Is it a bird? Is it a plane? No, it’s MELVILLE – that bloke who can actually be bothered trawling through OECD research papers


Is it really true that a separate Scotland, like Norway, could be awash with oil revenues to feed growing and generous public services? For separatists, that future can only look golden. Until that is, the inconvenient truths fly home to roost.

One way of testing those golden claims is to examine the ratio of tax revenues to the national incomes across Europe’s small states and compared with large ones like the UK, Germany and France. According to comparable data published by the OECD, all EU States, bar the Netherlands, increased their tax share of GDP between 1995 and 2006.

The UK’s tax share increased by just 1.9 per cent in ten years to a modest 37.1 per cent of our national income as both debt interest and unemployment fell and NHS spends rose. Denmark increased its tax share by a whopping 10.7 per cent to 49.1. Finland’s tax take grew by seven percent to 43.5, Belgium by five percent to 44.5 and Sweden by 7.9 to 49.1. Norway increased its tax share by a more modest 4.7 per cent to 43.9, despite being flush with its North Sea oil revenues, burgeoning oil prices and a rich income from the world’s second largest sovereign fund.

German taxes rose less than in the UK – by 1.4 per cent to just 35.6 per cent of income in 2006, and France by 8.8 per cent over the ten years to 42.4. Switzerland increased by 5.7 per cent to 29.6 per cent of GDP.

Two small rich states kept their taxes close to the low levels of the UK and Germany: the Netherlands managed to decrease its tax share over the ten years by 1.4 per cent to 39.3, and Luxembourg, the world’s wealthiest small state increased taxes by 3.1 per cent to 35.9 per cent of income, and just a fraction greater than the UK’s tax share. But most states do not include their health services within their tax charge, and the UK does.

Compiling and checking the comparability of data is a tedious process, which is why the OECD data is not recent. But that is unlikely to change the overall conclusion: small states tax you more, not less, as separatists posit.

There are large economies of scale in the governance of states, so that most small European states pay much more tax for their privilege of being separate. I wonder whether they know that in Holyrood?

For further studies go to:

LabourHame would like to reveal the true identity of “Melville” but if we did we’d have to kill you.

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13 thoughts on “Smaller states, bigger taxes?

  1. I don’t think you really understand the SNP’s point about oil revenues at all.

    Norway, like most other oil producing nations, has not simply spent all its oio revenues as they came in. Instead, they invested a share of that oil wealth in a fund. The current value of that fund is $525 billion. It just keeps growing, meaning that people in Norway will continue to benefit from Norway’s oil wealth long after the oil itself has run out.

    The UK on the other hand has just spent the oil revenues as it has gone along, and has little to show for it.

    The SNP’s point is not, therefore, to use the oil revenues to fund growing and generous public services. It is to invest a share of them in a fund like Norway – and as I said like most other oil producing nations – so that the wealth can help fund public services into the future, not just in the here and now.

    Obviously the size of the fund would be considerably smaller than Norway’s but it would still be worth doing, even at this late stage.

    1. I understand that, however, the situation we are in now is that we need the oil revenues to support our public services. So if you divert some of those oil revenues to a sovereign wealth fund, you will inevitably have to cut some public services.

      The SNP have yet to tell us which services will be cut to pay for this wealth fund – unless they think you can spend the same amount of money twice?

      1. I don’t think you can plausibly argue that the UK’s oil revenues are all directly used to support public services. As far as I am aware they are not allocated in any particular way but just go into the pot and are used to support general public spending. So some of the money will be used to support public services but some of the money will be used to support things like spending on nuclear weapons, the Olympic Games and general debt payments.

        1. I am talking about Scotland. And although the oil revenues are not allocated to any particular public service, without the oil revenue, Scotland would have a massive deficit. So the question is, if you divert some of the oil revenues to a sovereign wealth fund, what do you cut?

          1. What do you mean you are talking about Scotland? You said “the situation we are in now is that we need the oil revenues to support our public services”. The oil revenues are not used to support public services in Scotland – as I said successive Uk Governments have just put them into the general UK pot and they are then are used as the UK Government decides.

