Scotland subsidises England? Here's how to put this nationalist myth to the test
Home rule should be seen by the SNP as a necessary first step towards independence, not an optional one
After the Scottish Parliament election returned the SNP as by far the largest party, they predictably claimed they now had a “significant mandate” to hold a referendum on independence. The argument goes that, while the SNP did not win a majority of Holyrood seats, when combined with the Scottish Greens, pro-independence MSPs now outnumber pro-Union ones by 73 to 56 (if Reform UK’s nationalist flirtations are overlooked).
This is music to the ears of supporters who believe Scotland would enter a new golden age outside the UK. A motion passed at the SNP conference in March read: “With the achievement of a self-governing and independent country coming ever closer, this conference commends and recommends to the UK Government that it commences preparations for the time to come when it may no longer be able to rely upon continuing subsidies from Scotland.”
I have to say that I find the image this creates – of allegedly ‘loadsamoney’ Scotland withdrawing its wads of cash from the rest of the UK – a rather unpleasant one. Imagine the SNP’s reaction if a Westminster party passed a motion in favour of scrapping the Barnett formula – which most accept provides generous funding to Scotland – and warning the Scottish Government to “commence preparations for the time to come when it may no longer be able to rely upon continuing subsidies from England”.
An investment, not a subsidy
At the time, the Scottish Conservatives called the SNP motion a “whopping lie” and pointed to the Scottish Government’s own GERS fiscal report, which showed public spending in Scotland was £2,578 higher per person than the revenue raised in 2024/25, a sum often referred to as the Union dividend.
It is not, however, a ‘subsidy’ from ‘England’ with most English regions similarly benefiting from the vast wealth produced by the globally important, economic behemoth that is London and the surrounding south-east.
When the Barnett formula was negotiated, there was an acceptance that Scotland had good reasons for a greater share of the UK pie than it would receive purely on the basis of its population. For example, its territorial area is bigger than the densely populated regions of England so roads and other infrastructure necessarily cost more. And it has greater problems than wealthier parts of the country – as demonstrated by shorter life-expectancies – and therefore needs more public spending on health.
It also makes economic sense for the south-east to ‘invest’ in the rest of the UK, as improving the economy as a whole should create a virtuous spiral that benefits everyone. If rich areas were to try to hoard their wealth while poor areas struggled, the resulting economic turmoil would bring everyone down.
The end of the Barnett formula
There is, of course, a way that the SNP could put these two competing claims – that Scotland ‘subsidises’ the rest of the UK or vice versa – to the test. Rather than demanding an independence referendum, nationalist politicians could first campaign for Scotland to become a fiscally autonomous part of the UK, effectively ‘home rule’ – something that English nationalists would probably welcome.
This would mean the end of the Barnett formula with all taxes raised in Scotland going to the Holyrood government, which would then pay a fee towards shared UK spending on areas like defence and foreign affairs. Everyone would then know what this halfway house towards independence was like.
It’s the sort of thing that would probably need to happen anyway as part of the transition period in the event that Scotland voted for ‘Scexit’. The key difference would be that Scotland would experience it before, rather than after, making the decision on whether to leave the UK.
The fact that the SNP are instead pressing for independence and downplaying home rule suggests they fear the electoral consequences of the latter approach. If their claim that Scotland subsidises the rest of the UK was exposed, they would presumably come up with a new nationalist myth (probably that Scotland had been short-changed in the negotiations) to try to explain this away, but not everyone would fall for it.
A decade of ‘unprecedented austerity’
Home rule would be significantly less harmful to the Scottish economy than full-blown independence, as the resulting Brexit-style barriers would inflict even greater damage, but it would still be a terrible mistake. I suspect large numbers of Scots would long for the return of Barnett formula – almost certainly in vain as once gone it would be unlikely to return.
In 2018, the Sustainable Growth Commission – set up by the then First Minister Nicola Sturgeon and chaired by independence-supporting economist Andrew Wilson – published a credible report on the economics of leaving the UK. It projected Scotland would have a public spending deficit of about 6 per cent and said efforts would be required to reduce that unsustainable figure to 3 per cent within five to ten years.
This prompted Labour and others to warn of a decade of “unprecedented austerity”, while the then co-leader of the Scottish Greens, Patrick Harvie, was moved to complain that “governments have obsessed about simplistic measures like GDP growth for far too long”. Supporting independence is considerably easier if you are able, like the hard-left, to dismiss the need for economic growth, but recessions have real-world consequences and the worst fall heaviest on the poorest.
Assuming the SNP still accept economic reality, they need to confront it. If they are convinced independence will make Scotland better off, they should regard home rule as a necessary first step in that direction, not an optional one.
If they want to skip over it, then it sounds to me like, in their heart of hearts, they know that this instructive collision between their nationalist dreams and cold, hard reality would end the independence movement, once and for all.
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