils collect the water charges on behalf of Scottish Water.  In the rest of the UK, the charges are collected by the private water companies.  However, this is a minor distortion of the figures and can be largely ignored as statistically insignificant.

OTHER TAXES AND ROYALTIES.  Other taxes and royalties amounting to £1,010 million or 8.6% have been allocated pro rata on the basis of the Scottish population average, there being insufficient information otherwise.

INTEREST & DIVIDENDS:  Interest and Dividends of £485 million or 8.6% have also been allocated pro rata according to the Scottish population average, there being insufficient information otherwise. As these are general receipts, it is logical to allocate the national share by population percentage.

GROSS OPERATING SURPLUS AND CROWN ESTATE RENTS:  Gross Operating Surplus and Crown Estate rents bring an income of £1,223 million or 8.6%. The population ratio was applied even though there is a suspicion that there is an element of North Sea oil exploration licence fees in this figure.

OTHER REVENUES & ACCOUNTING ADJUSTMENTS:  Included in this topic, since it is included in the GERS report, is a negative figure of (£2,135) million for the entire UK, of which (£177) million or 8.3% is allocated to Scotland. This may be because of the arcane methodology involved, and possibly conflicts between several sources of receipts used in GERS. In our view it is sloppy accounting practice having (£2,135) million held in a suspense account. (In other words we don't know where to put it!)

EXTRA REGIO TERRITORIES (NORTH SEA):  This section has been completely omitted from the GERS report even though this information is in the public domain.  The division between the Scottish and English sectors of the North Sea has been set as Scotland having 95% of the revenues. Professor Kemp of Aberdeen University sets the share at 97.1%.  However, here it has been decided to err on the side of caution by setting the share at 95%.

North Sea Companies Corporation Taxes are £2,901 million, or 95.0% of the oil and gas sectors. The Corporation Tax figures are those taken from Companies House annual returns for companies with registered interests in the Scottish oilfields. It should be noted that many of these companies have their head offices in London, and the payments of Corporation Tax are credited to the London account by the Treasury, and NOT to Scotland!   The UKOOA Annual Report has been used where clarification was necessary. This source was used for the primary figures.

http://www.hmrc.gov.uk/stats/corporate_tax/table11_1.pdf

Petroleum Revenue Tax at £1,220 million also represents 95.0% as being the Scottish Sector. Source:

http://www.hmrc.gov.uk/stats/tax_receipts/table-1-2-jul-06.pdf

North Sea Supplementary Charge at £1,010 million is also reckoned to be 95.0% Scottish Sector. Source:

http://www.hmrc.gov.uk/stats/corporate_tax/table11_11.pdf

CROWN ESTATES:  Finally the Crown Estates seabed wayleave rights charges at £57 million, of which Scotland's share is £49 million or 95.0%. Crown Estates wayleave rights are not insignificant, as one UK Government document states that £1,300 million has been raised this way since 1978.

There is no logical reason why the GERS report should exclude these latter figures, which jointly amount to £4,985 million which would greatly reduce their alleged deficit of £11,200 million. However their other understatements must also be taken into account.

This brings us to the totals, and at this point the figures have a story to tell. Total UK taxation revenues for the year to the 5th of April 2005 were £447,431 million. Now let us assume that figure is 100% of total taxation. Scotland, with 8.6% of the population, contributed £48,111 million or 10.8% of total UK tax revenues. The percentage population formula would assume that Scotland would contribute only £38,479 million. In fact Scotland did much better by actually contributing an extra £9,632 million to the revenue pot.  Therefore, far from England subsidising Scotland, as Prime Minister Blair claimed, the reverse is true: the Scots are subsidising the rest of the UK.  Later on we shall see that the GERS report also overstates the amount of government expenditure in Scotland, thereby attempting to present Scotland as an economic liability that needs propping up by the UK Treasury. If this were true then Westminster would clearly have to accept responsibility for gross mismanagement of the Scottish economy.

EXPENDITURE

The main source of information here was the UK Treasury's website:

http://www.hm-treasury.gov.uk/economic_data_and_tools/finance_spending_statistics/pes_publications/pespub_pesa05.cfm

Other publications have been used for reference, and these are listed at the foot of the appendices which follow this report. The GERS report makes a great fuss about identifiable and non-identifiable spending in Scotland and how difficult it is to define these two grey areas. After months of researching government statistics, it has been a pleasant surprise to find how few grey areas exist. Those that do exist can be calculated using logic and common sense. Therefore, our assessment omits two headings contained in the GERS report which are almost certainly used for obfuscation of the true facts. Actually the phrase “smoke and mirrors” comes to mind. This will avoid the easily preventable mistakes contained in the GERS report such as the £530 million of English legal, courts and prisons spending being credited to Scotland's account whereas Scotland's legal costs are covered in the annual Barnett block grant.