            The SNP called for just 10 per cent of the oil revenues to be set aside in a fund for Scotland – and Labour in Westminster rejected that. If we were independent we could afford to set aside more, maybe 20 or 30 per cent. The idea that the best use of oil revenues is to spend as you go is one which has been rejected by just about every other country except the UK. Do you really think they are all wrong?

  2. It’s no wonder Melville wants to keep his real identity hidden. It’s very easy to take a set of figures and make them look good for your own argument, and it’s nothing but scare stories, a classic example of talking Scotland down and the “too wee” part of the “too wee, too poor, too stupid” brand of unionism. If I was coming up with such unsubstantiated nonsense about my own country I’d want my identity kept hidden too.

    At least if we were independent, WE’d decide how ALL of OUR oil money was spent. Not having it sent to another country, where they spend most of it and then send a small amount back up, which we could spend only on certain specified services they tell us we are allowed to spend them on.

    Anyway this is a very limited article in its focus. I don’t think it’s a very effective measurement (especially for readers of this website who might call themselves socialists) to be measuring how good a countries are, simply by their tax level. Surely the quality of public services and distribution of resources also have to be considered.

  3. The original post might be a good idea for a dissertation – although it needs more research – but I’m not convinced it has much merit as part of a political campaign.

    For the small country/high tax story, the OECD data here, showing tax and social security paid by a person on average income might mean more to people than abstract concepts. The 41% paid in Germany and the 18% paid in New Zealand suggest that whatever the OECD figures show, it is more complex than was suggested. The most glaring example of bigger not being better for the woman in the street is provided by the US and Canada. Ms Average pays hardly any more in Canada – and seems to get far more out of the deal – but Canada is much the same size in relation to the US that Scotland is to the rest of the UK.

    But scare stories about tax are nothing new. They are routine in election campaigns. Dire warnings by the No campaign in 1997 turned out to be false and after a decade and a half on there have been no tax rises imposed by Holyrood but rather the opposite. Comparisons with the UK governments’ records over the past few years aren’t very flattering to Westminster. Yes, the finance secretary, unlike the chancellor, has little opportunity to screw things up badly, but voters may not realise that. The media might lap this kind of thing up, but whether anyone will be convinced by it is something else. Doesn’t seem like a winner.

  4. Is this data direct taxation? Is the balance of small and large states comparable as direct and indirect vary considerably. A number of European countries have offset taxation to encourage focused spending in key regions.

    I do not find these figures helpful as presented. If we are going to win the arguement on the taxation model it has to be clear and simple e.g. Percentage taxation burden in Germany is ****. Using the same model in the UK percentage is ***.
    It is also difficult when benefits are factored e.g. a pensioner in Germany will receive approx. 80% of his salary when working. The UK pension is almost non existent. The retirement age varition is marked.
    To give any credit to these arguements we need a basket of factors that give direct comparisons. Each side of the debate plucking numbers that suit are pointless.
    I’m getting tired of these games played by ALL parties.

  5. The cybernats in this comment thread don’t seem to understand one simple truth. People don’t like tax raises. If independence means a tax raise, the people will reject it. They don’t care who spends the money, what matters to them is the effect it has on their wallets.

    1. Sorry that is not a good argument coming from a Labourite. You have little credibility on this issue given Labour’s economic record across the UK – and your record in Scotland of pushing through above inflation council tax increases.

      1. You do realise it was the SNP led councils who raised council tax the most during Labour’s time in government don’t you?

        MJL is also correct: people do not like tax rises – something the SNP used to it’s advantage with the council tax freeze. The SNP have a policy of increasing inequalities with the CT freeze. The people who can afford the CT increases are given the biggest cut and the people who need the sevices, funded by the CT, most of all are left with reduced services.

        1. Exactly. Like the way the SNP said it was the last Labour adminsitration who raised Council Tax across Scotland. Presumably they are now so used to dictating to councils the level of their CT, they have forgotten that its supposed to be decided by the locally elected members.

        2. You do realise that the SNP delivered a 4 year council tax freeze in the face of constant Labour opposition?

          That’s the kind of thing voters remember.

          They also remember Labour arguing against reforming local tax so that it is based on ability to pay.

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