Revealed: The ACCOUNTING TRICK that Hides Scotland's Wealth (2023)

Every Westminster Government in your lifetime has knowingly diverted tens of billions of pounds of Scottish revenues to Westminster. This has led to lower investment in Scotland, higher unemployment, lower economic growth, lower standards of living, economic migration and growing inequality and poverty. All of which would not have been the case were Scotland an independent country.

Internationally, this is the sort of government behaviour that often leads to demonstrations and makes headline news. This might have happened here if it wasn't for the fact that the Scottish people have largely remained unaware of the nation's wealth draining south. In this article, we will expose the accounting trick that hides Scotland's wealth. We will also supply undeniable evidence to demonstrate that if Scotland was already an independent country our economy would be booming and public finances would be debt-free.

The confidence trick

For generations, the people of Scotland have been fed a negative narrative on Scotland's economy. A depressing picture of Scotland has been drawn by Westminster politicians, portraying it as a subsidised state dependent on the UK for charitable handouts, with higher levels of debt and a dependency on the public sector. Scotland has been told that without the generosity of the UK to bail it out, it would be a bankrupt nation, unable to meet the very basic needs and wants of its people.

This narrative is fundamentally untrue. There is simply no evidence to support it whatsoever.

So manifestly untrue, in fact, that all the available economic data entirely contradicts the age-old, absurd and tired Westminster proposition that Scotland could not succeed as an independent self-governing country.  The "too small, too poor and too stupid" argument has become so completely discredited that none of the major players in the 2014 No Campaign dared to suggest it.

Politicians have retreated from suggesting that "Scotland's economy is a basket case" as the truth is now easily sourced. The UK Government hid evidence, such as the McCrone Report, classified as top secret for 30 years by the 1970s Labour Government but is now publicly available. The report states that "the SNP had underestimated the nation's oil wealth" and that an independent Scotland would "suffer from an embarrassment of riches".  That report was written in 1974 and classified as "secret" due to worries about "restless natives" if its facts were known by the masses in Scotland.  It was eventually made public only after a Freedom of Information Act request in 2005.

A few years ago the former Chancellor Denis Healey in an exclusive interview with Holyrood Magazine said:

"Scotland “pays its fair share” and that “these myths” are simply perpetuated by those that oppose independence". And that "Scotland's oil wealth had been squandered by Westminster rather than invested, while being underplayed (in value terms) by the UK government to subdue calls for Scottish independence".

It’s not all about oil though, as is made remarkably clear from the evidence in our publication Scotland the Brief.Scotland has everything that it takes to be an extremely prosperous and successful independent nation, and more. Scotland with only 8.1% of the UK population 4 possesses between 17-34% of the UK's natural wealth.

This prompts the question – why does a naturally wealthy nation with a strong, resilient and diverse onshore economy, booming exports, a highly educated population, low unemployment, a wealth of oil and renewables, and a wide range of strong economic sectors have a set of accounts (GERS) that suggest that Scotland’s finances are weak? That is a trick question, it doesn't. GERS is not a set of accounts for spending in Scotland; it contains spending outside of Scotland that doesn't benefit Scotland's economy and that Scotland didn't generate. GERS also contains clear evidence of mechanisms for removing wealth from Scotland’s accounts which then creates a phoney deficit. There are actually several hidden mechanisms for stealthily removing Scotland's wealth. The one we will look at in this article is debt loading.

How debt loading works

There is an expenditure line in GERS called Public Sector Interest Expenditure (PSI). It is sometimes the fifth or sixth largest expenditure by the Scottish Government and is sometimes larger 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 (2018-2023), PSI has added £30.2bn - an average of £6bn per year to the cost of running Scotland 436.

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 (and earlier historical data) that go back 42 years, Scotland’s share of UK debt interest amounted to a staggering £156.7bn. However, analysing those figures also demonstrates that, for much of that time, Scotland's accounts (even with the debt loading) actually showed a surplus. Were Scotland an independent country that launched an oil fund, as norway did, without the costs of servicing the UK's debt, then Scotland's entire borrowing requirements over those 42 years could have been zero, as any borrowing requirements could have been met with profits from the fund.Scotland’s accounts have had £156bn (one-hundred and fifty-six billion 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 £156bn cost, Scotland’s finances would be in surplus today.

