When you’re a full time carer, managing to get out for an hour or so to the local branch of Morrisons to get the weekly shopping counts as ‘quality me time’. It allows me to stock up on favourite munchies and comfort food. I like a wee slice of Kirriemuir Gingerbread, slathered with butter. The other half enjoys a thick slab of it in a bowl, covered in Devon Custard with a dollop of double cream. Bugger the cholesterol. But the other week there was none in the usual aisle, just a pile of Christmas cakes – and it was only bleedin October
I asked a guy stocking shelves where they’d moved it to. He apologised, and told me there wasn’t any in stock. All the ordering is done by Head Office down in England he said, and they’d sent instructions that no more would be ordered until the New Year in order to make space for piles of Christmas cake. In October. Who eats Christmas cake in October anyway?
He added that the store manager had been on the phone to them, explaining that cholesterol laden grumpy auld gits throughout Scotland buy a lot of Kirriemuir Gingerbread, and they moan a lot when they can’t get it. We sell a lot of it here, the shelf-stacking guy assured me. But Head Office in England was insistent that we really want to eat Christmas cake for the next 3 months. It’s a Union benefit to shake us out of our provincial Kirriemuir Gingerbread munching ways.
The phrase “Head Office in England” got me thinking. Supermarkets account for a large chunk of weekly expenditure, especially in low income households, like those of the typical carer and cared for. Money spent in a Scottish supermarket belonging to one of the large UK chains – like Morrisons, Tesco, Asda, Sainsburys, or, if you’re posh, M&S – generates VAT and other tax revenue for the UK Treasury that is identified as originating from the company’s head office, which is most often in London or the South East of England.
Of course much of what we buy in supermarkets, like many foodstuffs, is zero-rated for VAT, but non-food items like deep clean skin cleanser and toilet duck are all liable for VAT at the standard rate of 20%, as are “luxury” food items like chocolate coated biscuits.
The same holds true for non-food retail chains. None of the VAT collected on the flat screen telly you bought from Currys before it closed down counted as Scottish revenue, despite the fact it was a tax paid on sales in Scotland. None of it could be used by a Scottish Government to protect Scottish workers against job losses.
Since it doesn’t count as Scottish revenue, taxes generated by the money Scottish residents spend in most large retail outlets is not credited to Scotland in the UK Government’s GERS (Government Expendture and Revenues Scotland) figures, the figures upon which much of the argument about Scotland’s economic viability is based, and which Westminster uses to tell us how poor we are. Although on their own figures, Scotland generates 9.9% of UK tax revenues, with just 8.3% of the UK population.
Even on the UK’s skew-you statistics, Scotland is doing better than Better Together would like to acknowledge, but an independent Scotland’s finances would be even healthier, and by a considerable margin. The truth is that the GERS figures are about as realistic as the financial forecasts Craig Whyte made for the Gers.
As a furrinstance, the sales of toilet duck and choccie biccies in supermarkets mean that the revenues of an independent Scotland would be rather higher than the UK’s GERS figures give us credit for.
In an independent Scotland, tax due on all sales or profits generated in Scotland would be paid to the Scottish Treasury. The 50p VAT on your toilet duck from Morrisons supermarket is an additional 50p that would go to the Scottish budget over and above the official statistics currently being bandied about by the UK Treasury. The 50p would no longer be tax income originating from a head office in London. It would be tax income originating from the company’s offices in Scotland.
A bottle of toilet duck here and a packet of wet wipes there adds up. So just how much is Scotland being shortchanged? Finding out the exact figure would take a crack team of forensic accountants on speed, but we can get a rough idea. Let’s have a wee look at the largest UK retail chain, Tesco.
During the last financial year, 2012/13, Tesco reported UK sales of £48,216,000,000. Much of this is food which is not liable for VAT. On my last trip to the supermarket, around 15% of the amount spent was on non-food items, and so liable for VAT. That’s as good an estimate as any in order to work out some rough calculations.
I couldn’t be bothered adding in the chocolate biscuits. In what universe is a McVities chocolate digestive a “luxury”? It could only be in a country where a spare room for the wheelchair, the walking frame and bathroom equipment is a luxury for people on benefits … Oh.
But let’s lean over backwards to give Georgie boy and the Treasury the benefit of any doubt. With a standard VAT rate of 20%, and assuming zero-rated food items make up 85% of Tesco’s turnover, this means the company forwards roughly £1.44 billion annually in VAT to George Osborne’s account books.
This figure does not include other taxes paid by Tesco to the UK Treasury, such as corporation tax. The company says that it paid a total of £1.5 billion in direct taxation to the Exchequer in 2012/13, a figure which includes corporation tax, property taxes etc., but doesn’t include VAT payments.
All this money is counted by the UK Treasury as revenue originating from Cheshunt in Hertfordshire, just beyond the boundary of Greater London, where the company’s head office is located and its tax returns are filed.
The revenues which the UK Treasury regards as originating from the company’s head office were generated by the company’s 3146 stores across the UK. Tesco traditionally has a smaller presence in Scotland than in England, where the bulk of its stores are located. However Tesco has many more “Express” and “Metro One Stop” outlets in England, these are much smaller than the company’s main supermarkets and therefore do not generate the same amount of revenue for the company or the taxman.
