Tag: growth

Chancellor vows ‘big bang on growth’ to boost investment and savings

BETTER-OFF BRITAIN?

  • Chancellor launches landmark review to boost investment, increase pension pots and tackle waste in the pensions system.
  • New Pensions Bill confirmed in King’s Speech could boost pension pots by over £11,000, with further consolidation and broader investment strategies to potentially deliver higher returns for pensions.
  • An investment shift in defined contribution schemes could deliver £8 billion of new productive investment into the UK economy.
  • Action will be taken to unleash the full investment might of the £360 billion Local Government Pension Scheme to make it an engine for UK growth.

The Chancellor Rachel Reeves has announced a landmark pensions review as part of the new Government’s mission to ‘boost growth and make every part of Britain better off’.

Under plans unveiled by the new Chancellor, billions of pounds of investment could be unlocked in the UK economy from defined contribution schemes alone and pension pots for savers in defined contribution schemes could be boosted by over £11,000.

The Review will also, working closely with the Minister of State at MHCLG, look at how to unlock the investment potential of the £360 billion Local Government Pensions Scheme, which manages the savings of those working to deliver our vital local services, as well as how to tackle the £2 billion that is being spent on fees.

The announcement comes ahead of the first Growth Mission Board on Tuesday. This will be chaired by the Chancellor and drive the Government’s work to achieve the highest sustained growth in the G7. New measures have already been announced to fix the planning system, the creation of a new National Wealth Fund and the overhaul of the listings regime to boost UK stock exchanges.

The work announced today – focusing on investment – is the first phase in reviewing the pensions landscape and will be led by the first ever joint Treasury and Department for Work and Pensions Minister, Emma Reynolds (Minister for Pensions). The next phase of the review starting later this year will consider further steps to improve pension outcomes and increase investment in UK markets, including assessing retirement adequacy.

The Chancellor and the Pensions Minister will chair a roundtable with the pensions industry on Monday to start intensive industry engagement for the Review.

Chancellor of the Exchequer Rachel Reeves said: “Despite a very challenging inheritance, this new Government is getting on with the job of delivering our mandate to get the economy growing so we can make every part of our country better off.

“The review we are announcing is the latest in a big bang of reforms to unlock growth, boost investment and deliver savings for pensioners. There is no time to waste. That is why I am determined to fix the foundations of our economy so we can rebuild Britain and improve people’s lives.”

Deputy Prime Minister Angela Rayner said: “After putting in years of hard graft serving their communities, the very least our frontline workers deserve – millions of whom are low paid, millions of whom are women – is dignity and security in retirement.

“That’s why we want to make sure their hard-earned money works harder for them so we ensure they receive the pensions they have earned, whilst unlocking growth across our economy.”

Pensions Minister Emma Reynolds said: “As the first ever joint Treasury and DWP Minister I am uniquely placed to tackle the twin challenges of productive investment and retirement outcomes.

“Over the next few months the review will focus on identifying any further actions to drive investment that could be taken forward in the Pension Schemes Bill before then exploring long-term challenges to ensure our pensions system is fit for the future.

“There is so much untapped potential in our pensions markets, with an industry worth around £2 trillion. The measures we have already set out in our Pension Schemes Bill will help drive higher investment and a better deal for our future pensioners.”

M&G plc CEO Andrea Rossi said: “A Pensions Review is long overdue and to be welcomed. M&G has a rich heritage of investing in the UK and there are significant opportunities ahead to give the real economy a boost over the next decade and beyond.

“We know from experience, through our PruFund offer, that a large pooled fund gives savers access to a wider range of productive assets that aims to maximise benefits over the long-term. Consolidation, combined with the role of advice, has huge potential to align the interests of savers with the UK’s growth ambition. We look forward to supporting the Government on this landmark review.”

BVCA Chief Executive Michael Moore said: “We are very encouraged that the Government has brought forward their Pensions Review so quickly.

“The Chancellor has a real opportunity to deliver economic growth by facilitating increased investment in UK businesses to the benefit of returns to pension savers as well as the wider economy.

“Legislative and policy changes, including further consolidation of pension schemes to increase pension schemes’ ability to deploy capital into UK private capital funds are vital, as is greater industry partnership.

“The BVCA’s Investment Compact has already brought together over 100 growth equity and venture capital firms committed to working with pensions schemes to consider effective structures that attract investment.”

Defined contribution schemes will be managing around £800 billion in assets by the end of the decade and the Review will explore ways to increase their investment into productive assets. Even a 1 percentage point shift of assets into productive investments could mean £8 billion of new productive investment to grow the economy and build vital infrastructure by the end of the decade.

This would also help savers using these schemes build up better retirement pots as productive assets are more likely to provide higher returns. Immediate action has already been taken to boost retirement savings through the Pensions Bill, which introduces a Value for Money Framework to promote better governance and achieve higher returns – boosting the pension pot of an average earner who saves over their lifetime in a defined contribution scheme by over £11,000.

The first stage of the review will examine actions to support greater productive investment and better retirement outcomes, including through further consolidation and encouraging at-scale schemes to increase returns through broader investment strategies.

The Local Government Pension Scheme (LGPS) in England and Wales is the seventh largest pension fund in the world, managing £360 billion worth of assets. Its value comes from the hard work and dedication of 6.6 million people in our public sector, mostly low-paid women, working to deliver our vital local services. Pooling this money would enable the funds to invest in a wider range of UK assets and the government will consider legislating to mandate pooling if insufficient progress is made by March 2025.

To cut down on fragmentation and waste in the LGPS, which spends around £2 billion each year on fees and costs and is split across 87 funds – an increase in fees of 70% since 2017, the Review will also consider the benefits of further consolidation.

The first stage of the review will report in the next few months and consider further measures to support the Pensions Bill. It will take account of the need to prioritise gilt market stability, liquidity and diversity. It will then broaden out to consider the wider pensions landscape to strengthen security in retirement. In the meantime, immediate action has been taken through new laws announced to Parliament in The King’s Speech.