If we look back as far as reliable historical figures for Scotland’s revenues and expenditure go, we can see that in 1980-81, before the UK debt started to spiral, Scotland was charged £1.2bn to service the UK debt. Despite that, it managed to record a surplus of more than £1bn. Indeed, using GERS, Scotland’s finances showed a surplus until 1990, when the cumulative surplus amounted to £34.5bn (£54.3bn surplus without debt loading) 438.

It is undeniable 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, similar to Norway’s.

Let’s explore three alternative scenarios for how an independent Scotland could have managed its finances.

What the UK Government claims happened 


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 £282.8bn 439.

The UK debt is a mind-blowing £2,636.9bn, equivalent to 101.2% of GDP 440. Let’s be clear: UK debts have been growing steadily over those 42 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 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 £156bn 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, what could Scotland have done with those surpluses?

What’s the daftest thing Scotland could have done? 

Assuming that an independent Scotland would not have gifted its massive surpluses to another country so that the other country could pay down its debts, what is the lowest rate of return an independent Scotland could have received on those 1980s surpluses? What if an independent Scotland’s government had been so daft, so absolutely incompetent, that it could not figure out how to invest those massive surpluses, and as a result, did nothing with them but stuff them into a bank and let them gain interest at the standard market rate? 

Even in this case, that government would have had to have made significantly worse economic decisions, and more mistakes than Westminster did in running Scotland’s economy, to not see significant growth and better finances than those Scotland experiences as a part of the UK. What if we also assume the worst, and that even without those debt interest payments holding Scotland’s economy back, Scottish Government revenues didn’t rise, and that the economy grew much more slowly than other European nations with comparable populations, what would have happened? Note: we are making this as negative a projection as is humanly possible.

Well, those cumulative surpluses, plus standard bank rates of interest, would have grown until Scotland had £397bn in that bank account today 441.

Yes, that’s right, the daftest thing Scotland could have done as an independent nation would have left Scotland at least £680bn better off today than GERS currently suggests Scotland is, as part of the UK.

What would Norway have done?

Let’s assume Scotland’s government just banked the early surpluses until it noticed Norway was starting an oil fund and decided to copy it. Applying the same annual rates of return that Norway received on its investments since 1998/99, Scotland’s national oil/wealth fund would now be worth £788bn 443.

Remember that Norway is a small-to-medium-sized independent Northern European nation, with roughly the same population size as Scotland and has produced roughly the same amount of oil and gas. Norway’s sovereign wealth fund today is worth £1.1trn 444. That’s a lot more than I am suggesting Scotland’s would be worth because I have used the low revenues that the UK’s mismanagement of Scottish oil and gas resources generated, not the much higher Norwegian ones.

Over 42 years, the cost to Scotland of being part of the UK in monetary terms, if our government was almost as competent as Norway’s, is almost £1 trillion 445. That’s the difference between what Norway would have done and what the UK Government did with our surpluses. And people wonder why we have the second-worst pension in the developed world. Yet, the UK Government thinks it can’t afford to pay more.



It's fairly simple and becomes extremely obvious when you have access to the data. The UK Government has diverted Scotland's wealth to the UK Treasury to pay off its debts.  Thus it creates 100% of Scotland’s supposed debts and 100% of its phoney deficit.

The daftest thing Scotland could have done as an independent nation would have left Scotland at least £680bn better off today than GERS falsely suggests it is as part of the UK. However, had the Government of an independent Scotland simply copied Norway, then Scotland would now be £1 trillion (trillion pounds) better off than GERS suggests.

This is the impact of Westminster's debt loading alone, and upon that accounting trick, rests the entire economic case for the Union. There must be a better explanation to the people of Scotland about what GERS actually says and that Scotland does not have a deficit.

So would an independent Scotland have to pay the rUK a population share of the UK's historical debt?  No - there is in fact a very strong case for Scotland to be compensated for having already paid more than its "fair share" of the UK's debt, whilst being told that wasn't the case by consecutive Westminster Governments.

The research findings referred to in this article are contained in our book. You can purchase your copy of Scotland the Brief here.

Note: The research above was first carried out nine years ago but is updated every year. The figures and graphs have been updated and republished on December 7th 2023 to include the GERS most recently published for 2022/23.