Covid-19, the UK and Scotland’s Post Fiscal Position

I’m sure many of you are aware of the business “guarantees” (Loans) that the Chancellor has announced.  If not, there will be £330,000,000,000 made available in the form of low interest loans to businesses.

A loan must be repaid.  In this case I believe it is starting 6 months after the loan is taken out.


On that basis, lets hypothetically say the interest rate is 1.5%.  That gives a rudimental return to the UK Treasury of £4,950,000,000, plus the initial £330,000,000,000.  A total return of £334,950,000,000. or around 15% of GDP.

Now the fun starts.

GDP will drop due to Covid-19.  That much is absolutely certain, and as a result, Scotland, and the rUK will reduce their tax take.  With that in mind, the UK Government has issued these loans, which will count towards GDP when they are taken out and start being repaid.

So lets hypothetically say that Covid-19 reduced UK GDP by about 15%.  These loans will increase GDP by the same amount, and as such, the UKG will be able to demonstrate that its GDP hasn’t actually been badly that affected by Covid-19.

Scotland will not be able to do the same.

Scotland’s GDP will shrink, lets say, as above by 15%.  The loans that are issued by the UKG will be repaid to the UK Treasury, and will count, not as Scottish GDP increases, but as UK GDP increases.

This increase, will not be reflected in GERS.

Furthermore, these loans are tax payer funded.  That means, Scotland is paying an equivalent of 8.2%, or a little more than £27,000,000,000 towards the cost of these loans.  That’s almost our entre annual block grant.

But here is the catch.  We have no Treasury in Scotland.  The loans are with the UK Government, not the Scottish Government, and the debt is the UK Governments, but Scotland is always provided with its “fair share of debt”.

So here we are, in a position where the UK GDP will be artificially inflated, Scotland’s GDP will drop, and we will be given twice our “deficit” in new debt, without the ability to receive repayments to service that debt.

The UK Government could have printed money in the form of QE and given it as grants to UK businesses, thus not requiring repayment, but they chose not too.  Alternatively, they could have introduced a Universal Basic Income for all citizens on a temporary basis, but they chose not too.

Instead, they chose to issue loans to artificially inflate the economy and reduce the likelihood of a serious financial crash, whilst piling on the debt to Scotland and providing years of ammunition for the Union to further slander the Scottish economy.

Some hardcore Unionists think the Chancellor just destroyed Scottish Nationalism.  I suspect that when people realise what has just happened and how that is going to affect us over the next 12-18 months, the Chancellor will have just destroyed British Nationalism in Scotland.

Now all we need is the Scottish Government to start discussing and making a noise about this so that people can see the petty accounting trick for what it is.

You’ve just got to love this Union…