There was some dispute over Humza Yousaf’s calculation of the amount of devolved public spending of which Scotland was deprived in 2023 as a direct result of Brexit.
However, whether it is £1.6 billion, as Mr Yousaf said in a speech on Tuesday, or £1.2bn, as the National Institute of Economic and Social Research think-tank calculated, the crucial fact is it is a very big number.
Significantly more than £1bn of devolved public spending lost in Scotland in a single year because of the Brexit folly – that is surely a striking fact.
And £1.6bn, or £1.2bn for that matter, is an eye-catching number in relation to the Scottish Budget, which is £60.3bn in the current 2023/24 fiscal year and has been set at £59.7bn for 2024/25.
We have heard a great deal about the cost of the two much-delayed ferries being built by Ferguson Marine at Port Glasgow for Caledonian MacBrayne, which has ballooned to a few hundred million. However, this cumulative total cost of the ferries is dwarfed by the hit to devolved public spending in Scotland every year arising from the damage to growth and tax revenues caused by Brexit.
All too often, many people seem to view Brexit as some kind of abstract thing, failing to see the real-world consequences. The Brexiters appear to like things that way.
Brexiters and others who do not want to talk about the folly (often for political reasons) say we must move on, sometimes arguing that people are more bothered about the economy and living standards.
The point they miss, and it is a huge one, is that Brexit has had an enormous effect on the economy and living standards. And these people who do not want the Tory hard Brexit to be discussed any more should realise it will continue to weigh heavily on both in years and decades to come, unless the UK rejoins the giant single market and regains frictionless trade and free movement of people from and to European Economic Area countries.
In his speech at the London School of Economics and Political Science’s European Institute, Mr Yousaf declared that “amongst Westminster-based parties, there is a consensus that the UK should stay both out of the EU and the huge European single market – whatever the cost”.
This seems like a fair enough assertion. You cannot imagine the ruling Conservatives are going to perform a U-turn on their disastrous but beloved Brexit. And Labour leader Sir Keir Starmer, who back in 2019 was one of the most vociferous and eloquent critics of Brexit, has ruled out rejoining the single market and customs union.
Mr Yousaf on Tuesday highlighted in plain terms the transmission mechanism by which Brexit hits the public finances. And he calculated the impact on devolved public spending for calendar year 2023.
He said: “The National Institute [of] Economic and Social Research suggests that compared to EU membership, the UK economy was 2.5% smaller in 2023, and it expects that figure to rise to 5.7% in a little more than 10 years’ time.
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“That means £69 billion could have been wiped from national income in 2023 – that equates to around about £28 billion of tax revenue. Our population share for Scotland [is] £2.3 billion. Around 60% of spending in Scotland is on devolved services. So if you take the same level of borrowing and the same level of taxation, that means without Brexit devolved spending power for vital public services such as the NHS could have been £1.6 billion higher in Scotland than it is today.”
Summing up, Mr Yousaf added: “So, in other words we have suffered - our institutions have suffered, our public services have suffered, and, ultimately, our people have suffered to the tune of £1.6 billion that could have been invested in Scottish public services because of a Brexit that, remember, Scotland overwhelmingly rejected.”
It is a point absolutely worth making, especially at a time when the public finances in Scotland have been excruciatingly tight.
The National Institute of Economic and Social Research calculated the effect a little differently.
It told The Herald: “Scottish GDP is roughly £190 billion. So 2.5% is roughly £4.75 billion. That represents roughly £1.9 billion of tax revenue. And 60% of that is around £1.2 billion.
“So he’s a little high in his estimate.”
Whether it is £1.6bn or £1.2bn, the cost of Brexit in this context is eye-watering.
Brexit has clearly hammered tax revenues, depriving people in Scotland, and elsewhere in the UK for that matter, of crucial public spending.
Mr Yousaf is right to highlight this fact. He was also correct to underline in his speech the enormous damage done by the Conservatives’ failed austerity, and he made a good case for greater public investment.
His speech was, not surprisingly given he is the SNP leader, aimed in large part at making an argument for independence as well as looking like a clear attempt to challenge the Conservatives and Labour as a general election looms.
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However, taking the big constitutional question and politics out of it, the point Mr Yousaf makes about Brexit having hammered growth, tax revenues and public spending potential is a matter of simple fact.
Office for Budget Responsibility chairman Richard Hughes said last spring of Brexit’s effect: “We think that in the long run it reduces our overall output by around 4% compared with had we remained in the EU.”
Centre for European Reform associate fellow John Springford estimates Brexit had by the second quarter of 2022 reduced the UK’s GDP by 5.5%.
Economists at US investment bank Goldman Sachs have calculated that the UK’s economic output has fallen short of that of similar countries by about 5% since the 2016 Brexit referendum.
In a research paper published on February 9 on the cost of Brexit, Goldman economists James Moberly and Sven Jari Stehn said: “The UK has significantly underperformed other advanced economies since the 2016 EU referendum, with lower growth and higher inflation.”
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Labour appears entirely unwilling to discuss the enormous effects of Brexit. This is no great surprise, given it seems somewhat keen on pandering to “red wall” voters in the north of England who desired Brexit so much that they switched their allegiance from Labour to then Conservative leader Boris Johnson and his Leave brigade in 2019.
Nevertheless, Labour’s silence on the very real effects of Brexit is lamentable, especially given that many among its traditional voter base will be hardest hit by these. These Brexit voters may not want to hear that they made a mistake but it is surely better to inform them and then try to mitigate the damage, for everyone’s sake.
And the ruling Conservatives should absolutely be held to account for the colossal hit to Scotland’s public finances from their foolish hard Brexit.
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