Yesterday, I wrote a post:

Never mind Barnett, the Lower Thames Crossing to cost Scots taxpayers between £300m and £1bn!

The full AI-assisted argument is at: https://talkingupscotlandtwo.com/2026/07/12/never-mind-barnett-the-lower-thames-crossing-to-cost-scots-taxpayers-between-300m-and-1bn/

In a comment, rogercolkett wrote

While it’s clear that the UK government tends to spend more on big projects in the south of England than elsewhere, it’s not true that Scots are paying for it through their taxes. UK government expenditure is not funded by taxes or anything else. UK government expenditure works by instructing the Bank of England to create the money required and credit it to the relevant payee, just as when one takes out a high street bank loan that bank creates the money and credits it to our account. The big difference is that, whereas the high street bank also creates a debit in our name for the same amount as the credit and when it is finally paid off the money lent has been withdrawn from the economy, the Bank of England doesn’t have to hit the UK government with a balancing debit as the government owns both the Bank of England and the currency. There are several reasons for taxation, one of them being the validation of the currency by only accepting payment in that currency, and another being the withdrawal of money from the economy to reduce the risk of inflation, but funding expenditure isn’t one of them.

If you don’t believe all this, ask the Bank of England.

Below that Capella wrote:

Doesn’t it amount to the same thing?

If the UK government creates billions and pours it into the economy of SE England, does that not risk increasing inflation? So if then the UK government raises taxes from the whole UK to remove money from circulation to control inflation, we are paying to reduce the inflation rather than paying to fund the tunnel directly.

SE England gets the infrastructure, Scotland (and everyone else) pays to keep inflation down?

I was a prof of media politics, the above is beyond my expertise by some way though I still thought something like that which Capella wrote.

Today, I asked AI:

Does this argument mean that Scotland is not in any way disadvantaged by UK Treasury spending on capital projects like the Lower Thames Crossing – ‘

While it’s clear that the UK government tends to spend more on big projects in the south of England than elsewhere, it’s not true that Scots are paying for it through their taxes. UK government expenditure is not funded by taxes or anything else. UK government expenditure works by instructing the Bank of England to create the money required and credit it to the relevant payee, just as when one takes out a high street bank loan that bank creates the money and credits it to our account. The big difference is that, whereas the high street bank also creates a debit in our name for the same amount as the credit and when it is finally paid off the money lent has been withdrawn from the economy, the Bank of England doesn’t have to hit the UK government with a balancing debit as the government owns both the Bank of England and the currency. There are several reasons for taxation, one of them being the validation of the currency by only accepting payment in that currency, and another being the withdrawal of money from the economy to reduce the risk of inflation, but funding expenditure isn’t one of them.’

Its long answer in only 4 secs(!) suggesting this is a well-known debate:

No, this argument does not fully resolve whether Scotland is disadvantaged by UK Treasury spending on England-centric capital projects like the Lower Thames Crossing. It draws on elements of Modern Monetary Theory (MMT), which offers a valid description of operational mechanics in a sovereign currency-issuing country like the UK, but it sidesteps important macroeconomic, political, and distributional realities. https://www.investopedia.com/modern-monetary-theory-mmt-4588060

Operational Mechanics: Partially Correct

• The UK government (via the Treasury and Bank of England) does instruct the creation of central bank reserves (electronic money) to fund spending. Parliament authorises expenditure, and the Bank of England credits accounts accordingly. Taxes and borrowing (gilts) then manage the resulting reserves, demand, and inflation risks. The government cannot “run out” of its own currency in the same way a household or business can. https://99-percent.org/can-we-afford-mmt/
• Taxes serve purposes like anchoring the currency’s value (must be paid in £), managing inflation by withdrawing money, redistributing resources, and incentivising/discouraging behaviours — not “funding” spending in a literal pre-spending sense.

This is how the system works day-to-day, and MMT highlights it usefully against overly simplistic “taxes pay for everything first” narratives.Why It Doesn’t Eliminate Disadvantage for ScotlandHowever, this doesn’t mean location-specific spending (e.g., £3.1bn+ public money for the Lower Thames Crossing in southeast England) has no opportunity costs or fiscal implications for Scotland:

