Wednesday, 25 June 2014

Dunleavy and the Costs of Independence

If you only look at an arbitrarily defined sub-set of the costs involved in setting up an independent Scotland you can produce a figure of £200m to save the First Minister's blushes ... but no matter how hard you try you can't disguise the fact that the true cost will be significantly more than £1bn.

Before getting lost in the detail of this post let me make a "meta" point: if independence is a good idea for Scotland the question of whether it "costs" £200m or £2.7bn is largely irrelevant; the benefits should dwarf any set-up costs.

But ...

So much nonsense has been spoken about the "set-up costs" of an independent Scotland the subject deserves attention because it tells us something about the role of experts and media spin in this debate.

At its simplest the narrative can be summarised as;
  • 26/05/2014: HM Treasury Press Release
    • "The Institute for Government (IfG) and the London School of Economics (LSE) have published independent analysis which puts the average cost of setting up a new policy department at £15 million. Applying this to the 180 departments the Scottish government states it would need could see Scottish taxpayers fork out £2.7bn"
  • 29/05/2014: Salmond backs economist's £250m start-up price tag for independence
    • "The First Minister backed estimates by London School of Economics expert Patrick Dunleavy, who has put the cost at between £150million and £300million"
  • 22/06/2014: Transitioning to a new Scottish State by Prof Patrick Dunleavy (hereafter "The Report")
    • "An independent Scotland would face immediate set-up costs of up to £200 million in creating new administrative structures that duplicate UK institutions"
  • 24/06/2014: First Minister Alex Salmond (in one of his more self-righteous outbursts - and that's saying something) stated in a letter to David Cameron published in the Daily Record
    • "Professor Dunleavy’s report this weekend has vindicated the Scottish Government’s position and demolished that of the UK Government."
So its pretty clear right?  Anybody reading the Scottish press - certainly anybody skimming the headlines - would come away thinking this is the story: Scottish Government vindicated, UK Government position demolished.

In fact - despite the SNP's continued bleating about "Mainstream Media Bias" - the way this story has been reported is a triumph of SNP spin.  They've won the battle of the headlines; they don't need to worry about the few thousand people who will actually bother to understand the numbers and inform themselves ... ah well: at least if you make it to the end of this post you'll be one of the informed few.

So what does Dunleavy actually say?

He's clearly extremely (and to some extent justifiably) irritated that Treasury took his department's name in vain when publishing their £2.7bn estimate.  It's worth noting (as I pointed out at the time > Lies, Damn Lies and Cost Estimates) that the Treasury's estimates may have been disappointingly crude but at least they made no attempt to present the numbers as anything more than scoping figures. Other than two specific cost estimates ("a new benefit system could cost £400m alone, and setting up a new tax system could be as much as £562m") they merely stated that costs if you assume 180 departments at £15m per department "could be up to" £2.7bn. They also provided a percentage of GDP scoping of £1.5bn

What's clear from the tone adopted in Dunleavy's report is that he has dropped any pretence at objectivity. Contrast his assertion that the UK Treasury "demanded that Alex Salmond produce cost data for things that could only have numbers attached to them by someone with the prophetic powers of the Delphi oracle" and that they briefed "spectacularly wrong information" with his somewhat more emollient attitude towards the SNP's behaviour "It is possible the £600m number [leaked estimate of annual cost of running the Scottish tax systems] in the Swinney memo is itself just a mistake". It's clear to any objective reader of the report that the Prof has chosen his side.

Having chosen his side the Prof is faced with a challenge: how to retain his credibility at the same time as producing a number that will save the First Minister's blushes?  He gives the game away pretty early in the report, on Page 5 in fact:
  • "what we try to do here instead is to show what definite costs will be incurred in the short term - these are genuine "set-up" costs"
Do you see what he did there?  Just the "definite costs ... in the short term" followed by the blithe assertion that "these are genuine set-up costs".  Let's think about what the Prof is saying here.
  • Only definite costs: anything uncertain is simply excluded.  I don't think you need to have "the prophetic powers of the Delphi oracle" to make reasonable assumptions around costs that are not definite; but this appears beyond Professor Dunleavy.  To be fair, he's Professor of Political Science and Public Policy Chair; he's not an economist.
  • Only short term costs: the Report states elsewhere that "the transition will take more than seven years" ... but by restricting himself to "short term costs" he only includes costs he assumes will be incurred in 2016.  To say that the costs incurred after 2016 (to complete the creation of dedicated Scottish government infrastructure and systems) are in some way not "set-up costs" is frankly ridiculous.

