GERS reaction - a deterioration of the net fiscal balance mostly driven by higher devolved expenditure

13th August 2025

Fraser of Allender looks at the deficit showed in the GERS report today.

Higher devolved expenditure is the main driver of the widening deficit.

Scotland's net fiscal balance is 1.9% of GDP worse in 2024-25 than it was in 2023-24, but it is worth looking at what is driving this. We have already seen that North Sea revenues have added 0.4% of GDP to the deficit; reserved expenditure also adds 0.2% of GDP to that figure.

Reserved revenues (excluding North Sea) fell by 0.8% of GDP relative to the previous year, largely as a result of the cut to employee National Insurance Contributions announced in March 2024. Devolved tax revenues near-enough offset this, with Scottish Income Tax accounting for the lion's share of this increase, although Land and Buildings Transaction Tax revenues also rose by nearly 20%.

But it was the spending side that accounted for most of the deterioration in the fiscal balance. UK Government spending rose by 0.2% of GDP, but it was the 1.2% of GDP increase in devolved expenditure that accounted for most of the 1.9% that the net fiscal balance fell by.

Read the full article HERE