Glasgow ‘missing out’ on financial boom equivalent to Scotland’s entire oil and gas industry

Glasgow is missing out on an economic boom the size of Scotland’s entire oil and gas industry and is one of Europe’s most underperforming cities.

Analysis by The Sunday Post reveals seven of the top 10 areas in Scotland for average income tax paid are in Edinburgh or the north east, with no Glasgow constituency making the grade.

Experts believe it represents a shifting balance of economic power from the west to the east that could see some communities left poorer and older on average as young people move away to secure higher paying jobs.

Despite being just 50 miles apart, the story of Glasgow and Edinburgh could hardly be more different.

While Glasgow is struggling to recover from the effects of deindustrialisation decades ago, Edinburgh remains the fastest growing city in Scotland and one of the fastest growing parts of the UK – with growth outpacing even that of London.

What did our research find?

Our analysis of HMRC data released earlier this year shows Edinburgh South has the highest average income tax collected per taxpayer, at £12,900, while neighbouring Edinburgh West came in at £9,840.

Aberdeen South and West Aberdeenshire add to a swathe of wealth running up the east coast that takes in a further two Edinburgh constituencies and – falling just outside the top 10 – Gordon and Buchan.

Constituencies that are considered to be commuter areas for Glasgow, such as East Renfrewshire and Mid Dunbartonshire, do feature in some of the top spots.

However, the first Glasgow constituency – Glasgow West – does not appear until number 12 in the rankings.

Four of Glasgow’s constituencies rank below the national average, while Glasgow North East has the lowest rate of income tax paid per person anywhere in Scotland, at £3,430.

Constituency areas have wildly varying demographics and some can be skewed by certain factors, such as wealthy Edinburgh East and Musselburgh appearing further down the list than may be expected because of a large number of retired residents.

But experts agree the gap between the east and west is growing.

Paul Swinney is director of policy and research at the Centre for Cities thinktank. It analyses how and why economic growth and change takes place in UK cities.

Swinney believes politicians have failed to focus on Glasgow as much as they should given the scale of its economic shortfall.

© Supplied by Centre for Cities

He said: “Glasgow hugely underperforms relative to its European counterparts.

“It’s a big place. It should be the most productive part of Scotland and one of the most productive areas anywhere in the UK – but it isn’t.

“The calculations we’ve done suggest the size of Glasgow’s underperformance – the gap between where Glasgow is now compared to where it should – is as large as the total size of the oil and gas industry in Scotland.

“So if Glasgow was performing as it should, it’s the equivalent of adding another oil and gas industry to Scotland’s economy.”

Cities across the UK underperforming

Glasgow is not alone in underperforming in relation to its population and demographics. Outside of London, it is a common trait in UK cities – although Edinburgh arguably overperforms.

Research by the Centre for Cities found Manchester had the biggest performance gap anywhere in the UK, followed by Birmingham.

But both of those areas are showing signs of better recovery than Glasgow.

Swinney is calling for greater devolution of powers to cities and large towns, with local figureheads such as mayors or metro provosts given some degree of control over how funds are raised and spent.

Many big cities in England now have mayors and greater fiscal controls but Swinney argues devolution in Scotland has been “hoarded” at the Scottish Parliament.

He said: “It is one of the UK’s largest economic problems, the consistent underperformance of big places that should be leading the national economy but actually trail behind it.

“The good news for large cities in England is that over the past 10 years, that has started to change.

“Mayors are in place now over those greater city areas and they have a degree of policy control – although that is still relatively low in comparison to their international counterparts.

“The worrying thing for Glasgow is that not only does it not have those fiscal devolution powers but it doesn’t have the other things Manchester has been collecting over the past 10 years.”

UK inequality is not the norm

The wealth gap between the east and west coast manifests in various ways, including differences in income, wealth, and life expectancy.

Graeme Roy, professor of economics at Glasgow University, said much of the wealth on the east coast is a result of large salaries being paid in the oil and gas industry in Aberdeen and financial services in Edinburgh.

He said: “There is always going to be variation between different parts of the country but what is quite unique about the UK and Scotland is the level of that variance.

“The UK is, on a regional basis, one of the most unequal nations in the OECD so there is lots of data that shows there is a huge concentration in London for who pays the most income tax and who is paid the most money.

“In many other countries, there are many more big cities that rival the capital. Whereas in the UK, you have London and then it drops off quite a bit.”

© Supplied

Scotland’s total income tax take was £16.3 billion, compared to £248.4 billion across the UK during the same period.

The £656 million collected in Edinburgh South, the highest paying area in Scotland, is dwarfed by the £4.2 billion paid by London’s Kensington and Bayswater – an average of £62,300 per taxpayer.

The figures highlight how the UK Treasury has become increasingly dependent on a handful of wealthy areas to fund public services.

Such substantial regional inequality can force young people to move away, making it harder to fill key roles in more impoverished areas.

Boundaries Scotland recently proposed revised constituency maps for the Scottish Parliament, reflecting population shifts and changes in electoral wards since 2010.

Roy said: “Most economists would say that regional inequality is not a good thing.

“While you want to support your really successful areas, you want to make sure that’s not done at the expense of other places.

“That’s a big critique of the UK, that we haven’t done that – and Scotland is no different.”