FACT CHECK: Murdo Fraser’s latest dodgy independence nonsense

“Coronavirus would have caused catastrophe for independent Scotland” – Scots Tory MSP Murdo Fraser, The Scotsman June 2, 2020

DOORSTEP ANSWER

Independent Norway is spending roughly nine times as much as Scotland on its economic package to deal with the Covid-19 lockdown. Denmark is spending roughly four times as much. Being constrained by UK Treasury rules hinders Scotland’s ability to deal with the crisis as it requires.

FRASER’S CLAIMS

On March 17, the FM declared that she was suspending the campaign for a second independence referendum for the duration of the Covid-19 crisis. This has not stopped Scottish Tory politicians from weaponising the issue in support of Unionism.

Murdo Fraser MSP in a Scotsman article on June 2 argued: “If ever there were an argument to be made about how the broad shoulders of the United Kingdom support Scotland and our economy, it has been substantially boosted by the events of the last few weeks.” He went on to specify the aid he claimed had been directed to Scotland, “a staggering £10 billion”.

Unionists like Fraser, a former party finance spokesperson, have always spoken as if Scotland was a fiscal charity case dependent on the UK for support rather than an integral partner. But for most years since 1945, Scotland has contributed a higher proportion of UK taxes than its population share, counting North Sea revenues.

READ MORE: SNP say case for independence ‘growing stronger’ after new poll

The “broad shoulders” argument Fraser advances fails on a number of counts. For most of the post-war era, UK interest rates were on average higher than in continental Europe, as a result of over-heating in the London and South East economy. This forced higher interest rates on Scotland which helped deflate the local economy and reduce growth and employment below par.

Today, the Scottish Government is severely restricted by the UK Treasury in what it can borrow to deal with a crisis. Under current rules, the Scottish Government can only borrow up to £600 million each year within a statutory overall limit of £1.75bn, for revenue purposes. This represents a little over 1% of GDP – far short of the money needed to deal with Covid-19. If anything, current spending rules are an argument for fiscal independence, not reliance on the UK Treasury.

WHAT ARE THE SNP DOING?

According to Fraser, the Scottish Government “has reprioritised a mere £255m from within existing departmental budgets for Covid-19 expenditure. To put this in context, this is from a total Scottish Government budget now in excess of £46bn in the current financial year”.

At the end of May 2020, the Scottish Government substantially revised its budget in the light of the crisis. This revision allocates £4.01bn of expenditure specifically to the Covid-19 emergency – nearer 9% of the £46bn budget Fraser refers to (which appears to be the pre-coronavirus budget forecast for 2020). This extra includes a £2.3bn package of support for business, an additional £620m for health and care services, and £358m for transport.

Fraser is correct to say that most of this extra Scottish Government spending has been funded by a £3.5bn increase in the block grant. But we should note in passing that this cash – like all UK Government extra spending on Covid-19 – comes not from UK taxes or borrowing, but from an overdraft facility advanced to the UK Treasury by the Bank of England. In other words, the UK Government essentially is printing money to fund itself. Any independent nation with a central bank and its own currency could do likewise.

Fraser berates the Scottish Government for providing only £255m of extra Covid-19 expenditure from within its own existing budget resources. Naturally, he declines to suggest where such savings might be made. However, Fraser misrepresents and understates the degree to the Scottish Government has rejigged its existing budget to cope with the crisis. The £255m figure is a net sum representing additions or switches between departments. However, internal departmental budgets have also been reorganised in significant measure to focus on the crisis.

This is detailed in the Summer Budget Revision statement published on 27 May, with the health and economy portfolios seeing major internal amendments. In addition, nearly a billion pounds has been reassigned to cope with the anticipated shortfall in non-domestic rates, as a result of the economic downturn. The new total Scottish Government budget is £52bn (not Fraser’s £46bn).

WHAT IS THE RESPONSE IN ARE OTHER SMALL COUNTRIES?

Norway plans to spend an extra £36bn of its saved oil wealth this year to tackle the Covid-19 crisis. That’s close to 10% of GDP and includes £8bn in support to local businesses. Norway has also promised nearly £1bn to support the distribution worldwide of any vaccine developed against Covid-19. Compare this level of support with the £4bn Scotland is able to spend. Fraser may be content with the “broad shoulders” of the UK Treasury, but independent Norway’s sovereign wealth fund, set up in 1990 to preserve the nation’s oil and gas wealth, has an accumulated value equivalent to £160,000 for each of Norway’s 5.3 million people.

Denmark (which does not have a sovereign wealth fund) has announced a £12bn emergency package to help businesses affected by the pandemic and lockdown – three times the Scottish figure. Companies that pay out dividends or are registers in tax havens are not eligible. Denmark is funding this rescue package through borrowing. Danish government bonds have the highest AAA security rating.

Unfortunately, the Scottish Government is precluded from such borrowing under UK Treasury rules – a point Fraser neglects to mention.

FACTCHECK RATING:

Yet another own goal from Murdo.



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