He goes further in his desperation to create a small headline number; he creates categories of costs which in his arbitrary definition are distinct from set-up costs: "Transition Costs", "Investment Costs" and "Disentangling Costs". I mean this is hardly subtle. Let's be clear: there is no accounting definition of "set-up costs"; Prof Dunleavy has chosen to define these in a way that allows him to achieve the lowest possible headline number 

So let's go though each of these costs and see what the Prof concludes;
  1. Set-up Costs: "they cover just the legal costs of setting up a department, agency or public body, and any additional accomodation/IT costs plus hiring in staff not needed before" -- mainly defence, foreign affairs, tax and benefits.  In the range of £150m to £200m
  2. Disentangling costs: "governments on both sides of the border will need to de-merge data ... and perhaps change some back-office operational processes".  No estimate given
  3. Transition Costs:  "when Scotland negotiates or contracts with rUK to keep doing part of processes.... only the extra cost of the contract negotiations and monitoring are new burdens borne by Scottish tax payers". No estimate given
  4. Investment costs: "to be borne by Scotland in order for its policy makers to gain full control over the tax, benefits and defence areas, running all the back-office systems in a self-sufficient way".  In his executive summary he states these IT costs would "certainly cost several hundred million pounds" and that Treasury estimates of £962m (for welfare and tax systems alone) "do not seem implausible" but is keen to point out they are "not based on any careful analysis".

So he simply fails to provide any estimates at all for two of his categories of costs and offers no more than "several hundred million pounds" and a begrudging acceptance that £900m is not implausible for some specific IT investment costs.  It's worth mentioning here that ICAS in Scotland's Tax Future observed  "In New Zealand, for example, changes to the tax system which are less complex than those for an independent Scotland are costing around £750m. The cost for an independent Scotland could be significantly greater".  A leaked memo from Swinney (the one that Dunleavy is embarrassingly keen to dismiss as "just a mistake") stated that tax system costs would be "expected to lie in the region of £575 to £625m"

The Professors complex semantic gymnastics cause him some problems here. He states IT investments costs are "not just 'set-up costs'". Not just - so he tacitly accepts that even by his own arbitrary definition at least some of these costs are set-up costs.  He bends over backwards to try and justify keeping these IT numbers out of any headline figures: "these are investments""could well be cheaper and far more flexible to operate""systems might well be smaller, more flexible and more modern than those in the UK".  Well I would have thought that by definition they'd be more modern ... and yes they might be, they could well be better; but that doesn't mean the entire IT "investment" can be dismissed. If there is a Yes vote there will be hundreds of £ millions spent on IT development that otherwise would not be spent. Nobody is arguing that rUK would spend less - this is simply added "system" cost however you choose to allocated it. 

And there's more

  • There are other costs that appear completely excluded by Dunleavy's analysis because they are not "immediate" (and so don't fit his arbitrary "set-up costs" definition) and don't fit any of his other cost category definitions either.  For example 
    • He states "a full embassy network covering about 50 countries would come later" and so presumably are simply not included in these cost estimates at all
    • Under the "Investment" heading he states "as the Scottish Defence Force builds up, they too can take over their own command and control, procurement and other complex back-office functions". He offers no cost estimates for this saying only "the UK Treasury has not given any specific numbers for defence" -- apparently the Prof will not make estimates in this area unless the Treasury have. I mean; we know he doesn't possess the prophetic powers of the Delphi oracle but you think he'd offer some estimate. 
  • 43 existing UK government bodies have been completely excluded as "clearly or probably not needed".  He doesn't share which government bodies these are (let alone which are "probably" as opposed to "clearly" not needed). Which is a shame
In fact he doesn't share any of his workings to get to the £150 - 200m headline figure. This seems a rather surprising omission from someone who is so quick to criticise the UK Treasury's lack of "careful analysis". I guess we take his word for it.

Instead of sharing his workings, he instead chooses to dedicate much of the report to the topic of policy cost savings and defence spending; a subject that is so clearly "off-brief" it betrays his desperation to find ways to justify ignoring whole categories of costs to help the headline cause. Why not look at the other side of the equation: factor in increased costs of debt due to currency separation? Possible costs of lost EU rebates? Economic cost of employment loss due to firms relocating employment South of the border to avoid export and/or to mitigate future currency risk? The selectivity of Prof Dunleavy's vision is telling.

So what does his report actually tell us?

If you only look at an arbitrarily defined sub-set of the costs involved in setting up an independent Scotland you can produce a figure of £200m to save the First Minister's blushes ... but no matter how hard you try you can't disguise the fact that the true cost will be significantly more than £1bn and in fact look to be closer to the Treasury estimates than Alex Salmond's.

