August 15 2026 - 8:00am
He who pays the piper calls the tune — except, perhaps, in Scotland. The country’s latest spending and revenue figures show that Scotland spends a record £2,720 more per person than the UK average. In other words, UK taxpayers are effectively sending cash to the Scottish Government to help pay for higher public-sector wages, more generous welfare benefits, and to fund NGOs and charities that support SNP policies.
As well as being a nice little earner, it also provides a great deal of potential votes. For nearly 20 years, the Nationalists used generous fiscal transfers from the UK Exchequer to coddle their public-sector and welfare client groups. In a fragmented political landscape, this has provided a bedrock of support for the SNP in successive elections.
This Union dividend, as Labour used to call it, lacks any real justification in terms of need. It was drafted on the back of an envelope by the Labour treasury minister Joel Barnett in 1978. And where does it go? The Scottish public sector accounts for 23% of workers in Scotland against 18% for the UK as a whole. They are paid more, too. Between 2019-24, public-sector pay rose by 5% in real terms in Scotland, according to the Institute for Fiscal Studies, while it remained flat across the UK. Meanwhile, welfare spending per head also sits at 12% more than in England. This is largely because of generous devolved benefits, such as the Scottish Child Payment of £28 a week, which is unavailable to families in England.
The Scottish Government also spends around £1 billion on the voluntary sector, including funding for SNP-friendly lobbying groups such as Stonewall and the Equality Network. Students, who often vote SNP or Green, have benefited from free tuition in Scotland.
It is crude psephology, but if you add together the 600,000 public-sector employees, 130,000 third-sector workers and almost 200,000 students, and combine this with well over a million individual claimants across 17 devolved benefits, there are a lot of potential voters. It turns out that half of the Scottish electorate is reaping the rewards of SNP largesse.
Of course, they don’t all vote for the party, and many categories overlap. But it doesn’t take a genius to see why the SNP might be interested in keeping public-sector wages higher than in England and being more generous with welfare benefits.
And who pays? Well, a lot of it comes from UK taxpayers. Scotland’s notional deficit — spending minus revenues — declined marginally last year. However, it is still more than twice the UK’s. Andy Burnham is on record as saying the Barnett formula should be reviewed.
Yet, despite the Barnett bonus, and despite higher income taxes in Scotland for higher earners, which yielded an extra £1.5 billion last year, the Scottish Government remains in a parlous financial state. It is spending up to £5 billion a year more than it receives, according to Audit Scotland.
If this isn’t gross fiscal mismanagement, it’s hard to know what is. But the Nationalists will always claim that this mismanagement is all Westminster’s. In an independent Scotland, all would be for the best in the best of all possible worlds.
Iain Macwhirter was political commentator for The Herald between 1999 and 2022, and is the author of Disunited Kingdom: How Westminster Won a Referendum But Lost Scotland. He was Rector of the University of Edinburgh from 2009-12.
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