GENERAL PUBLIC SERVICES:  The GERS report gives the figure of £1,476 million, whereas the actual figure is £886 million, giving a variance of £590 million. It should be noted that £530 million of this variance is accounted for by English courts, prisons and legal services that do not apply to Scotland, which has its own legal system. The balance can be attributed to the two major HMRC offices at East Kilbride and Cumbernauld, which have a UK-wide remit.

EU TRANSACTIONS:  The GERS report gives the figure of £(316) million, whereas the actual figure is £(69) million in line with the population ratio, giving a variance of £(247) million.

INTERNATIONAL SERVICES:  The GERS report gives the figure of £480 million, whereas the actual figure is £486 million, giving a variance of £(6) million understated.

DEBT INTEREST:  The GERS report gives the figure of £2,086 millions, whereas the actual figure is £2,110 million or 8.6%, giving a variance of £(24) million understated. It is questionable, considering that Scotland has been in surplus decade after decade, whether Scotland should bear any part of this debt burden. However, as this is a grey area, a population percentage has been applied.

DEFENCE LESS COSTS OF TRIDENT:  The GERS report gives the figure of £2,431 million or 9% of the UK total, which also charges the entire cost of the Trident system to Scotland, when it fact it is a UK commitment. In actual fact the correct figure is £954 million or 3.5% giving a variance of £1,477 million. The GERS compilers have obviously taken the population plus Trident to arrive at their figure. Most of the so-called unidentifiable expenditure is amply documented as being spent in SE England and Wales!

TRIDENT NUCLEAR DETERRENT FORCE:  The GERS report includes the true Trident costs of £1,700 million in the general Defence expenditures whereas the actual figure is £146 million per the Scottish population ratio, giving a variance of £146 million.

PUBLIC ORDER AND SAFETY:  The GERS report understates with the published figure of £2,317 million, whereas the actual figure is £2,481 million, giving a variance of £(164) million. There is a suspicion that the costs of security for the Coulport nuclear storage facility and the protection of the royal family in Scotland are included here. In reality these should be a charge pro rata on the UK population as a whole.

ENTERPRISE AND ECONOMIC DEVELOPMENT:  The GERS report gives the figure of £679 million, whereas the actual figure is £516 million or 7.2%, giving a variance of £163 million overstated.

SCIENCE AND TECHNOLOGY:  The GERS report gives the figure of £295 million or 12.1%, whereas the actual figure is £281 million or 11.6%, giving an understated variance of £14 million.

EMPLOYMENT POLICIES:  The GERS report gives the figure of £803 million or 21.9 %, whereas the actual figure is £711 million or 19.4%, giving a variance of £92 million.

AGRICULTURE, FISHERIES AND FORESTRY:  The GERS report gives the figure of £666 million or 12.2%, whereas the actual figure is £729 million or 13.4%, giving a variance of £(63) million.

TRANSPORT:  The GERS report gives the figure of £1,702 million or 10.6%, whereas the actual figure is £1,413 million or 8.8%, giving a variance of £289 million. These figures are suspect, since there appears to be an element representing investment in transport infrastructures in London that has been allocated to the Scottish account.

ENVIRONMENTAL PROTECTION:  The GERS report gives the figure of £825 million or 12.0%, whereas the actual figure is £639 million or 9.3%, giving a variance of £186 million. There is a question mark about the amount allocated to the Scottish account and it might be a good idea for a Member of Parliament to ask a question in the House to verify the actual amount spent in Scotland, since there is a suspicion that the amount has been overstated by including spending in the rest of the UK.

HOUSING AND COMMUNITY AMENITIES:  The GERS report gives the figure of £1,279 million or 16.3%, whereas the actual figure is £893 million or 11.3%, giving a variance of £386 million. The GERS figure is clearly inflated, and it must be suspected that this amount is overstated by including spending in the rest of the UK.

HEALTH:  The GERS report gives the figure of £7,737 million or 9.4%, whereas the actual figure is £7,919 million or 9.6%, giving a variance of £(182) million.

RECREATION, CULTURE AND RELIGION:  The GERS report gives the figure of £950 million or 13.8%, whereas the actual figure is £746 million or 10.8%, giving a variance of £204 million.

EDUCATION AND TRAINING:  The GERS report gives the figure of £5,892 million or 9.0%, whereas the actual figure is £5,675 million or 8.7%, giving a variance of £217 million.

SOCIAL PROTECTION:  The GERS report gives the figure of £15,475 million or 9.4%, whereas the actual figure is £15,281 million or 9.3%, giving a variance of £176 million.