I see that today (26/06/2014) an Oxford Economics Professor (Ian McLean) has come out to say "closer to £2bn than £1bn" and in response Prof Dunleavy now says "up to £1.5bn".  Those £200m headlines seem like a distant memory; let's hope the "Main Stream Media" is paying attention to these developments.

Our First Minister's statement that Prof Dunleavy "has vindicated the Scottish Government’s position and demolished that of the UK Government" is now shown to be nothing more the dissembling bluster many of us knew it to be.  We know he's very keen on demanding apologies;  I wonder if he'll apologise for knowingly misleading the Scottish people over the true costs of Independence?

Addendum II
Today (31/08/2014) the Sunday Times published findings from a Centre for Economics and Business Research (CEBR) study - commissioned by The Sunday Times - which concludes "The set up costs for an independent Scotland would run to nearly £2.5bn while taxpayers could face paying out a further £2bn on new currency arrangements" and points out the £2.5bn figure is "ten times greater than SNP leader Alex Salmond has previously suggested"

Tuesday, 17 June 2014

Who Do "Business for Scotland" Represent?

According to the Scottish Government Statistical Bulletin;
  • Exports to the rest of UK (from Scotland) in 2012 (excluding oil and gas) are provisionally estimated at £47.6 billion, of which £25.3 billion is attributable to service sector companies and £12.7 billion is attributable to manufacturing sector companies.
Given that the potential impact on this £47.6bn of trade is one of the big issues for business in the Independence debate I think we can agree that any "Scottish Business" voice would need to include representation from businesses involved in this trade to have any credibility.

This is why I'm amazed that "Business for Scotland" gets any airtime at all. As I show in painful detail in this post, the identified Members of Business for Scotland can be fairly summarised as;
  • 30 "business professionals"
  • 28 people who have Small Company directorships; businesses with no declared turnover or employee figures.  These are predominantly consultancies, property companies and service companies; I can't identify any material trading links with rUK and none can be considered major employers
  • 6 People who have or have had larger scale business experience
    •  A one-time retail entrepreneur who's only material company directorship now is of a Scottish co-ed school
    • The founder of a £5.6m turnover domestic Scottish property preservation company (with no declared employee figures)
    • The founder of an £8.7m voice and data solutions company  focused on the domestic Scottish market (with no declared employee figures)
    • A Director of a £6.6m turnover software business that employs 75 staff but has only £443k turnover in the UK (including Scotland)  
    • The founder of an (exclusively Scottish) property development company with a turnover of £47m and 233 employees
    • The founder of an (exclusively Scottish) care home group with £22.1m turnover and 879 employees
That the directors of Business for Scotland include a former SNP MSP and someone who stood (unsuccessfully) as an SNP local council candidate is probably not relevant.

That their spokespeople have had so much TV and Radio airtime is - quite frankly - mind boggling.


I became involved in the Independence Referendum debate when I realised that a Yes vote would make it harder for the businesses I'm involved with to continue to thrive whilst remaining based in Scotland. The full background is explained in my Bona Fides post and in my detailed post on Scotland's Trade with rUK where I reluctantly conclude: "The businesses I am involved with are already making contingency plans for the case of a Yes vote. Our heads tell us that we would need to relocate our stock-holding and warehousing outside Scotland to protect our businesses under that scenario"

We are not unusual businesses; current best available estimates are that 37% of jobs in Scotland depend on links to the rest of the UK1. It's unsurprising therefore that I see many businesses with the same concerns; some speak out, more are afraid to for fear of backlash and recriminations.

But there is a body that claims to speak for Scottish Business in this debate: Business for Scotland. They are registered with the Electoral Commission as a Yes Campaigning Body and get a surprising amount of airtime.

I must confess I was intrigued by these guys; their website comes across as rather rampantly nationalist in tone and their articles and spokespeople seem singularly unimpressive.  I'm genuinely curious to understand what sort of business people are in favour of independence.  I've covered most of the arguments I've heard in this blog and whilst there are emotional and political "Yes" arguments that I can understand (without agreeing with) I haven't seen any rational economic or business arguments for independence. I wondered: are any of these businesses material contributors to the estimated 962,0001 Scottish Jobs that depend on links to the rest of the UK? 

So Who - Exactly - Are Business for Scotland?
Well the first thing I did was ask them.  Actually the first thing I did was read some of the content in their website; this got me annoyed, so I 'engaged' with their MD Michelle Thomson on Twitter (Twitter biog:  "Property Investor, Musician, Maverick"). Let me share some highlights (I'd give links but she appears to have deleted these Tweets);

Of course she has not responded "off Twitter".   It was clear I'd get nowhere asking directly so I went and did my own digging.  If you've followed my blog you'll know I'm willing to put in the effort to seek out primary data.

