³ÉÈË¿ìÊÖ

Where stands Scotland now? We're talking the income and spending balance. Is Scottish oil funding the UK, or is Scotland the subsidy junkie?

And the answer is ... that Scotland would be forgiven for scratching its head and being a bit confused.

That follows publication of the Scottish Government's latest figures, with its own reckoning of income, expenditure, deficits and, in one case, a surplus. (This would have been written sooner, but Sir Fred Goodwin's pension arrangements sidetracked me.)

This is called GERS, the Government Expenditure and Revenue Scotland, begun 15 years ago under the Conservatives.

Few doubt that it was intended then to show Scotland how much it was in deficit, as a way of spiking home rule guns. It has the same potential today, depending on how you want the numbers to turn out.

You can take your pick from the different ways of counting, and the two sides of the constitutional debate - the Nationalist "yes, we can afford to be independent" against the Unionist "no, we cannae" - predictably stress the bits that suit them.

There are no right or wrong answers to this debate. Indeed, there are quite a few answers.

Here are the main ones, and you can decide which make sense to you.

Open to dispute

The big numbers are that Scotland had income in 2007-08 of £45.2bn, and a further £7.3bn in what could be seen as Scotland's oil revenues.

On the expenditure side, it comes to about £53.3bn.

Both sides of the ledger are open to dispute about how they're counted.

(You could stop at this point and note, purely as a matter of interest, that Scotland's revenue comes disproportionately from tobacco and gambling tax, and the aggregates levy, while Scotland raises well under its population share on wealth-based taxes; stamp duty, capital gains and inheritance tax. But it would be best not to stop at this point, in case we lose our momentum.)

The variations on counting this are whether you include North Sea oil revenues, and whether you include capital spending.

You might ask: why not include oil income, if it's under Scottish waters?

But the convention created by the Treasury in the 1970s is that it doesn't belong to any part of the UK, but to "the continental shelf".

Too volatile

The argument used by sceptics about Nationalist accounting is that it's too volatile a source of income, though that's not so much a public accounting assessment as a political argument.

You might also ask: why not include capital? It's money going out the door, isn't it? Well, yes, but it's being spent to leave you with an asset in future, and intended to deliver long-term benefits.

It's simplistic to say capital spending is good and current spending (on services, and primarily public sector wages) is bad. But the kind of deficit you really don't want to run - in countries as in households - is in current expenditure.

So back to the figures. The worst case scenario allocates no oil revenue to Scotland, and forces it to include its capital spending.

The result, for 2007-08, is a deficit of £11.1bn, or nearly 10% of gross national income. Ouch.

Add in Scotland's population share of oil revenue (8.5%) and that falls to £10.4bn.

But give Scotland an oil share based on its sea area and the deficit falls to £3.8bn (2.7% of GDP).

That share of GDP could be seen as significant, as it is within the 3% deficit limit required of European Union members (at least before the recession struck).

That's not a reason to join the euro. It is merely a reminder of the benchmark for modern developed economies running deficits more often than not, in a way that households do well to avoid.

Whopping deficits

Strip capital expenditure out of the reckoning, and you find...

Without oil, the deficit runs to £7.1bn.

With a population share of oil revenue, that falls to £6.4bn.

But if you give Scotland its geographic allocation of oil revenues, this is the one calculation that puts Scotland in surplus - but by only £219m.

(If Scotland were not allocated a population share of the cost of the London Olympics - one of the stranger anomalies of Treasury accounting - you might be forgiven for adding £47m to that surplus.)

These figures represent the third year when the capital-free, oil-max figure has been in surplus. It was in the billion pound area for 2005-06 and 2006-07, following two years of whopping deficits, at £3.7bn and £2.6bn.

And how about a longer-term history of Scottish accounts since oil started to boost government income.

Glasgow University's Centre for Public Policy for Regions (CPPR) takes the figures including capital spend and Scotland's geographic share of oil, finding that Scotland contributed massively to the UK during the 1980s.

Special case

In 1985-86 - not a happy time for the Scottish economy - its net contribution to the UK exceeded £15bn (adjusted to 2003 prices to make the figures comparable).

But from 1990, that was reversed.

There was a peak deficit year in 1994-95 of nearly £10bn.

And while it prefers to use the newly-published GERS figures that put Scotland £3.8bn into the red for 2007-08, CPPR calculates the year just ended will be the first time in 18 years that Scotland was in surplus.

However, 2009-10 will see a return to more than £4bn of red ink, say the academics.

The special case for 2008-09 is explained by Scotland's share of the £12.9bn in oil revenues that flooded into the Treasury, followed by less than £7bn in the current year.

But then, 2008-09 includes the giant banking bailout, which could throw everyone's accounting out of kilter.

Complex dispute

It's yet to be decided if the cost of the bailout will be apportioned to parts of the country.

That matters politically, as the best figures for two decades are on course for publication next year - the final GERS before the next Holyrood elections, and just ahead of the independence referendum the SNP wants in autumn of next year.

In this important, though often complex dispute, one change from 2007-08 is worth noting.

Scotland has been allocated a sharply increased share of oil revenues.

Based on expert analysis of the production and value of output from different parts of the North Sea, Scotland's share had been edging up in recent years from 82% to 85% of the total.

But the faster falling output from the southern North Sea means that Scotland's share has jumped to 93.5% of the UK total.

Without that change, the slim £219m surplus wouldn't be a surplus at all.