Barclays CEO C. S. Venkatakrishnan said: “We welcome the Government’s timely review of the pensions sector.

“Pensions reforms are critical to unlocking institutional investment in growth equity, and alongside a streamlining of listing requirements, will give a significant boost to UK capital markets and growth. Building institutional demand is also an important signal in encouraging private share ownership.

Border to Coast CEO Rachel Elwell said: ““Our focus is on delivering a strong and sustainable LGPS to enable it to pay the pensions of the 6.6million local government workers in an affordable manner.

“Border to Coast has developed innovative and cost-effective investments, while cutting Private Market fees by almost 30%. There is an opportunity to build and expand on this, delivering greater value to local taxpayers, and delivering productive investment in the UK. We therefore welcome the opportunity to work with the Government on a co-ordinated review to deliver this.

“If the Government is ambitious and considers a wide range of options in this review we are optimistic that this will deliver the clear roadmap we have called for, building on the work of the BVCA’s Pensions and Private Capital Expert Panel.”

Chair of the Pensions & Private Capital Expert Panel and co-founder of IQ Capital Kerry Baldwin said: “An early and ambitious review of the pensions landscape is an extremely important step in prioritising returns for UK savers and driving economic growth.

“The Chancellor’s Pensions Review will add further impetus to the work of the Investment Compact for Venture Capital and Growth Equity, which has brought together the private capital and pensions industries to support pension savers and to encourage investment from pension funds into unlisted equities.

“There has been significant progress through this collaboration. We are already developing a greater understanding of the ways we can work together to deliver new options for UK pension savers at the same time as supporting high growth, innovative UK companies with new sources of capital.

“The Review offers us the opportunity to develop this shared agenda further and deliver better outcomes for all the stakeholders.”

TheCityUK CEO Miles Celic said: “Creating the right investment environment is critical both for improving people’s retirement incomes and for boosting growth across the UK.

“The government’s new Pensions Review will be an important mechanism to help deliver this. We look forward to working closely with government and regulators to ensure that an effective long-term strategy that supports financial resilience is developed.”

Fixing the Foundations

Chancellor unveils a new era for economic growth

  • Chancellor pledges she will take action to fix the foundations of the economy to make everyone, not just a few, better off.
  • Government to get Britain building by taking immediate action on planning reform and unblocking stalled sites to unlock thousands of homes.
  • Immediate removal of the de facto ban on onshore wind in England as government starts delivering on clean energy mission to cut bills for families and boost energy independence. 

The Chancellor yesterday (8 July) promised to take immediate action to fix the foundations of the economy, rebuild Britain and make every part of the country​ better off.

In her first speech as Chancellor, Rachel Reeves pledged to leaders of some of the UK’s pioneering industries to build growth on strong and secure foundations built on stability, investment and reform, and forged through a new partnership with the private sector.

Addressing the difficult economic inheritance this government faces, she committed to taking immediate action to drive sustained economic growth, the only route to improving the prosperity of our country and the living standards of working people.

Setting out her first steps to deliver on the government’s commitments in its manifesto that every action it takes will be based on sound money and economy stability, the Chancellor promised a new economic model that will grow the economy and keep taxes, inflation and mortgages as low as possible.

The Chancellor said had the UK economy grown at the average rate of OECD economies over the fourteen years from 2010, it would be £143.3 billion larger – worth £5,053 for every household in the country. This could have brought in an additional £58 billion in tax revenues in the last year alone to sustain our public services.

Taking decisive action, the government is today announcing a series of measures to lay the foundations for a dynamic, modern and growing economy, including taking urgent steps to build 1.5 million homes over the next five years and the immediate removal of the de facto ban on onshore wind in England, as part of its clean energy mission.

Chancellor of the Exchequer Rachel Reeves said: “Today I am taking immediate action to fix Britain’s economic foundations.

“By growing our economy we can rebuild Britain and make every part of the country better off.”

Deputy Prime Minister Angela Rayner said: ““Our country is under new management and a new era for economic growth will be built on secure foundations.

“The Chancellor and I will work in lockstep to kickstart the economy, unleashing housebuilding and powering local growth.

“Change starts now. We will unblock the bottlenecks and drive forward a transformational package to build the homes people need.”

Energy Security and Net Zero Secretary Ed Miliband said: “Every family has paid the price of the ban on onshore wind farms in higher energy bills.  This ban has undermined our energy security, put costs on people’s bills – especially those on lower incomes – and held us back in our fight against climate change.

“This Government is wasting no time in delivering the bold plan we need to take back control of our energy; boosting our energy independence and cutting bills for families as we tackle the climate crisis.

“Getting rid of this ban and giving priority for planning permission for much needed infrastructure sends an immediate signal to investors here and around the world that the UK is back in business, an immediate step in our mission to make Britain a clean energy superpower.”

The UK government is taking swift action on its central growth mission by announcing the following:

Planning

The government is taking swift action to identify and unblock key ‘stalled sites’ to get large housing schemes moving forward, starting with four sites across England to unlock over 14,000 homes: Liverpool Central Docks, Northstowe, Worcester Parkway and Langley Sutton Coldfield.

The Chancellor has also welcomed the Deputy Prime Minister’s commitment to make the economic benefit of development a central consideration when intervening in the planning system. This starts today by recovering two appealed planning applications for data centres in Buckinghamshire and Hertfordshire.

To facilitate this new approach, the Deputy Prime Minister will also write to local mayors and the Office for Investment to ensure that any investment opportunity with important planning considerations that comes across their desks is brought to her attention and to the Chancellor’s.

This will help to ensure the planning system can unlock major schemes from clean energy projects and transport infrastructure to film studios and art-entertainment venues.

The Chancellor has also confirmed that the government will support local authorities with 300 additional planning officers across the country. 

Further announcements will be made in the coming weeks to accelerate the development of housing and infrastructure, including launching a landmark consultation on an updated, growth-focused National Planning Policy Framework to include mandatory housing targets and a requirement to review greenbelt boundaries where necessary to meet them.