I went through every one of the 64 named individuals on the member profiles section of their website and cross-checked to ensure I included all of the Directors of Business for Scotland Limited. I used Creditsafe, Google, Linked-In and Companies House to identify all of their current UK Company directorships.  In some cases they don't even name the companies that they are involved with in their profiles; I was able to track them down without too much difficulty and am pretty confident I found all of them. Having identified all of the current UK directorships held by these BfS members I then checked Companies House filed accounts and looked for the most recent declared turnover and number of employees.  For those who aren't aware: a company does not have to declare it's turnover or employee numbers if it qualifies as a Small Company2

[I have no interest in using this blog to embarrass individuals or to 'expose' company links if they choose not to explicitly declare them.  If anybody (including reputable journalists or indeed BfS themselves) would like to see the background work I would be happy to share.]

I want to be very clear about this: I am not questioning the right of any of these individuals to have a view on the Independence Referendum or to speak out .  I am merely seeking to answer the questions that the Business for Scotland MD seems so reluctant to address;
  • Roughly how many Scottish Employees are represented by their members?
  • Do they represent any businesses involved in Trade with rUK?
The BfS website states:
Our members are business professionals, owners, directors and entrepreneurs from all over Scotland, some have small businesses, some fairly large ones

I was unable to find *any* Limited Company Directorships for 30 of the Featured Members
I guess these are the 'business professionals' referred to; basically people who have (or have had) jobs. Again let me be clear; I am not disparaging the professional credentials of any of these people; I'm just trying to assess the extent to which they are representative of Scottish Business; I list them all below with links to their profiles and extracted quotes so you can form your own view  (where companies are referred to I have searched for them and they do not appear to be registered limited companies).

John Cookeextensive background in public policy, public affairs and communications
Adam Davidson: owns a BoConcept franchise
Alex Grantrecently retired, formally Chief Operations Officer for the airline bmi
Rachel Holmes:  a lecturer in taxation, accountancy and finance at Edinburgh Napier University
See her car-crash select committee performance here (44-47 mins and 1:01 are particularly cringe-inducing)
David HoodProfessional market (sic) and speaker
Mark Listera business consultant 
Catherine McLeanindependent, professional consultant
Sheila McLeana Programme Management Office specialist working with clients on a contract basis
Ken McNeilprincipal of McNeil Stevens Financial Planning
Helen MacDonough: owns a boutique hair salon
David Macfarlane: chef, innovator and author
Jill Murphy:  founding partner at ThinRedLine Design a marketing and branding company
Brian Murray is in favour of independence (sic)
Eunice Olumide recently launched her own fashion design business
Jim Osborneearly retirement six years ago
Michelle Rodgerfounder Tartan Cat Communications
Andrew Richardsonaccountancy practice in Elgin
Susan Robertsonwriter, editor and partner in a communication consultancy 
Neil Stephen: founding partner of Dualchas Architects
Philip Stewartowns Dundee-based Kangaroo Print and Advertising
Kenneth Wardrop: a freelance consultant
Charlie Watta semi-retired consultant
Dr Willie Wilsonruns a small chain of community pharmacies
Ekaterina Zelenkovaruns her own fledgling interpretation business

A few that fall into this category (no current company directorships that I can find) were slightly less straightforward

Chris Chirnsideworks in Merchant Services ... also runs business networking events with his company 6 Degrees Networking. All I could find was a Singapore registered LLP called "6 Degrees Networking"; its not clear if this may be the company referred to.

Andy LambBusiness Development Director with ECCS Group. This would appear to be two "East Coast Construction Services Ltd" Companies (SC192098, SC105462). Andy is not a Registered Director of either of them and both are small companies with no declared turnover or employee numbers

Dave McGrathManaging Director at Richard Irvin Sustainable Energy Limited. Dave is not a Registered Director of Richard Irvin Sustainable Energy Limited (SC396527), a business which is described as "one of the north east Scotland’s leading building services contractors operating across Scotland"

Douglas Norrisleads an Ayrshire based SME employing some 80 people in Scotland. This would appear to be a company called Datec Technologies Limited (SC199369) which is a subsidiary of IL International LLC a US business. Douglas is not a Registered Director.

Ben RogersDigital Lead at GFI Software.  GFI Software Limited (4126587) is a company registered in Middlesex. Ben is not a Registered Director

Thomas Scott: UK public speaking champion [...] alongside his father and his uncle, Thomas set up Communication Consultants to not only train but also develop and provide mentoring to their clients. Thomas's LinkedIn Profile described him as "Scottish Director at Communication Consultants"; I was able to find two registered companies: Communication Consultants Ltd (06562502) and Communication Consultants (UK) Ltd (03009748) registered in London and Lowestoft respectively. Thomas is not a Registered Director of either of them.