1. Real Resource and Opportunity Costs
   Spending on any project uses real resources (labour, materials, land, engineering capacity). Directing them to one region means they are not available elsewhere. If the UK government prioritises southern England infrastructure, it crowds out potential spending in Scotland (or other priorities) within political and inflation constraints. MMT acknowledges inflation risks from excessive spending; prioritising one area’s projects affects the overall fiscal space.
2. Political and Budgetary Allocation
   UK government decisions on what to spend (and where) are political. The Barnett formula and block grant system exist precisely because of devolution and fairness concerns. Scotland gets automatic consequentials for many comparable English spending increases, but as discussed previously, classifications for big capital projects (Olympics, HS2, LTC) can limit or delay this. Even if “money is created,” the choice to allocate it south reduces pressure for equivalent Scottish projects. Scotland’s fiscal framework ties much of its funding to UK-level decisions.
3. Inflation, Debt Sustainability, and Broader Constraints
   While the government creates money for spending, sustained deficits without corresponding tax or productivity growth can lead to inflation, higher interest rates, currency pressure, or political limits (bond markets, Bank of England independence, fiscal rules). UK borrowing and debt interest are real (even if in its own currency), affecting future budgets. Critics of MMT (mainstream economists) argue it underplays these risks and the role of taxes/borrowing in sustainable policy. https://blogs.lse.ac.uk/lsereviewofbooks/2026/05/11/why-cant-we-just-print-money-debunking-the-myths-of-modern-monetary-theory-print-money-pay-taxes-emmanuel-maggiori/
4. Inter-regional Equity and Union Dynamics
   Scotland contributes to the UK tax base (via reserved taxes like income tax on higher earners, VAT, etc.) and benefits from pooled UK spending in areas like defence, foreign policy, and monetary stability. However, if capital investment is disproportionately directed to London/southeast England (a long-standing pattern), Scotland can be relatively disadvantaged in infrastructure, productivity, and economic opportunities — even if “taxes don’t fund spending.” This fuels debates about fiscal transfers, the Barnett formula’s adequacy, and independence arguments. Empirical data shows higher per capita public spending in Scotland, but debates persist on needs vs. outcomes.

In short:

The MMT-style argument correctly describes how spending is executed but doesn’t erase distributional choices or opportunity costs. Scotland is affected by where UK capital spending goes, through political priorities, resource allocation, and the mechanics of devolved funding. Whether this constitutes a net “disadvantage” depends on one’s view of the union’s overall fiscal flows, which are contested (Scotland often receives higher per capita spending overall, but critics highlight underinvestment in Scottish infrastructure relative to needs). The Lower Thames Crossing debate fits this pattern: public money supports an England-focused project, with private finance hoped for the rest — and Barnett effects are indirect/partial at best.

So put simply, in the end, Scotland still pays for a capital project it does not benefit from?

Yes, put simply: Scotland contributes to the cost of capital projects like the Lower Thames Crossing that it does not directly benefit from.

How Scotland “Pays”

• Via UK-wide taxation and fiscal transfers: Scottish residents and businesses pay UK taxes (income tax, VAT, National Insurance, corporation tax, etc.). A portion of this revenue supports the UK government’s overall budget, including the ~£3.1 billion+ public funding committed to the LTC. Even under operational realities where the Bank of England creates reserves for spending, taxes withdraw money from the economy and help fund/manage the government’s balance sheet over time.
• Opportunity cost in the UK budget: Every pound spent on the LTC (or similar England-centric projects) is a pound not spent elsewhere. Political decisions on priorities affect Scotland indirectly through the overall fiscal envelope and devolved block grant adjustments.
• Limited or partial offset via Barnett: Scotland may receive some consequential uplift in its block grant if the spending is classified as comparable, but for projects like the LTC (England-focused road infrastructure), this is often incomplete, delayed, or disputed — similar to past cases with the Olympics or aspects of HS2.

Important Nuances

• Scotland is a net beneficiary of the UK’s overall fiscal union in per capita public spending terms (higher spending on health, education, etc., than its tax contribution in recent years). However, this doesn’t erase grievances about where capital investment goes — southeast England has long received a disproportionate share of major infrastructure.
• The LTC’s model (public seed funding + private finance via tolls) aims to reduce long-term taxpayer burden, but the upfront public commitment still draws from the shared UK pot.
• This is a political and distributional issue within the union, not a strict “Scotland subsidises England” one-way street. Many large UK projects (defence, research, etc.) benefit the whole country unevenly.

In essence, yes — Scottish taxpayers and the Scottish economy contribute without direct benefit from this specific project, which is why such spending often sparks debate about fairness, devolution, and fiscal autonomy.

I had to take issue with Grok on that ‘Scotland is a net beneficiary of the UK’s overall fiscal union in per capita public spending terms (higher spending on health, education, etc., than its tax contribution in recent years).’

Its response was an interesting example of how AI makes mistakes but also how it reacts to correction. Try that with some profs out there.

Is Scotland’s higher spending on health education etc an important ‘nuance’ in that it is not a grant from the UK treasury or UK government but an internal decision by the devolved Scottish government on the distribution of funds from a block grant often criticised as inadequate?

Yes, that’s a fair and important clarification. Scotland’s higher per capita spending on devolved areas like health, education, and social care is primarily an internal decision by the Scottish Government on how to allocate its block grant (and limited devolved tax revenues), rather than a direct “grant from the UK Treasury” as extra benevolence.