These will prioritise Brownfield and “grey belt” land for development to meet housing targets where needed, partnered with new ‘golden rules’ that will make sure the development this frees up will also deliver thousands of affordable homes, including more for social rent.

Critical major infrastructure

The current planning regime acts as a major brake on economic growth which is why the government will make the changes the country needs to forge ahead with new roads, railways, reservoirs, and other nationally significant infrastructure.

The government will set out new policy intentions for critical infrastructure in the coming months, ahead of updating relevant National Policy Statements within the next 12 months to provide certainty to industry. We will legislate to ensure they are updated at least every 5 years.

The government will also build on the Strategic Spatial Energy Plan which is being developed by the National Energy System Operator to speed up the roll out of clean power, and will seek to expand the use of spatial planning to other infrastructure sectors.

The Chancellor has asked the Secretaries of State for Transport and Energy Security and Net Zero to prioritise taking decisions on critical infrastructure projects which are with them now.

To go further, to help speed up delivery on infrastructure such as transport and energy, the government will review how it can unlock critical infrastructure, without weakening environment protections.

Alongside this, the government will make sure energy projects are prioritised in the planning system and consult on including onshore wind power developments in the Nationally Significant Infrastructure Projects (NSIP) planning regime.

Further details on ending the de facto ban on onshore wind will be set out later by the Department for Energy Security and Net Zero, and the Department for Levelling up, Housing and Communities.

Martha Lane Fox, President of the British Chambers of Commerce, said: “Fixing the foundations of the economy can provide businesses with the stability and certainty they need to unleash a wave of investment to create growth and new jobs.

“Labour’s pledges to create an industrial strategy, improve trade relations with the EU, and boost skills training all have capacity to make a huge difference. 

“Today’s commitment to deliver large scale infrastructure at greater pace, especially green energy projects and more housing where people want to live, is very welcome.

“But policy must be backed up with better skilled and resourced planning departments to deliver this step change. That’s why the pledge to fund an extra 300 planning officers is so important.

“It’s also why the BCC’s Planning Skills Fund has been set up in partnership with Government. It will develop an additional pipeline of new and upskilled planning talent to boost growth in our local economies.”

David Thomas, Chief Executive Officer, Barratt Developments’ said: “We welcome the Government’s commitment to reform of the planning system and their drive for growth.

“Building more new homes will bring huge economic and social benefits to the UK, and it is vital that local and central government are united with industry to plan positively to deliver high quality new homes and developments across the country.”

Keith Anderson, Chief Executive Officer, Scottish Power said: “I welcome the clear sense of urgency and direction set out by the Chancellor today.

“Prioritising clean energy infrastructure and building at speed and at scale will unleash strong economic growth across the country.

“If the UK can halve the time it takes to get renewables, electricity grid and storage projects through the planning system, we’ll look to double our investment over the coming years.”

Henrik L. Pedersen, Chief Executive Officer, Associated British Ports said: “Associated British Ports has an ambitious project pipeline of major investments in port infrastructure including supporting the development of floating offshore wind in Wales as well as green hydrogen and carbon capture and storage in the Humber.

“The right enabling measures from Government will unlock these developments at pace. In this regard the Chancellor’s speech is very welcome and encouraging.”

Mark Reynolds, Chairman & Chief Executive Officer, Mace Grop, Co-Chair of the Construction Leadership Council said: “Today’s announcements show a welcome proactive approach to tackling the delays to the planning system that are costing the UK up to £11bn a year in growth and hampering the delivery of the homes and infrastructure we sorely need.

“The focus on cutting the red tape to progress nationally important projects, such as data centres, combined with increased resourcing of the planning departments, will bring a renewed energy and focus to the construction sector.

“It’s particularly welcome to see the Chancellor has put this at the top of her agenda – we stand fully behind the delivery of the Government’s ambitions.”

Kate Kenny, Senior Vice President, Jacobs said: ““We greatly welcome the changes outlined by the Chancellor today to simplify the planning regime and unlock greater investment in critical national infrastructure projects.

“The updating of National Policy Statements will also play a major role in providing clarity and certainty of pipeline for industry and its supply chains to invest in the long-term skills required to deliver the clean energy, transport, water and other significant infrastructure projects that the UK requires for a prosperous future.”

Tom Glover, UK Country Chair, RWE said: “We fully support the new government’s focus on unblocking the planning system, and welcome commitments to prioritise taking decisions on critical national infrastructure projects as soon as possible.

“Ensuring that local authorities are properly resourced to deliver a real acceleration in planning approvals is also crucial – we therefore welcome the announcement to fund an additional 300 planning officers. 

“As a leading renewables developer we are also pleased that the government are moving swiftly to end the ban of onshore wind, in the long-term this means committing to bring projects over 50MW back into the Nationally Significant Infrastructure Projects (NSIPs) regime. We look forward to further information on this in due course”.

Andrea Rossi, Chief Executive Officer, M&G said: “As a major investor in the real economy we welcome efforts to provide long-term policy certainty and the ambition to get Britain building. Speed and ambition are crucial.

“By providing clarity on infrastructure priorities, combined with a swifter planning system, we can deliver investment, kick-start the economy and secure good returns for UK pension policy holders.”   

Chris Cummings, Chief Executive Officer, The Investment Association said: “The Investment Management industry strongly supports the Chancellor’s ambition to drive economic growth. There is more our industry can do to support the UK economy and its people, and we are ready to work with the new government to achieve this.  

“Investment is the engine of economic growth, and our industry supports the government in finding innovative ways for more capital to be channelled into thriving British businesses and infrastructure projects. Removing blockers in the planning system will be key to this.

“It is vital we open straightforward ways for pension funds to invest in the housing, transport and energy projects we all rely on by removing regulatory obstacles and overturning the culture of “safetyism” that has curtailed economic growth.” 

Rob Perrins, Chief Executive Officer, Berkeley Group said:  “We’re hugely encouraged to see the clear priority and focus on housing delivery as part of the Government’s mission for growth.

“Today’s announcements are a very positive start and we will continue to work closely with Government to help unlock the potential of brownfield regeneration sites to deliver good green homes, both affordable and private. Reviving urban land has a vital role to play in driving the sustainable growth and productivity our country needs.”