27 members: Directors of small Companies with no declared turnover or employee numbers2
Again let me clear: there's nothing wrong with small companies, their voice is important in this debate.  I'm merely trying to get a handle on the nature of the businesses represented. I list them all below so you can decide for yourselves. Wording in italics is taken verbatim from their published profiles. The companies listed are all of the active directorships I have been able to find; all are below the medium company size threshold that would require disclosure of turnover or employee numbers.  I have excluded non-trading and dissolved companies.

Bruce Alexander:  Roslin-based SME dedicated to the development of novel control methods for insect-related problems - Xeroshild Ltd (SC286434)

Kenny AndersonConstruction and property entrepreneur - Anderson construction (aberdeen) Ltd (SC148028), Anderson Buchan Properties Ltd (SC212818)

Richard Arkless: LED Warehouse Ltd (SC451237) - founded 05/12, no accounts filed

Frances Barron: The Handmade Cheesecake Company Ltd (SC458241), Burns Country Larder Ltd (SC428967), The Dessert Depot Ltd (SC238553)

Ian Blackford: pretends to be semi-retired from a high profile investment banking career, but he is actually an active non-exec director of a number of companies - First Seer Ltd (SC243805), Commsworld Holdings Ltd (SC190987) (See Ricky Nicol Entry below)

Ron Dickinson: Ron Dickinson Associates Ltd (SC408405) - business consultancy

Fraser Duffground engineering and environmental consultancy - Terrenus Group Ltd (SC372563)

David Dwyer:  low-cost websites to businesses - Inspire IT Services Ltd (SC346614)

Eric Flannigan: Flannigan Consulting Ltd (SC478037) - founded 05/14, no accounts filed

Paul Fletchermarketeer and senior management consultant -  Enabling Innovation Ltd (SC467138), Kelvin Consulting Ltd (SC462301)

Martin Jackruns an event management company - Think Different Events Ltd (SC366035)

Joe Lafferty: Leadership & Team Coach - Lifetree (Scotland) Ltd (SC266149), Dundee Contemporary Arts Ltd (SC175926)

Paula LivingstoneOwner and founder of Rustyice Solutions and Apogee Internet - Apogee Internet Ltd (SC414097) is Non Trading; Rustyice Solutions Ltd (SC396764) is in Dissolution; only actively trading company Paula is a Director of is The Irvine Valley Regeneration Partnership (SC196845)

Andy Lythgoeformed his own consultancy in 2005 -  Lythgoe Property Consultancy Limited (SC295175), Craig Health Economics Consultancy Ltd (SC364446), Ancaster Court Ltd (SC173743)

Donald MacLean:  Scottish utility consultancy - Business Cost Consultants Ltd (SC294893)

Jamie RaeEntrepreneur Jamie Rae is founder of award-winning international recycling business REDEEM plc. Jamie exited REDEEM in Jan 2011 and currently has four active small company directorships: Hair by Andersons ltd (SC478097), Go Rental Property ltd (SC445426), Nugensis ltd (SC389487) - an IT consultancy, Spirit Aid Limited (SC214111) - a charity.

Gary H Sutherlandfounder and Managing Director of two Glasgow based businesses; EmployEasily HR Services Limited, an Employment Law & HR Consultancy, and Glasgow Business Hub Limited, providers of modern, flexible meeting room spaces for hire  -  Employeasily HR Services Ltd (SC352618), Business Boost (Scotland) Ltd (SC471120), Stirling District Citizens Advice Bureau Ltd (SC126241), Glasgow Business Hub Ltd (SC422285)

Peter Symeruns a small group of adventure travel and activity companies; three located in Scotland, one in Morocco and one in Spain. Peter has three active directorships; Liquid Life events ltd (SC269499), Perthshire Paintball ltd (SC268606), Splash White Water Rafting llp (SO302468) - across all of these the only declared figure is £300k turnover for Splash White Water Rafting, no employee figures are declared

Iain Taylorhas run ‘e-corporate’ which aims to provide legal services for the 21st century. E-Corporate Ltd (SC304621) is non-Trading; Iain is a Director of one Trading company Kircaldy Analytics Ltd (SC462702)

Malcolm Wadia: Plysim Ltd (SC412936) - engineering consultancy

Gerry WallaceManaging Director -  GEM Lift Services Ltd (SC109290) - a Scottish regional business

Sara Jane Walls: an entrepreneur running two Glasgow businesses - The Yoga & Pilates Place Ltd (SC470684), The Residence Glasgow Ltd (SC402766)