NOTES ON APPARENT DISCREPANCIES:  There are a number of arithmetical discrepancies between the statistical figures used and the same figures used by GERS. This is most probably due to the rounding function of the Excel spreadsheet used. There is a well known work available for correcting this bug.

COMMENTS:  The GERS report tells us nothing useful about how an independent Scotland would be able to run its own affairs. It does demonstrate that the present UK administration is bloated and cumbersome - an example of big government in action. For example, the UK's PAYE system for collecting income tax is very inefficient, requiring 48.3 pence in every pound collected for its internal administration. Will the Chancellor of the Exchequer please take note? Probably not!

CONCLUSIONS

An independent Scotland would need to consider more radical taxation methods, and Niall Aslen, as the author of this survey, recommends the Scottish Enterprise Party's proposal for a Flat (Rate) Tax system wherein both tax and national insurance contributions (a tax by any other name) are combined. Its simplicity makes it very cost-effective to collect and, with a personal allowance of £10,000 p.a., it would at a single stroke take more than 200,000 Scottish taxpayers out of the loop. One single composite rate initially of 25 pence in the pound on all earnings over the sep's higher personal allowance of £10,000 is easy to administer by both government and employer.

Another idea would be, as the Scottish Enterprise Party proposes, for Scotland to develop one, or possibly two FREE TRADE AREAS along with an OFFSHORE FINANCIAL SERVICES tax system, which, linked to the existing highly successful financial services sector in Edinburgh, would create a powerful and stable economy. Naturally, Scotland could not simultaneously be a member of the EU, since the Eurozone rules forbid free trade areas and offshore tax havens, but since the sep already advocates Scotland being outside the EU there is no contradiction here.

In the light of the statistics cited above there can be no doubt at all that Scotland could go it alone as an independent nation again, just as Norway and other smaller European nations have done. We can give our citizens a higher quality of life while investing part of the oil revenues in an Oil Fund for future generations to enjoy the benefits.

Our pensioners can have pensions on which they can live in dignity without demeaning means testing for poverty.  As it is, the sep has established that Scotland can already afford an individual State pension of £155.   Schools can invest in new buildings, equipment and teachers without incurring the crippling debts of PPP/PFI that will have to be repaid by our grandchildren far into the future. A properly funded and run Health Service, free to all, that does not ration health care by postcode or age, and again free of the PPP/PFI fiscal drain which benefits the private companies, not the patients, the poorest of whom are ruthlessly exploited for profit in their hours of need.

Crofters and hill farmers, who are the sturdy backbone of our rural communities, can receive aid which stops the depopulation of our rural areas.  Fishermen can rely on properly supported conservation measures that will preserve stocks, thereby ensuring they have a living and, even more important, stocks for their sons to fish in the future, protected by a small but efficient navy, army and air force.

Business people will be able to develop a vibrant economy for the benefit of all Scots, by having a business-friendly regime of lower business rates and modest taxes, and in turn can increase the wealth of the nation by trading with the entire world through innovative means such as a Scottish freeport. This is something that the great Scottish thinker Adam Smith envisaged centuries ago, and something we Scots can make a reality through efficient communications by land, air and sea to facilitate this trade - with communications planned and implemented by Scots, not some disinterested foreign government.

Ladies and gentlemen of Scotland, the future lies in your hands. We think we have made the case that the UK government has continuously deceived us for many years about Scotland's true financial situation, as for decades it has done about Scotland's oil and gas resources, now revealed by the recently released McCrone Report.  The GERS figures that purport to show that Scottish finances cannot support independence have been shown up for the work of fiction that they are.

The Great Deception is exposed. Do YOU personally still believe it?

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The work and expertise of Niall Aslen in the compilation of this analysis is fully acknowledged and credited with the profound thanks and gratitude of the Scottish Enterprise Party.

Niall Aslen reserves his Copyright. 22nd March 2007

This article may be reproduced free of charge on condition that the author's copyright and the Scottish Enterprise Party's involvement and support are both acknowledged.

The sources used in compiling this article include 1,781 pages of various publications, as follows:

The GERS Report itself http://www.scotland.gov.uk/Publications/2006/12/11084016/0

http://www.hmrc.gov.uk/stats/

http://www.oxfordeconomics.com/Free/pdfs/regcont.pdf

http://www.treasury.gov.uk/economic_data_and_tools/finance_spending_statistics/pes_publications/pespub_pesa05.cfm

(Note. You may have to cut and paste this link into your browser.)

UKOOA Annual Report 2006 (Hard copy)

Insider magazine January 2007 edition.

Institute of Fiscal Studies Report. Briefing note 9.

Economic Outlook. Regional contributions to UK Public finances. Oxford University.

Adam Smith Institute Briefing note: A Flat Tax for the UK by Richard Teather.