Nick Jansa, Executive Managing Director EMEA, Ontario Teachers’ Pension Plan said: “We welcome the government’s announcement today on improvements to the planning system and removing barriers to investment in growing the UK’s critical infrastructure.”

Chancellor: ‘I will take the difficult decisions to deliver growth’

Rachel Reeves: ‘No time to waste’

  • Chancellor Rachel Reeves will vow to “fix the foundations of Britain’s economy” to make every part of Britain better off.
  • In her first major speech, the Chancellor will declare economic growth is “a national mission” and promise to take the tough decisions to deliver on the Government’s mandate.
  • She is expected to announce swift changes to unblock infrastructure and private investment.

The Government will take the difficult decisions to deliver growth, Rachel Reeves will say in her first speech as Chancellor today.

Business leaders from some of Britain’s most pioneering industries – including its financial services and green industries – are expected to be in attendance in central London to hear Ms Reeves vow to “fix the foundations of our economy so we can rebuild Britain and make every part of our country better off.”

Rachel Reeves will say there is “no time to waste” on delivering change, pledging to reverse “the legacy of fourteen years of chaos and economic irresponsibility”.

The Chancellor is expected to say: ““Last week, the British people voted for change. And over the past 72 hours I have begun the work necessary to deliver on that mandate.

“Our manifesto was clear: ‘Sustained economic growth is the only route to improving the prosperity of our country and the living standards of working people.’

“Where governments have been unwilling to take the difficult decisions to deliver growth – or have waited too long to act – I will deliver.

“It is now a national mission. There is no time to waste.

“This morning I want to outline the first steps this new government has taken to fix the foundations of our economy, so we can rebuild Britain and make every part of our country better off.

“We face the legacy of fourteen years of chaos and economic irresponsibility. 

“New Treasury analysis I requested over the weekend exposed the opportunities lost from this failure.

“Had the UK economy grown at the average rate of OECD economies since 2010, it would have been over £140 billion larger.

“This could have brought in an additional £58 billion in tax revenues last year alone to sustain our public services.

“It falls to this new Government to fix the foundations.”

Surgeons Quarter reports record breaking month

EDINBURGH based event and hospitality venue is thriving as it records its most successful business period to date after hitting record numbers during the Edinburgh International Festival

Surgeons Quarter (SQ), one of Edinburgh’s largest Fringe performing spaces, boasted a record 250,000 visitors to the Royal College of Surgeons of Edinburgh’s (RCSEd) campus and increased occupancy to an impressive 99.5% at its on-site, Ten Hill Place Hotel across the month of August. 

As the commercial arm of RCSEd, SQ worked closely with renowned festival producers theSpaceUK to host 248 productions across its 11 on site Fringe venues.  

Scott Mitchell, Managing Director of SQ said: “The buzz in Edinburgh during the Fringe this year was incredible. To see our venues, and Edinburgh, transform into a hive of creativity and culture was very special. 

“Each year we continue to grow and we’re incredibly proud of what we have achieved this year with record numbers coming in.  

“Working with such a talented organisation such as theSpaceUK again this year has been extremely rewarding and we’re delighted with how well received each show was at this year’s Fringe. 

“This year we have been able to host nearly 250 shows, with 120,000 audience members, which is just incredible. While the numbers are astounding, it is only testament to the quality of entertainment and service of those who performed and worked with us this year.” 

Celebrating its 14th year as one of the largest Fringe venues, SQ operated five festival bars, and transformed its Courtyard Bar and Hill Square Gardens into a fiesta of flavour with Mexican street food created by SQ’s Executive Chef Dominik Kawalec. 

This year’s line-up included shows from across the globe with musical performances, operas, drama and theatre shows as well as comedy and spoken word.  

Surgeons Quarter, Cafe 1305 Scott Mitchell – Managing Director

Scott continued: “None of this would have been possible without our fantastic, dedicated team, who worked incredibly hard to deliver top service across our venues throughout such a busy period. 

“Whilst delighted with our increased footfall a key point of action for next year is to find a solution to either the increased recycling or use of re-usable products in an outdoor environment to adhere to our licencing conditions and sustainability agenda. 

“I’d like to extend my thanks to not only those who worked with us, but to those who visited our venues and helped create a truly unique atmosphere in a Fringe that will live long in the memory.” 

The 2023 Edinburgh Festival Fringe welcomed worldwide audiences, selling nearly 2.5 million tickets across 288 venues.  

SQ will now turn its focus to the upcoming festive season, hosting 80s themed party nights throughout December offering a three-course meal, festive cocktail and wine for £60pp, and private parties from £65pp. 

Surgeons Quarter promotes, sells and manages all commercial activities held within the RCSEd campus. It includes facilities for conferences, meetings, private events, parties, weddings and its own four-star hotel Ten Hill Place as well as Café 1505 and SQ Travel. 

Profits from the Surgeons Quarter portfolio go towards the advancement of surgery and the improvement of patient outcomes worldwide. 

More information about Surgeons Quarter can be found at: 

https://www.surgeonsquarter.com/ 

Scottish revenue increases by £15 billion

Strong growth in income tax and energy sector

Scotland’s notional deficit has continued to fall at a faster pace than the UK’s, driven by record energy sector revenues and strong growth in the tax take, figures for the 2022-23 financial year show.

Total revenue for Scotland increased by 20.7% (£15 billion) compared with 11.3% for the UK as a whole. This includes a £1.9 billion increase in revenue from Scottish income tax and £6.9 billion increase in North Sea revenue. These increases have partially been offset by a rise in spending on cost of living measures and interest payments on UK Government debt.

To mark publication of the 30th Government Expenditure and Revenue Scotland (GERS) statistics, the Cabinet Secretary for Wellbeing Economy, Fair Work and Energy, Neil Gray, visited the University of Glasgow’s Mazumdar-Shaw Advanced Research Centre to learn about the significant economic potential of quantum technology to Scotland’s economy. Recent research has suggested the sector could be worth £1 billion to Scotland by 2030.