One of the BfS members in this category deserves special mention

David Morrison:  ... for the last 20 years has managed a group of companies specialising in commercial property development and investment.  [...] David has always seen Scottish independence as a long overdue correction of three hundred years of exploitation by a Westminster government and has always been enraged at the supercilious, lying nonsense of successive governments, be they Conservative or Labour, that we are “too poor, too wee and too stupid” to be able to handle our own destiny. [...] being a hard nosed businessman, he knows the signs of a dying business and GB plc is certainly that.  Any sound businessman will tell you that if a part of a group is in terminal decline, disassociate yourself from it and concentrate on the profitable part;  so it is with Scotland.  - David is a Director of the following Small Companies: Maybeg ltd (SC470882), Begford ltd (SC470880), Broxburn Properties ltd (SC199377), Tayforth llp (SC303710), Kinburn (123) llp (SC302287), Sangobeg Developments ltd (SC156804), Tayforth Property Developments ltd (SC154787),
Sangobeg Investments ltd. (SC126408).  He is also a director of 12 other dissolved companies.

Also in this category are some of the Directors of Business for Scotland Limited itself

Gordon MacIntyre-Kemp:  Gordon has worked for major blue chip companies in sales and marketing roles - aside from Business for Scotland Ltd, he has one current directorship, Intelligise Ltd (SC365240) - "management consulting activities" with net assets of £898.  The other two companies he is a director of  are both dissolved  - Creative Learning Action ltd (SC210189), Icosmart ltd (SC212158)). Gordon was a (failed) SNP local council candidate for Hyndland; nothing wrong with that, but he doesn't mention it on his profile. Gordon appears to be Business for Scotland's main "go to guy" on economic issues.

Ian McDougallmanaging director of McDougall Johnstone, a corporate finance and accounting firm. Aside from Business for Scotland Ltd, he has one current directorship, McDougall Johnstone ltd (SC333890) - below audit threshold size and <£41k net assets.

Michelle Thomson23 years of working in the financial services sector, before starting her own business in building up a portfolio of buy to let and corporate rental properties accessible through her her trading company: Your Property Shop. We have already seen from our Twitter exchanges that as MD of Business for Scotland Michelle is not a great fan of answering direct questions.  Aside from Business for Scotland Ltd, Michelle has one active directorship: Your Property Shop Ltd (SC451292) - founded 05/13 and yet to file any accounts. She is also a Director of Edinburgh Global Property Investments ltd (SC342421) which ceased trading in 2011 and was dissolved in 2013; the balance sheet suggests this business never traded materially. She is also a Director of Michelle R Thomson Consulting ltd (SC377063) which is non-trading.

Ivan Paul McKeeInternational businessman Ivan has worked in manufacturing for 30 years, mostly for large corporate organisations, until 8 years ago when he launched his own manufacturing consultancy and turnaround company. Ivan holds two directorships in companies registered in Scotland: EISM Properties ltd (SC464456) - incorporated 11/13, no accounts filed, Keyshift ltd (SC286042) - management consultancy activities, exempt from audit with no declared turnover or employee figures.  Ivan is also a Director of 3 companies registered in England:
  • Excel Assemblies ltd (8388168) and it's subsidiary Excel (Electronic) Assemblies ltd (7046739) in Manchester - incorporated 02/13, no accounts filed
  • Greenfold Systems ltd (7765371) - registered in Manchester but apparently based in Dunfermline. Exempt from audit, no declared turnover or employee numbers.  As recently reported in the Herald "The company developed out of the remnants of the former Simclar manufacturing business expects to create 65 jobs after winning £400,000 official support.  Greenfold Systems was awarded Regional Selective Assistance by Scottish Enterprise in the latest round of the funding scheme. The agency made the award after assessing ambitious expansion plans drawn up by Dunfermline-based Greenfold following a successful first 18 months in business"
Again: the only Registered Directorships I have been able to find for any these BfS Members above are companies that do not exceed the Small Business threshold and the preponderance of consultancies, property companies and service companies you've never heard of leads me to conclude that none are involved in material goods trade with rUK and I doubt any would be involved in the employment of any of the estimated  962,000 Scottish jobs linked to trade with rUK.

7 members: Directors of Limited Companies greater than Small Company size.

