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Last Updated: Tuesday, 16 January 2007, 21:45 GMT
Massive spending error revealed
Holyrood committee room
The disclosure was made to finance committee members
Scottish Executive economists have admitted that the level of public spending may have been over-estimated by more than 400m.

It comes after errors in the way UK Government spending for Scotland is calculated were discovered by economists Jim and Margaret Cuthbert.

The discrepancies were found in the annual Government Expenditure and Revenue in Scotland (GERS) report.

Dr Andrew Goudie, chief economic adviser, said he was investigating.

According to the most recent report, published in December, net borrowing was about 11bn, with a lesser estimate of 6 bn when the impact of North Sea oil had been taken into account.

The Cuthberts - a husband and wife team - had argued that certain types of spending in areas such as prisons, courts and nature conservation is excluded from some calculations made in England but not in Scotland.

We are very grateful for the work that the Cuthberts have done
Andrew Goudie
Chief economic adviser

The Cuthberts' study was published in the quarterly economic commentary of Strathclyde University's Fraser of Allander Institute, which backed their concerns.

Dr Goudie, who was giving evidence to the Scottish Parliament's finance committee, said he had written to the Treasury so that the figures could be checked.

"We are very grateful for the work that the Cuthberts have done," he said.

"It has brought to light something that is extremely important and I for one welcome the fact that they have identified something here that we are certainly pursuing very strongly now.

"My team have also been in continual contact with them since, in order to try and improve it."

However, he insisted that estimates in GERS were as accurate as could be expected given the figures available to his team.

Wendy Alexander
Wendy Alexander said it was a fitting day to discuss the issue

Committee convener Wendy Alexander said it was a fitting day to be discussing the issue.

"I think it would be hard to think of a more appropriate day than the 300th anniversary of the Act of Union for the Scottish Parliament to be debating the essential character of the current financial relationship between Scotland and the rest of the UK," she said.

Scottish National Party finance spokesman John Swinney said: "The revelations this morning by senior executive civil servants blows a hole in Labour's scaremongering attempts to mislead the Scottish people about our real fiscal position.

"While the SNP have long argued that GERS is an inaccurate, politically motivated exercise, the evidence heard in parliament this morning now completely confirms our case. The SNP believe in a successful Scotland, while Labour just want to hold the economy back."

Professor Gavin McCrone, general secretary of the Royal Society of Edinburgh, claimed the Barnett Formula - used to adjust public expenditure figures - was out of date and a new independent needs assessment was needed.

Speaking during a round-table discussion he also told MSPs that he rejected the term "subsidy" often used to describe the deficit and insisted there had been no deliberate intention to give Scotland more money.

"There is increasing pressure from parts of England to look at all of this again and Lord Barnett has said himself that he no longer believes his formula is appropriate," he said.

A study would show that Scotland needs more public money than the national average, given issues such as the sparseness of the population, Mr McCrone added.

Figures spark public spending row
12 Jan 07 |  Scotland
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11 Dec 06 |  Scotland
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16 Feb 05 |  Scotland

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