Mr Gray said: “I am pleased that Scotland’s finances are improving at a faster rate than the UK as a whole, with revenue driven by Scotland’s progressive approach to income tax and our vibrant energy sector.

“While the record revenues from the North Sea show the extent that the UK continues to benefit from Scotland’s natural wealth, these statistics do not reflect the full benefits of the green economy, with hundreds of millions of pounds in revenue not yet captured.

“It is important to remember that GERS reflects the current constitutional position, with 41% of public expenditure and 64% of tax revenue the responsibility of the UK Government. Indeed, a full £1 billion of our deficit is the direct result of the UK Government’s mismanagement of the public finances.

“An independent Scotland would have the powers to make different choices, with different budgetary results, to best serve Scotland’s interests.

“While we are bound to the UK’s economic model and do not hold all the financial levers needed, we will continue to use all the powers we do have to grow a green wellbeing economy, while making the case that we need independence to enable Scotland to match the economic success of our European neighbours.

“I’m grateful to the University of Glasgow for showing me their world-leading quantum technology research, which could be worth £1 billion to our economy within seven years, highlighting just how bright Scotland’s future could be outside of the UK.”

Government Expenditure and Revenue Scotland 2022-23

Government Expenditure & Revenue Scotland figures ‘show Scotland benefits from being part of a strong United Kingdom with a sharing and pooling of resources’

The Scottish Government has published their annual Government Expenditure & Revenue Scotland report, which shows the difference between total revenue and total public sector spending in Scotland.

The figures for 2022-2023 showed that people in Scotland are continuing to benefit from levels of public spending substantially above the United Kingdom average.

And even in a year of exceptional North Sea Revenues, Scotland’s deficit is still more than £19 billion, demonstrating how the country continues to benefit from being part of a strong United Kingdom, with the vital pooling and sharing of resources that the Union brings.

Commenting on the figures, Scottish Secretary Alister Jack said: “The Scottish Government’s own figures show yet again how people in Scotland benefit hugely from being part of a strong United Kingdom.

“Scotland’s deficit is more than £19billion – even in a year of exceptional North Sea Revenues. Without oil and gas, that figure soars to more than £28billion.

“People in Scotland benefit to the tune of £1,521 per person thanks to higher levels of public spending.

“As we face cost of living pressures and unprecedented global challenges it is clear Scotland is better off as part of a strong United Kingdom.”

GERS 2023 – Uptick in oil revenues narrows the gap between Scottish and UK Deficit

Fraser of Allander Institute’s MAIRI SPOWAGE, JOAO SOUSA and CIARA CRUMMEY unpick the latest statistics:

This morning sees the publication of Government Expenditure and Revenue Scotland 2022-23.

These statistics set out three main things:

  • The revenues raised from Scotland, from both devolved and reserved taxation;
  • Public expenditure for and on behalf of Scotland, again for both devolved and reserved expenditure;
  • The difference between these two figures, which is called in the publication the “net fiscal balance” – but as you may well hear colloquially referred to as the “deficit”.

These statistics form the backdrop to a key battleground in the constitutional debate, particularly when it is focussed on the fiscal sustainability of an independent Scotland and what different choices Scotland could make in terms of taxation and spending.

So what do the latest statistics show?

The latest figures show that the net fiscal balance for 2022-23 was -£19.1 bn, which represents -9.0% of GDP. This is a fall from the 2021-22 figure of -12.8% of GDP and is down significantly from 2020-21 which was inflated hugely by COVID-related spending.

The comparable UK figure for 2022-23 is -5.2% of GDP. The UK figure is unchanged from 2021-22. The reason for the differential trend for Scotland and the UK as a whole has been driven by North Sea revenue, which contributed £9.4 billion to Scottish revenue in 2022-23.

Chart 1: Scottish and UK net fiscal balance, 1998-99 to 2022-23

Source: Scottish Government

In this year of record North Sea revenue (at least in cash terms), the difference between the Scottish and UK deficit is driven by the expenditure side of the net fiscal balance equation.

Chart 2: Spending and revenue per head, Scotland-UK, 1998-99 to 2022-23

Source: Scottish Government

On revenues, including the North Sea, Scotland raised £696 more per head than the UK, whilst on expenditure, Scotland spent £2,217 more per head than the UK average.

So what do these statistics really tell us?

These statistics reflect the situation of Scotland as part of the current constitutional situation. That is, Scotland as a devolved government as part of the UK. The majority of spending that is carried out to deliver services for the people of Scotland are provided by devolved government (either Scottish Government or Local Government).

To a certain extent therefore, the higher per head spending levels are driven by the way that the funding for devolved services is calculated through the Barnett formula.  Add on top of that the higher than population share of reserved social security expenditure, and we have identified the two main reasons for higher public expenditure in Scotland.

Let’s go over some of the main points that may come up today when folks are analysing these statistics.

Scotland isn’t unusual in the UK in running a negative net fiscal balance

This is absolutely right. ONS produce figures for all regions and nations of the UK, and these have shown consistently (in normal years, so excluding COVID times) that outside of London and surrounding areas, most parts of the UK are estimated to raise less revenue than is spent on their behalf.

In 2021, we discussed the differences between parts of the UK in an episode of BBC Radio 4’s More or Less programme.

The Scottish Government doesn’t have a deficit as it has to run a balanced budget

This statement isn’t quite true (the SG now has limited capital borrowing powers and resource borrowing powers to cover forecast error). The Scottish Government’s Budget is funded through the Barnett determined Block Grant, with some adjustments to reflect the devolution of taxes and social security responsibilities (most significantly, income tax).

The SG do not have the flexibility to borrow for discretionary resource spending.

However, to focus on this around the publication of GERS somewhat misses the point of the publication. It looks at money spent on services for the benefit of Scotland, whoever spends it, and compares that to taxes raised, whoever collects them. As touched on above, the Barnett-determined block grant funds services at a higher level per head in Scotland than in England in aggregate.

What does this tell us about independence?