Ken Cairnduff[founded] Internacionale and Au Naturale which by the time he sold it in 2006 had more than 150 stores and 2,500 employees. Following this he invested in commercial property development with mixed success.  Ken has two active directorships of trading companies; Kelvinside Academy War Memorial Trust (SC011734) - a co-educational day school with £5.5m turnover and 84 employees.  He is also a director of Cairnduff Developments ltd (below thresholed to declare turnover or employee numbers).  In addition he is a director of

  • Four Companies in Administration: Cairnduff Developments Holdings ltd (SC392740), Cairnduff Developments Ayr ltd (SC333945), Cairnduff Developments Longbenton ltd (SC310145), Cairnduff Development Forfar ltd (SC309715)
  • Three Companies in Liquidation: Razzle Dazzle ltd (SC414405), Townhouse Retail ltd (SC371544), Fun for 2 ltd (SC299265)
  • One Company with Accounts Too Old: Razzle Dazzle (Scotland) ltd (NF003244)

Leslie Andrew Meiklefounder of the largest property preservation company of its type in Scotland. Wise Property Care (SC168153) appears to serve Scotland exclusively (see website) - it has a turnover of £5.6m but is exempt from audit and does not declare any employee figures.  Aside from his Directorship of Business for Scotland Ltd, he holds one other small company Directorship: The Property Care Association (5596488) which is also exempt from audit.

Ricky NicolCEO and founder of Scotland’s largest indigenous telecoms company, Commsworld. Ricky is a one of 7 Directors of Commsworld Holdings ltd (SC190987) and subisdiaries Commsworld Ltd (SC150343) and Fluency Commuications Ltd (SC390685).  Commsworld is "engaged in the sale, installation and project management of complete voice and data solutions for the business community" and reports an £8.7m turnover ... but qualifies as a Small Company so must employ less than 50 people.  The website states "Headquartered in Edinburgh, and with offices in Glasgow and Aberdeen" so would appear to focus on the domestic Scottish market; staff salaries are reported in the accounts at £332k so I'm guessing 10 - 15 staff outside of the Directors?

David Cairns: David is executive chairman of a growing £8m turnover software company, now headquartered in Stirling since he relocated it from Newcastle.  David Cairns of Finavon holds directorships of ScotlandIS (SC209844)  - the Trade Body for Scotland's ICT Industry and PrismTech Group Ltd (SC338033) and its subsidiary Prismtech Ltd (2664365).   Prsimtech's latest reported turnover was actually £6.6m, down from £7.6m the previous year; the "growing £8m turnover" quoted in David's profile is presumably more recent figures not yet filed at Companies House. Prismtech employs 75 Staff.   So this is exciting: have we found a BfS member involved in a business with a material number of employees that might trade with rUK!  No, we haven't; as you can see below the total UK (inc Scotland) turnover of Prismtech is £442k
Since I published this post Keith Steele the CEO of Prismtech (and a committed NO voter) has been in touch.  He would like it to be known that David’s and his views are their own and do not represent those of the business.  He also confirms that my assumption about published revenue numbers is correct and the business is once again enjoying healthy growth with revenues well above £9m to be reported in their next published accounts

Sandy Adam. Alexander William Adam is founder and major shareholder of Springfield Properties Plc, a £47m turnover business with 233 employees.  As is clear from their accounts, they are an exclusively Scottish property developer who work closely with Housing Associations providing Social Housing

Tony Banks...self-made millionaire businessman ... the epithet ‘one of Scotland’s top entrepreneurs’ does not sit comfortably on his shoulders. “The truth is there are no airs and graces about me,” he says. Anthony Roiall Banks is founder and owner of Balhousie Care Group - Scotland's largest privately owned provider of care in nursing homes, residential care homes and advanced specialist care centres. Balhousie Holdings Ltd has a turnover of £22.1m and 879 employees. In addition to the four subsidiaries which are consolidated into Balhousie Holdings Ltd, Tony holds five other Directorships of trading companies, all below the threshold requiring declaration of turnover or employee numbers: Arb Properties Scotland llp (SC303301), Clepington Road llp (SC303253), Tic (Angus) ltd (SC266895), Milnbank ltd (SC257927), The Entrepreneurial Exchange ltd (SC160976).

Since I first published this post I was directed to Tony Banks' book "Storming the Falklands: My War and After".  The extract below (page 153 of the e-book version) I include without comment:

There's One Director of Business for Scotland Ltd Left, not featured as a Member Profile

Jim Mather: Jim is a Director of Business for Scotland but does not appear in the member profiles and appears to have no other company directorships. To quote his Wikipedia entry he is: "a Scottish politician, former Minister for Enterprise, Energy and Tourism and until the 2011 election, the Scottish National Party Member of the Scottish Parliament for Argyll and Bute. He is credited with making the economic case for Scottish Independence, having taken the argument to the media, boardrooms and committee rooms across Scotland between 2001 and 2007".

So there you go.

