The National:


“NHS staff in Scotland to be offered 4 per cent pay rise – only possible because of the Union dividend and our place in Britain” – Tweet by Tory politician Murdo Fraser, 24 March 2021


There is no Union financial dividend. The Scottish NHS is funded wholly by Scottish taxpayers. This comes either through separate Holyrood income tax bands or from Scottish tax receipts collected by the UK Treasury then returned to Scotland - minus deductions for the nuclear deterrent, H2S and other Westminster fancies.


The National:

Fraser has been a Tory list MSP for the Mid Scotland and Fife since 2001. He was chair of the Scottish Young Conservatives between 1989 and 1992. He became an MSP by default in 2001, following the resignation of Nick Johnston, as next name on the Conservative Party Mid Scotland and Fife list. Fraser lost his bid to become Scottish Tory leader to Ruth Davidson in 2011. He keeps a signed letter from Donald Trump pinned to his office wall.


On March 24 2021, the final day of the outgoing Scottish Parliament, the Scottish Government announced it was offering a 4% pay rise to 154,000 designated NHS Scotland staff. This covers nurses, paramedics, allied health professionals, domestic staff, and porters – but not doctors. If accepted, this represents the most generous NHS pay rise in the UK, and the biggest single year increase for NHS staff since devolution.  

The offer would see staff on bands 1-7 receive at least a 4% pay rise, with those earning less than £25,000 getting a guaranteed minimum increase of over £1000. Effectively, this means staff on the lowest pay point would get a 5.4% increase. The pay settlement will be backdated to December 1 2020 in recognition of an exceptional year of significant pressure for staff.

The National:

This increase is in addition to the £500 “thank you” bonus for all NHS and care workers already granted by the Scottish Government. The Scottish pay offer has been made as part of ongoing negotiations between the ScoGov, NHS employers and unions. NHS unions will now consult their members on the proposal.  

Meanwhile in England, the Conservative Government has made a submission to the NHS Pay Review body offering a £250 uplift for staff earning less than £24,000 (a quarter of the Scottish offer) and only one per cent for all other NHS employees. The Royal College of Nursing estimates nurses’ pay would increase by only £3.50 a week as a result. 


In normal circumstances, the Westminster Government decides on a pay offer for English NHS staff. The final, agreed addition to the UK public budget is then replicated for Scotland (via an increase to the Holyrood Treasury grant) on a population basis. This is the so-called Barnett Formula. One presumes that the claim by Murdo Fraser – that the Scottish Government NHS pay offer is the direct result of a “Union dividend” – refers to the automatic working of the Barnett Formula.

If so, Fraser’s logic is obviously defective. The Scottish Government is proposing a significant wage increase compared to the so-called Barnet consequentials arising from the 1% offer in England. Which means the Scottish Government will need to fund its own, enhanced NHS pay offer from different sources. We should also note that the Scottish citizens and businesses pay tax into the Exchequer. The money received back in Barnett consequentials is merely their own cash being returned to Scotland. From that perspective, there is no “Union dividend” in financial accounting terms.

The National:

How will the Scottish Government fund the 4% NHS pay increase, above and beyond any Barnett consequentials? In the first instance, under the devolution settlement, the Scottish Government is not required to spend Treasury cash in a like-for-like manner compared to English departmental outlays. Scotland has vastly different needs, geography, health patterns and demography compared with England and the other UK nations. So the Scottish Government is free to allocate its budget as it sees fit from the Treasury grant. In this case it is rewarding and incentivising a health team that has been at the forefront of protecting Scottish citizens during the pandemic.


We also need to take into account recent changes in the devolution settlement.  The Scotland Act 2012 gave the Scottish Parliament power to set a different rate of income tax in Scotland. This took effect from April 2016. For the financial year 2021-22, the approved Scottish Budget will raise income tax on the highest earning decile of taxpayers, both in cash terms (£1247) and relative to their gross income (by 1.3%).

This ability to increase tax income in Scotland (proportionate to England) will help fund the proposed pay offer to Scottish NHS staff. Obviously, this cannot be claimed as part of a “Union dividend” as it was decided at Holyrood. Note: Murdo Fraser is against the Scottish Government using its tax-raising powers. Speaking in the Holyrood budget debate on January 28, Fraser said: “When it comes to the detail of the Budget for the coming year, we have been clear that there should be no new income tax rises”.

READ MORE: Westminster urged to 'follow the Scottish lead' with four per cent NHS pay rise

In other words, Fraser is opposed to using Scottish tax income to fund frontline medical care in a pandemic. Curiously, Fraser seems not to have noticed the £9 billion rise in UK income tax receipts - arising from the Chancellor Sunak’s March Budget - as a result of the freeze in the income tax personal allowance. That is the kind of “Union dividend” Fraser tends to ignore.

NHS staff across the four UK nations are calculated to have provided over 1,000,000 hours of unpaid overtime since the start of the pandemic. Many would argue that even a 4% pay offer hardly compensates for this heroic effort.


The National:

Not even 1%.