Setting aside the noise that will no doubt accompany GERS today, there are essentially two key issues, that need to be considered together.

GERS takes the current constitutional settlement as given. If the very purpose of independence is to take different choices about the type of economy and society that we live in, then it is possible that these a set of accounts based upon the world today could look different, over the long term, in an independent Scotland.

That said, GERS does provide an accurate picture of where Scotland is in 2023. In doing so it sets the starting point for a discussion about the immediate choices, opportunities and challenges that need to be addressed by those advocating new fiscal arrangements. And here the challenge is stark, with a likely deficit far in excess of the UK as a whole, other comparable countries or that which is deemed to be sustainable in the long-term. It is not enough to say ‘everything will be fine’ or ‘look at this country, they can run a sensible fiscal balance so why can’t Scotland?’. Concrete proposals and ideas are needed.

And please guys… dodge the myths!

We have produced a detailed guide to GERS which goes through the background of the publication and all of the main issues around its production, including some of the odd theories that emerge around it. A few years ago, we also produced a podcast which you can enjoy at your leisure.

In summary though, to go through the main claims usually made about GERS:

  1. GERS is an accredited National Statistics produced by statisticians in the Scottish Government (so is not produced by the UK Government) and is a serious attempt to understand the key fiscal facts under the current constitutional arrangement
  2. Some people look to discredit the veracity of GERS because it relies – in part – on estimation. Estimation is a part of all economic statistics and is not a reason to dismiss the figures as “made up”.
  3. Will the numbers change if you make different reasonable assumptions about the bits of GERS that are estimated? In short, not to any great extent.
  4. If you have any more questions about how revenues and spending are compiled in GERS, the SG publish a very helpful FAQs page, including dealing with issues around company headquarters and the whisky industry.

Look out for more analysis

It’ll be interesting to see the coverage of these statistics today and the talking points that are generated given where we are in the constitutional debate.

If you have any questions about GERS for us, then why not get in touch? Submit them to fraser@strath.ac.uk and we’ll try to cover them in our weekly update later this week!

Shona Robison: A fair economy supporting Scotland’s people

Deputy First Minister outlines priorities for sustainable growth

Fair work and more efficient public services will be at the heart of Scotland’s economy, Deputy First Minister Shona Robison pledged today.

Plans to deliver real benefits to the people of Scotland through a strong, green economy, underpinned by the most progressive tax system in the UK, are outlined in the Scottish Government’s Portfolio Prospectus which pledges firm actions to be achieved by 2026.

These include:

  • creating the UK’s most progressive tax system to deliver public services, tackle poverty and grow the wellbeing economy
  • increasing the number of workers earning at least the real living wage, while narrowing the gender pay gap
  • making Scotland a leading European start-up nation, in which more businesses are created and grow to scale
  • growing international exports while diversifying into new markets
  • laying foundations to produce 5 Gigawatts (GW) of hydrogen production by 2030, as part of a Scottish hydrogen supply chain
  • implementing a New Deal for Local Government, including a fiscal framework, to tackle collective challenges and improve outcomes

The Deputy First Minister was joined by Wellbeing Economy Secretary Neil Gray on a visit to Dear Green Coffee Roasters in Glasgow – a company based on fair work principles and sustainability which embodies the vision for a wellbeing economy.

Ms Robison said: “The Scottish Government’s Policy Prospectus lays out the practical measures we will take to transform the economy, deepen our relationship with business and maximise the value of our public spending.

“Developing a wellbeing economy is not just good social practice, it makes sound economic sense. By focusing on strong public services, we can help disabled people, the long-term sick and those with caring responsibilities to get back into work. While paying a fair wage, and reducing the gender pay gap, can produce a committed workforce which in turn will help increase productivity and improve staff retention.

“We will work in partnership with local government to update the way it is financed and improve collaboration. Underpinning this will be stable, sustainable public finances delivering people-focused public services and supporting Scotland’s net-zero goals.

“Our resources will be focused where they can have the maximum impact, such as laying the foundations of a hydrogen supply chain and supporting internationally competitive green technologies, health and life sciences and advanced manufacturing.”

The Scottish Government’s Policy Prospectus is based on three missions: equality, opportunity and community.

Business confidence dips for Scottish firms in January

Bank of Scotland Business Barometer for January 2023 shows: 

  • Business confidence in Scotland fell five points during January to 10% 
  • As National Apprenticeship Week approaches 27% of businesses in Scotland say investing in training and development presents the biggest opportunity for growth in the next six months 
  • Overall UK business confidence reaches six-month high at 22% with twice as many businesses optimistic about the economy than in December   

Business confidence in Scotland fell five points during January to 10%, according to the latest Business Barometer from Bank of Scotland Commercial Banking. 

Companies in Scotland reported lower confidence in their own business prospects month-on-month, down 17 points at 8%.  When taken alongside their optimism in the economy, up six points to 12%, this gives a headline confidence reading of 10%.  

Scottish businesses identified their top target areas for growth in the next six months as evolving their product and service offer (42%), investing in sustainability (29%) and investing in their teams (27%).  
 
The Business Barometer, which surveys 1,200 businesses monthly, provides early signals about UK economic trends both regionally and nationwide. 
 
A net balance of 14% of businesses in the region expect to increase staff levels over the next year. This is up from December when a net balance of 11% of businesses reported plans to make new hires.  

Overall UK business confidence climbed in January, with firms reporting their highest confidence levels since July last year.  

Business confidence increased by five points to 22% and the net balance of businesses feeling optimistic about the economy doubled on December’s reading to 16%. 

Ahead of National Apprenticeship Week (6-12th February) 30% of businesses across the UK reported that they are looking at opportunities to grow by investing in staff development and training. A net balance of 17% of firms reported plans to create new jobs in the next twelve months. 

Chris Lawrie, area director for Scotland for Bank of Scotland Commercial Banking, said: “Ongoing pressures from wider economic challenges are clearly continuing to impact Scottish businesses, but confidence remains in positive territory and firms’ resilience shines on.  

