Ed: Following in the tradition of War and Peace in 186 words [foot] here’s, spookily, Debt Loading in 816! Numerology alert!
Gordon MacIntyre-Kemp has written a piece specifically on Debt Loading – part of why GERS figures show a deficit when there actually isn’t one for Scotland. It’s a fairly long article, so I have just extracted some of the paragraphs that explain how Scotland paying off interest on the uk debt – which is not our debt – makes Scotland’s economy look far worse than it actually is – it is an accounting trick. A lot more information here if you would like to delve further (and some nice graphs):
“How debt loading works
There is an expenditure line in GERS called Public Sector Debt Interest (PSDI). It’s the sixth largest expenditure of the Scottish Government and a larger spend than Scotland’s allocated share of the UK Armed forces expenditure. Historical analysis of GERS reports demonstrates that every year since records began, Scotland has been paying interest on a population share of the UK’s debts. In the last five years (2014-19), PSDI has added £16.2bn – an average of £3.241bn per year to the cost of running Scotland.
That’s not paying back the capital on any debt, it’s just the interest on the UK’s debt. Scotland has recently been granted very limited borrowing powers, but while the UK’s debt was being built up Scotland had no borrowing powers. In fact, Scotland’s economy was either in surplus, or had a lower deficit than the UK, so Scotland did not contribute to the creation of the debt.
How does a nation without the ability to borrow end up paying billions of interest on debt every year? It does so because the allocation of the debt is not related to the UK region or nation which generated the debt, nor where the money was spent or the economic benefit felt. The UK’s debt is allocated to Scotland’s accounts on a population percentage basis, even though Scotland did not generate that debt.
Looking at Scotland’s GERS reports that go back 39 years, Scotland’s share of UK debt interest amounted to a staggering £126bn. However, analysing those figures also demonstrates that, had Scotland been an independent country, its entire borrowing requirement over those 39 years would have been zero. Let me be clear: nothing, not one penny.
Scotland’s accounts have had £126bn (one-hundred and twenty-six thousand million pounds) of interest on debt removed from them, despite the fact that Scotland did not generate, nor benefit from this spending. This has happened simply because it is not an independent nation and had to chip in to service the rest of the UK’s rising debts. Without that £126bn cost, Scotland’s finances would be in surplus today.”
“Scotland was part of the UK and so past Scottish surpluses went to the UK Treasury, meaning that Scotland was actually subsidising the UK. Over time, the burden of the UK debt payments on Scotland’s economy started to weigh it down. This meant that the surpluses falsely looked like they declined during the 1990s and the cumulative surpluses were eaten up by UK debt-related deficits. As a result, the GERS reports now show a cumulative, but phoney, deficit of £170.5bn.
The UK debt is a mind-blowing £1,821.3bn, equivalent to 85.2% of GDP. Let’s be clear: UK debts have been growing steadily over those 38 years. Any budget allocated to Scotland’s accounts in that time that is of a higher value than Scotland’s revenues is not a subsidy, it is a loan that Scotland has to pay the interest on. A loan that Scotland only seemed to need because it was subsidising the rest of the UK and much of those loans was spent outside of Scotland and did not benefit Scotland.
It is a fact that as an independent nation Scotland would have possessed those cumulative surpluses of £72.6bn and could have chosen to re-invest in Scotland’s economy. This would have grown Scotland’s economy significantly quicker than what has happened under Westminster management. An independent Scotland would not have accrued the £126bn of debt interest charges as it wouldn’t have needed any debt of its own.
That is why you can’t use GERS as an argument against independence. Allocating interest charges on debt that Scotland did not generate allows GERS to show a deficit. GERS assumes that those surpluses disappeared into thin air, and that could not have happened. It is an undeniable fact that in an independent Scotland those surpluses would either have been invested to grow Scotland’s economy or possibly put into a sovereign wealth fund for the future benefit of our nation, as Norway has done.”
So, with no borrowing powers, Scotland could not gave accrued debt, and even as a region of the U.K., it has always been in surplus. Even under the worst governance imaginable in an independent Scotland, we would have been better off than we are now. All GERS ever shows is how badly the Union has failed Scotland.