The UK Levies More Taxes on Scotland and Discriminates Against it in Subsidies

Ian Blackford, Leader of the Scottish National Party in the House of Commons, has said that British Government statistics show that Scotland has been subsidising the rest of Britain for more than 40 years.

According to Ian Blackford, Leader of the Scottish National Party in the House of Commons, Scotland has been subsidising the rest of Britain for more than 40 years. This means that Scotland not only did not receive subsidies from the United Kingdom, but also subsidised it in addition to paying higher taxes.

This statistic  dates back to 2013 and has not been updated since. One can guess why the British Government does not update this statistic. Britain seems concerned about renewed protests and calls for Scottish independence. The Scottish National Party is seeking to open the Scottish independence case before the general election and is calling for a second referendum. The last one was held in 2014.

The growing perception of tax discrimination in Scotland raises a number of issues that, if left unaddressed, could strengthen the Scottish independence movement. Some of these are listed below:

  1. North Coast Oil

North Sea oil and gas assets off the coast of Scotland are subject to higher income tax. This means that Scotland pays more taxes to Britain. But when it comes to subsidies, Britain receives more subsidies than Scotland. Estimates of per capita income in Scotland and England in both the oil and non-oil sectors show that per capita income in Scotland is lower than the UK average.

Black gold did not benefit the impoverished areas of the oil capital, Scotland. Instead, profits go to wealthy suburbs and multinational corporations, while tax revenues go to Whitehall. The proponents of independence in Scotland are now more concerned than ever about why Scotland is poorer than elsewhere in the UK. Now, given Scotland’s geographical share of oil assets, the question is whether the British Government, if it approves Scottish independence, would agree to the transfer of these North Sea oil and gas assets to Scotland, something that has never happened before. Johnson has postponed the division of assets and liabilities until post-independence talks. Scotland’s income comes from both the energy and non-energy sectors. But falling oil prices have diminished its importance. However, Scotland’s almost 40% increase in non-oil revenues added to Scotland’s confidence to become independent.

  1. Scotland Worries About Britain Leaving the EU

The Scots equate Britain’s exit from the EU with a major recession. They tried to retain EU citizenship by staying in the UK, but that promise was broken.

  1. British Discrimination in Healthcare Allocation

The outbreak of the coronavirus in the UK and the allocation of lower healthcare costs  to Scotland seem to have pushed Scottish public opinion in favour of independence.

According to some reports, tax revenues have been higher from Scotland than the rest of the UK (for 30 years). But a large percentage of Scotland’s population lives in poverty compared to England. The number of children growing up in poverty is much higher in Scotland. There is also a large difference in life expectancy between Scotland and England.

  1. Discrimination in Estimating Public Costs

Estimates of Scottish and British public spending show an increase in public spending in the UK, but it has remained the same in Scotland. This is another reason for the increase in protests and calls for independence. In contrast, spending as a share of the GDP fell with the exception of the North Sea in Scotland.

With a change in British law, the Scottish Parliament gained control of income tax and changed its tax regime. This change means that under the new tax scheme tax rates in Scotland are higher than England and the Scottish people pay higher rates on their taxable income than anywhere else in the UK. Scottish taxpayers, for example, lose their marriage benefits as a result of the new tax system, which would not have happened if they lived in England.

In the new Scottish Budget, there will be no divergence between Scotland and the rest of the UK. But the UK’s Personal Allowances for Scotland and the above tax rates law will not change. So there is an element of uncertainty for Scottish taxpayers until the British Government submits its full financial statement.

  1. Failure to Calculate Military Expenditure in Public Spending

One of the manifestations of Scotland’s assistance to Britain, and not the other way around, is its military funding, which, if Scotland becomes independent, will receive its share of British military assets, and its membership in NATO will be unimpeded for its security. Scotland will have to pay the membership fee if it joins NATO, but it will pay less than it does Britain.

According to British news and official documents, even if we take into account the oil revenue of the North Sea, Scotland costs more than Britain. So even Britain loses. While they do not calculate defence costs. This means that money is not spent in Scotland alone. This is a computational scam.

Another problem is that Scotland receives its share of the budget from the UK as aid and subsidies, and the costs of social security and the entire British military budget are calculated in the subsidy paid to Scotland.

In fact, the British Government probably does not take these costs – which fall under the category of unrecognizable costs – into account intentionally.

More spending in Scotland has become a British excuse for tax increases. Even if we accept that Scotland costs more than Britain, per capita spending in Scotland is still higher than in the rest of England.

  1. Unfair Ratio Between Population and Services

Scotland is less densely populated than many other parts of the UK, making it more expensive to provide services on the same level for education and health.

Another reason for public services in Scotland compared to the rest of Great Britain. Things like water supply and sanitation are public services in Scotland while this has been privatised in other parts of the UK.

These issues stem from the British public sector budgeting mechanism, which is a function of Barnett’s formula. The vast majority of people, politicians and the media in Britain seem to think that the Barnett formula shows that Britain is subsidising Scotland.

The Roots of Discrimination

The Barnett formula for allocating budgets and resources is based on population share. For example, if the British Government spends an extra $10 million on health in the UK, the Scottish Government will receive 9.7% of it because the Scottish population is equivalent to 9.7% of the UK  population. But Barnett’s share of the British budget does not necessarily provide a level playing field in Scotland.


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