“Over the next few months as concerns such as rising costs continue, it is important firms keep a close eye on cash flow. Having reserves ready for when challenges hit makes managing turbulent periods easier. We’ll remain by the side of Scottish firms to help them successfully navigate the months and years ahead.”    

For the second month in a row, confidence in the manufacturing and service sectors increased, with manufacturing rising to 28% (up 15 points) and services up to 25% (up seven points). 

Business confidence in construction was down two points to 27%, while retail confidence fell for the second month in a row to 7% (from 13%), the lowest level since February 2021. 

Paul Gordon, Managing Director for Relationship Management, Lloyds Bank Business & Commercial Banking, said: “After a challenging 2022, it’s heartening to see confidence rising for the second consecutive month.

“This is the first back to back increase since September 2021. There is no doubt that the business environment remains challenging and uncertainty still remains, but this improvement in optimism is very welcome as we start 2023.  

“With pay expectations tempering, trade expectations set to improve, and a clearer way forward on energy price support, this may give businesses a bit more certainty and the confidence they need to inspire investment and promote growth.” 

Hann-Ju Ho, senior economist for Lloyds Bank Commercial Banking, said: “Business confidence continues to improve following the December boost. Firms are clearly more optimistic about the wider economy and this is driving the increase, helped by precursory signs that wage and other cost pressures may be easing. 

“It is still a tough environment for businesses, with high energy bills remaining a concern during the winter months, but there are grounds for optimism for 2023 if inflation starts to trend lower.” 

Chancellor to use ‘Brexit freedoms’ to tackle poor productivity

  • Chancellor Jeremy Hunt will set out a long-term plan for prosperity made possible by Brexit.
  • Hunt will make the case against “declinism”, with the UK growing faster than France, Japan and Italy since 2010.
  • He will also confirm post-Brexit reforms to unlock £100bn of private investment this decade will be implemented in the coming months.

Chancellor of the Exchequer Jeremy Hunt will today set out his approach to tackle poor productivity and boost growth, using the new freedoms won by Brexit as a catalyst.

Following the Prime Minister New Year address outlining his five priorities which include growing the economy, halving inflation and getting debt down – the Chancellor will speak about how this will be accomplished.

Delivering the speech at Bloomberg’s European headquarters in London, Mr Hunt will caution against an attitude of “declinism” about Britain and set out the case for optimism as the UK aims to play a leading role in Europe and across the world in the industries of tomorrow. Since 2010 the UK economy has grown faster than France, Italy and Japan, and since the EU referendum the UK economy has grown at around the same rate as Germany.

The Chancellor will also confirm that post-Brexit reforms to Solvency II will be implemented in the coming months, which could unlock £100 billion of additional investment into the UK’s most productive assets this decade – such as clean energy and UK infrastructure.

Chancellor Jeremy Hunt is expected to say: “Our plan for the years that follow is long term prosperity based on British genius and British hard work.

“[And] world-beating enterprises to make Britain the world’s next Silicon Valley.”

The Chancellor will also caution against declinism, with the UK aiming to play a leading global role:

“Declinism about Britain was wrong in the past – and it is wrong today.

“Some of the gloom is based on statistics that do not reflect the whole picture.

“Like every G7 country, our growth was slower in the years after the financial crisis than the years before it. But since 2010, the UK has grown faster than France, Japan and Italy. Since the Brexit referendum, we have grown at about the same rate as Germany.

“If we look further ahead, the case for declinism becomes weaker still. The UK is poised to play a leading role in Europe and across the world in the growth sectors which will define this century.”

The Chancellor will focus on key growth industries, including Digital Technology, Green Industries, Life Sciences, Advanced Manufacturing and Creative Industries – areas where Britain has a competitive advantage to build on further.

Mr Hunt will also set out some of the challenges the UK faces, including poor productivity, and set out a plan to long-term prosperity, using the UK’s new-found Brexit freedoms to support growth and entrepreneurship.

In the Autumn Statement, the Chancellor set out the government’s strategy for boosting growth by investing in our people, in the infrastructure that connects our country, by creating the right environment for business investment, and by supporting our world-leading financial services companies and innovators.

To further support investment across our economy, the Chancellor also announced a decision to proceed with reforms to Solvency II – an EU Directive that governs the amount of funds British insurers are required to hold in reserve. The Association of British Insurers suggest the Chancellor’s reforms are expected to unlock up to £100 billion of private investment this decade into UK infrastructure and clean energy, such as nuclear power.

And in December, the Chancellor went further and announced the Edinburgh Reforms – a package of reforms to drive growth and competitiveness in the UK’s financial services sector, while retaining our commitment to high international standards. This included the publication of our ambitious plan for repealing and reforming EU law for financial services.

The Chancellor is also expected to say: “Confidence in the future starts with honesty about the present, and we should not shy away from the biggest challenge we face which is our poor productivity. Our plan for long term prosperity tackles that challenge head on.

“It is a plan necessitated, energised and made possible by Brexit which will succeed if it becomes a catalyst for the bold choices we need to take.

“Our plan for growth is a plan built on the freedoms which Brexit provides. It is a plan to raise productivity. It is a plan to use the proceeds of growth to support our public services at home, to support businesses in the new low carbon economy and to support democracy abroad. It is the right course for our country and the role in the world to which we aspire.”

With a UK tech sector worth one trillion dollars the Chancellor will call on other businesses to consider the UK as a place for investment by tech entrepreneurs, life science innovators and energy companies.

The UK is an attractive location for tech investment; the recently announced digital markets regime aims to open the UK’s digital markets up to greater competition and spur increased innovation across the sector. The regime is an alternative to the EU’s Digital Markets Act – the UK’s proposals are widely regarded as more proportionate, targeted and flexible than the EU’s.

This month PwC surveyed more than 4,400 top chief executives in 35 countries and found that the UK has risen the joint third most important country to invest, behind only the US and China and equal with Germany.

The Edinburgh Reforms: Chancellor to announce package of financial reforms during visit today

  • Chancellor to announce reforms to drive growth and secure the UK’s position as world leading financial services hub in Edinburgh today.
  • Ringfencing rules are set to be updated to release banks without major investment activities from the regime, regulators will be given a new remit to deliver growth and a widespread review will repeal hundreds of pages of EU law.
  • The Government will continue to deliver reforms across the economy to drive economic growth during challenging times.

