Where does Scotland’s wealth go (if it doesn’t stay here)?

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It’s a simple question but not one often asked, probably as most economics bloggers like myself get bogged down in numbers and over-complicate the issue.

Data from the UK Government’s Office for National Statistics demonstrates in simple terms the distribution of personal wealth in the UK.  It is clear to see that London and the south are by far the wealthiest parts of the UK.  Not just the south east but the South West as well.

Clearly the further north you go the lower the distribution of wealthy households and this matches other research that shows overall lower average household wealth, and lower the average household income in the north.

The map of wealthy household distribution shows a clear north/south wealth divide within England itself, which many of us knew about, but many will be surprised at just how far south the divide sits.  Without over complicating the issue this data when taken with all other wealth and income statistics that look at wealth/income distribution within the UK confirms that wealth is centralised around London.  The more northern areas of the UK have suffered years of de-industrialisation, high unemployment and lower investment that followed the emergence of London-centric finance and service-led economic policy under consecutive Conservative and New Labour governments.

No surprises there then!  However, when you compare the map of where the wealth ends up with a map of where the UK’s wealth is generated, they don’t tell the same story.  The union drains wealth from Scotland.

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The second map (Eurostat Regional GDP per capita) shows clearly that, in terms of wealth per head, the Scottish central belt generates as much wealth as much of London and the South. Also Scotland’s north east is (perhaps not surprisingly) one of the best performing economic areas in the UK.  Now look again at the first map and ask yourself, “why doesn’t Scotland’s wealth stay in Scotland”?

It becomes clear that we are only better together if you believe that London is entitled to the lion’s share of Scotland’s wealth.  The Jimmy Reid Foundation, a new and increasingly well respected think-tank, published a report in June 2013 demonstrating this wealth drain and the resulting under-performance of Scotland’s economy.  It highlighted that Scotland’s economy would be 25% larger than it is today in the absence of the historic and present union wealth drain.

A month earlier, I made the same point on this blog when I wrote about Scotland’s economy going south.

It is an accepted fact that every year for 30 years Scotland has generated more tax revenue per head for the UK treasury than the rest of the UK.  The latest figures taken from the Government Expenditure and Revenue Report Scotland (GERS) state that Scotland generated £800 more in tax per person than the UK average.  Scotland would have been £8.3 billion better off than the UK over the past 5 years.

Put simply, when the UK runs a surplus Scotland contributes more to the surplus, and when the UK runs a deficit Scotland has to pay more of the debt back than it is responsible for.  It’s a “lose/lose” situation for Scottish tax payers and especially for those in need of support from the state.

Often attributed to Aristotle:

You can judge a nation by the way it treats its most vulnerable citizens.

Instead of understanding and reacting to the root cause of the problem we now have a culture of scapegoating the poor, unemployed, disabled, infirm and especially immigrants rising to the top of a political agenda which is dominated by the London and south of England establishment.

So let’s consider three key vulnerable groups that the Scottish Government could help if we did not give away so much of our budget every year around £4.1bn drained away on debt interest last year year alone!

1) The poor
Whilst according to The Times, 1 in 29 Londoners are dollar millionaires, 29% of Scots live in fuel poverty according to the latest research.

2) Children
In some areas in Scotland more than 1 in 3 children grow up in poverty (1 in 5 across the nation as a whole).  The charity ‘Child Poverty in Scotland’ says that with Scotland’s undoubted wealth, this statistic is a scandal. There is no reason why our child poverty rates should be so much higher than many other European countries.  In Denmark and Norway less than 10% of children live in poverty.

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3) Old people

According the UK Life Expectancy figures (see 3rd map), the impact of the unfair distribution of wealth under the Union combined with unemployment caused by deindustrialisation means that people who live in Scotland are dying earlier than those from the wealthiest parts of the UK.

For example, the male life expectancy in Scotland is 75 versus 79 in the English south east. Possibly more worryingly healthy life expectancy in Scotland is only 59.5 years.

This causes two big problems. First, health care costs in Scotland become higher than the rest of the UK and secondly Scots who pay the same percentage of their wages towards pensions all their working lives will get up to six years less pension.

So as well as subsidising the rest of the UK during their working lives they do so again in death.

Because people are living far longer in the heavily populated south east of England, the state pension age is already due to increase to 67 by 2028 and future rises in the state pension age would remain linked to improvements in life expectancy.  Asking your average Scottish man or woman to work seven years longer than his healthily life expectancy is asking a bit much.

Indeed, last year, the charity director of Age UK, Michelle Mitchell said:

“We would not support an automatic increase linked to average life expectancy as there are huge disparities in life expectancy across the country and between different groups.”

But it is happening anyway!

Note:  There are only three small areas of the UK where the average person is expected to live over 82 years(dark green on the map), they are Kensington, Westminster and Chelsea.

Conclusion

David Cameron is fond of saying that we are STRONGER, SAFER, RICHER, and FAIRER … TOGETHER.

But clearly that’s only if you live outside Scotland and particularly if you are from the South of England!  Scotland itself is clearly weaker, less safe, poorer, and less fair as part of the Union.

How does a political and economic system that drains billions in revenues from Scotland and leaves the poor unable to heat their homes make us better together?  The current Westminster system leaves many Scots children in poverty and growing up in a culture of hopelessness. It leaves our nation’s families comparatively poorer despite the fact that we generate more tax revenue per head that the rest of the UK.

How can anyone justly claim that is worth fighting for? But then maybe that is why the No camp does not actually campaign on the economic and social record of the Westminster system but rather campaign against independence and, by extension, against the hopes and aspirations of those of us that see independence not as an end in itself but a means to an end whereby we build a stronger, safer, richer, fairer and all round better Scotland.

We can build a Scotland which gets the best of both worlds from remaining in partnership with our friends across the British Isles in areas where we share mutual interests, but most importantly being able to shape our own economic future and maximise our own resources to benefit more Scots today and in generations to come through self-government.