According to the company’s submission to the Scottish Government’s consultation on alcohol, it has “over” 126 stores in Scotland. Let’s say 128 then.
Getting out the back of a fag packet so we can make some rough calculations, and with the additional assumption that Tesco’s Scottish stores each generate the same average revenue as stores elsewhere in the UK, this gives us a ballpark figure of £1.44 billion VAT + £1.5 billion direct taxation x (128 Scottish stores / 3146 UK stores) – working out at £119 million annually in tax payments to the UK Treasury from sales and profits generated by Tesco operations in Scotland.
Since a higher proportion of the Scottish stores are large supermarkets, and Tesco is also involved in non-food retailing such as financial services, this figure is probably a low estimate.
By way of comparison, Tesco Ireland has 137 stores in the Irish Republic. The Irish arm of the business is roughly the same size as Tesco in Scotland. Tesco Ireland generates a total of €3.07 billion (£2.64 billion) in sales annually. The standard rate of VAT in Ireland is 23%. Assuming the same 85% figure for zero rated food items, this means that Tesco Ireland forwards around €105 million (£90.3 million) annually to the Irish Government in VAT alone. At the 20% VAT rate in force in Scotland, Tesco’s retail sales in Ireland would generate €92.1 million (£78.6 million) annually in VAT revenues for the Irish Government. This figure does not include the other taxes that the company pays to the Irish Treasury.
Our estimate of £119 million for the total potential Scottish revenues from Tesco is likely to considerably underestimate the true figure, it includes several other taxes as well as VAT. More realistically, the total due in VAT alone to an independent Scottish Treasury from Tesco operations in Scotland would be similar to the Irish figure, probably greater than £78.6 million annually.
Since the total in other taxes paid by Tesco to the UK Government is greater than our deliberately low estimates for VAT, the true figure for the taxes Tesco would pay in an independent Scotland is certainly well over the £140 million mark. At the moment, Scotland is not credited with a penny of this amount.
£140 million is a large sum of money, working out at 147 million packets of Kirriemuir Gingerbread at 95p per pack, or 582,758,206 tins of Tesco own brand baked beans at 29p per tin. The contents of the tins would be capable of producing more fart gas than a Better Together press release. But only by a tiny wee margin. If laid end to end a half billion tins of beans would wrap around the world almost one and a half times, or form a tower 34,600 miles tall stretching high into geostationary orbit. We could have our own space programme, and we could adapt Michelle Mone’s bras to make a slingshot to get our astronauts to the Moon. Or possibly even Michelle herself as she’s not keen on living in an independent Scotland.
But remember £140 million is only the hidden Scottish revenue from just one supermarket chain. What applies to Tesco applies equally to Morrisons, Asda and all the rest. It also applies to M&S, TopShop, John Lewis, and the other retail chains on our high streets and in our shopping centres. In these outlets the large majority of sales turnover is liable for VAT.
Few of these companies are headquartered in Scotland, yet together they make sales in Scotland worth billions of pounds annually, and the billions they generate for the UK Treasury are filed in tax returns from their head offices, which are usually in London. This is how London “subsidises” us.
There are other ways in which Scottish revenues are invisible in the official statistics. Much of the alcohol duty paid by our whisky industry is not counted as revenue from Scotland. Alcohol produced in the UK which is exported abroad becomes subject to UK alcohol duty at the point of export, and a large proportion of Scotland’s multibillion whisky exports gets shipped out from ports in England. The UK Treasury counts the duty levied on this whisky as income from the tax region in which the port is situated.
Billions of pounds of Scottish revenue is magicked away in the official statistics, and doesn’t count as Scottish revenue. It masquerades as revenue from other parts of the UK, most commonly as revenue from London. In total, the extra revenues which do not currently figure in the GERS statistics, but which would accrue to an independent Scottish Treasury, would be considerably larger than the entire annual income from the North Sea. Who needs the yle when you’ve got Tesco own brand baked beans eh?
This is why Project Fear is ramping up the hysteria. Scotland generates far more for the UK Government than it wants to admit to.
And so far I’ve not even mentioned how the expenditure part of the GERS statistics are likewise a skew-you to Scotland. That’s a whole other rant.
Anyone who tells you Scotland cannae afford independence is farting verbally to the tune of half a billion tins of Tesco own brand baked beans. We would in fact be considerably better off than the GERS figures suggest. We could probably even afford the few extra pennies for the Kirriemuir Gingerbread with the icing topping.
No doubt in an independent Scotland the supermarkets would still insist on starting Christmas in September, but at least the revenues and taxation they generate would go to the Scottish budget, and count as income for the Scottish Government, to be spent in Scotland and on her population. And we’d be able to buy Kirriemuir Gingerbread all year round.
Vote Yes, for Kirriemuir Gingerbread.
28th October 2013: This is an amended and corrected version of the original article, after it was pointed out to me that like the Kirriemuir Gingerbread crazed eejit that I am, I had forgotten that food in the UK is not liable for VAT. It was the withdrawal symptoms that made me do it.