Chancellor, Jeremy Hunt, will announce a package of over 30 regulatory reforms to secure the UK’s place as the world’s foremost financial centre during a visit to Edinburgh today,

The “Edinburgh Reforms” will build on the unparalleled strength of the UK’s financial services sector, taking advantage of the opportunities provided by the UK’s exit from the European Union to tailor regulations to suit the country’s needs.

Today the Treasury will publish its plan to rigorously review, repeal and replace hundreds of pages of EU regulation ranging from disclosure for financial products to prudential rules for banks, creating a tailor-made UK regulatory framework based on international best practice that balances burden on business with protection for the consumer.

Rules that hold back growth will be reviewed, with overbearing EU rules which put companies off listing in the UK being overhauled, among dozens of regulations within scope of the Financial Services and Markets Bill.

The Government will also announce changes to ringfencing rules which currently require major banks to separate their retail and investment arms, and retail banks have to comply even if they don’t have an investment arm, a time consuming regulatory exercise.

Reforms will cut red tape and boost banking competition in response to the Skeoch review by freeing retail focused banks from ringfencing rules while maintaining protections for consumers. The UK’s world leading regulatory regime has evolved over the past decade and will continue to protect consumers and safeguard financial stability.

Chancellor of the Exchequer, Jeremy Hunt said: “This country’s financial services sector is the powerhouse of the British economy, driving innovation, growth and prosperity across the country.

“Leaving the EU gives us a golden opportunity to reshape our regulatory regime and unleash the full potential of our formidable financial services sector.

“Today we are delivering an agile, proportionate and home-grown regulatory regime which will unlock investment across our economy to deliver jobs and opportunity for the British people.”

This builds on the reforms to Solvency II announced in the Autumn Statement which will unlock over £100 billion for productive investment from UK insurers over the next decade, such as clean energy infrastructure.

The Chancellor is also expected to issue new mandates to the Financial Conduct Authority and the Prudential Regulation Authority setting out how they will help deliver growth and promote the international competitiveness of the UK.

The financial services sector is vital for Britain’s economic strength, contributing £216 billion a year to the UK economy. This includes £76 billion in tax, enough to fund the entire police force and state school system, while employing over 2.3 million people – with 1.4 million outside London and 163,000 people in Scotland.

While in Edinburgh today, the Chancellor will meet with top financial services CEOs to discuss these reforms and how the sector can further drive investment and growth in the UK.

As confirmed in the Autumn Statement, the government will look to announce changes to EU regulations in four other growth industries by the end of next year, including digital technology, life sciences, green industries and advanced manufacturing.

Financial services reforms ‘set to boost Scotland’s economy’

  • Economic Secretary, Andrew Griffith MP, hailed the crucial role Scotland plays in maintaining the UK’s position as a world leader in financial services as part of a speech given in Edinburgh today.
  • He also visited Scottish Widows following insurance industry reforms which could unlock over £100 billion of investment in UK infrastructure and green projects, including in Scotland.

Economic Secretary Andrew Griffith was in Edinburgh today, where he hailed the success of Scotland’s financial services sector and the strength of the Union.

Speaking at TheCityUK’s Annual Conference, the minister praised the energy and vitality of Edinburgh, the second biggest financial hub in the UK, with one seventh of Edinburgh’s workers – 50,000 people – employed by the sector.

Mr Griffith then visited life insurance and pensions firm, Scottish Widows, following reforms to regulation (Solvency II), which could unlock over £100 billion of investment in the UK over the next ten years, boosting infrastructure, green growth and Scottish jobs.

Economic Secretary to the Treasury, Andrew Griffith said: ““Scotland’s economy makes a crucial contribution to maintaining the UK’s position as a leading global hub for financial services – with Edinburgh and Glasgow the two largest clusters outside of the City of London.

“Our reforms to Solvency II have the potential to unlock over £100 billion of investment into the UK economy, including in Scotland – in things like infrastructure and sustainable energy.

“We are committed to maintaining the UK’s place as one of the most open and dynamic markets in the world – and will set out further plans for ambitious reform, in the coming weeks.”

Craig Thornton, Chief Investment Officer, Scottish Widows: “By working together the insurance industry, Government and the Prudential Regulation Authority will now be able to unlock a significant investment boost for the UK economy, while continuing to help people secure their financial futures.

“Scottish Widows has already invested around £3bn in social housing projects across the UK, however we will be able to invest billions more in projects which are vital to the growth of the economy and the transition to net zero.

“We’re looking forward to moving on to the next stage of the reform process at pace, which includes working with Government to accelerate the vital work of identifying suitable investment opportunities in the UK which will benefit from the recently announced changes.”

Solvency II is a set of regulations dictating how much financial reserves insurers have to hold against the risks included in their policies. It also dictates how they are required to report these risks to regulators.

The rules were implemented in 2016, and were a compromise between EU member states. Leaving the EU has enabled us to reform these rules to suit the unique features of the UK insurance market.

At the Autumn Statement, the Chancellor announced steps to reform the legislation that would unlock over £100 billion of investment in UK infrastructure, and drive down prices of life insurance products for consumers.

These included:

  • A 65% reduction in the risk margin for life insurers, and 30% reduction for general insurers. This will help free up capital on insurers balance sheets.
  • A significant increase in flexibility of the matching adjustment – freeing up money for long-term assets such as infrastructure.
  • A meaningful reduction in the current reporting and administrative burden on firms, such as doubling the thresholds at which the regime applies.

These steps act as a first course of the Government’s ambitious agenda to seize on our Brexit freedoms and reform our world leading financial services sector, so that it works in the interest of British people and consumers.

They also build on the measures within the Financial Services and Markets Bill – which grants the UK the power to repeal and replace hundreds of pieces of burdensome EU laws; protects access to cash for communities in Scotland; and compensate the victims of APP fraud.