To summarise the Business for Scotland Members
  • 30 "business professionals"
  • 28 people who have Small Company directorships; businesses with no declared turnover or employee figures.  These are predominantly consultancies, property companies and service companies; I can't identify any material trading links with rUK and none can be considered major employers
  • 6 People who have or have had larger scale business experience
    •  A one-time retail entrepreneur who's only material company directorship now is of a Scottish co-ed school
    • The founder of a £5.6m turnover domestic Scottish property preservation company (with no declared employee figures)
    • The founder of an £8.7m voice and data solutions company  focused on the domestic Scottish market (with no declared employee figures)
    • A Director of a £6.6m turnover software business that employs 75 staff but has only £443k turnover in the UK (including Scotland)  
    • The founder of an (exclusively Scottish) property development company with a turnover of £47m and 233 employees
    • The founder of an (exclusively Scottish) care home group with £22.1m turnover and 879 employees

I've detailed my bona fides on this blog.  I do not consider my business interests to be particularly special and it's only fair that I apply the same test to me (it will save others some work -- I know how tedious this research can be); My current active Directorships are;
  • M8 Group Limited (SC242849) and its subsidiaries Ltd (SC197870), Greenfngers Trading Ltd (SC231986): Turnover £15.2m, 72 employees.  I have shared elsewhere that 90% of that turnover is to rUK.
  • Endura Ltd (SC128821): Turnover £17.9m, 88 employees. Sales to rUK are an extremely significant proportion of that turnover

I think I have shown in this post that even the two businesses I am involved in are larger contributors to the trade and employment in Scotland that is dependent on rUK trading links than the entirety of the declared BfS membership.  As will become apparent in the debate soon; there are a lot of businesses that share the same perspective as I do: a No vote will protect employment in Scotland by ensuring our seamless trading links with rUK are maintained.

If you want to know more about why I believe that, please read > Independence & Scotland's Trade with rUK

In contrast to the rather skewed perspective offered by Business for Scotland, there is now an organisation called Working for Scotland; they adopt a "No" stance and have compiled a list of testimonials from a broader and rather more representative cross-section of Scottish Businesses, Business People and Trade Unions > What Scottish Businesses Think About Independence (and yes, I've added my voice to that list).  I've done a quick check and even excluding the banks the businesses quoted there employ over 20,000 people in Scotland and - of course - are involved in significant rUK trade.

Furthermore the Federation of Small Businesses has published a detailed survey of almost 1,800 small Scottish Businesses in which they observe (note the question was not directly asked):
  • "In the comments section of this question, 134 members volunteered that they would consider or would definitely be relocating their business outside of an independent Scotland, while a further 51 stated that they would look to close, downsize, sell, or retire early. This totals 185 respondents (10%) who would consider withdrawing their business from the Scottish economy"
Bibby Financial Services (presaging a Report due to be published in August) have said

  • "Over a quarter (26 per cent) of Scottish small and medium-sized businesses fear they will lose business if there is a ‘yes’ vote in the referendum and some 70 per cent have rejected the idea that independence would be a positive step for the nation."
Finally a recent Treasury report has suggested 1 in 10 Scottish jobs are at risk

You be the judge: it strikes me that the two sources above offer a rather more meaningful insight into the views of Scottish Businesses (and the impact on Scottish jobs) than "Business for Scotland"


1. Professor Brian Ashcroft recently published analysis which estimates that 962,000  Scottish jobs depend on links to the rest of the UK  (Scottish Jobs and the UK) .  ONS stats show total Scottish employment (public and private sector) in March 2014 of 2.6m (ONS stats). So we can say 37% of jobs in Scotland depend on links to the rest of the UK.

2. To qualify as a small company a per the Company Act a group of companies must meet at least two of the following conditions

  1. Aggregate turnover must be £6.5 million net (or £7.8 million gross) or less
  2. The aggregate balance sheet total must be £3.26 million net (or £3.9 million gross) or less
  3. The aggregate average number of employees must be 50 or fewer
3. Business for Scotland "Members" with no Company Directorships

Thursday, 5 June 2014

The McCrone Report

There is a point in any Scottish independence debate where - having pointed out the other factual or logical flaws in the pro-independence logic -  the McCrone report gets raised.  I recommend reading this independent newspaper article if you're not familiar with the story but do also scan the "report" itself.

This isn't really about Oil & Gas; it's a "reason why we can't trust Westminster"

Politicians choose not to leak a confidential memo that would play into the hands of their political opponents shock.

I find the Yes campaign's position on this slightly bewildering. Apart from anything else the "report" was a confidential memo speculating about the future; it's subsequently gained a mythical status which has given it a somewhat over-blown significance.

Update 16/07/2014: In fact at the Royal Society of Edinburgh in a public discussion on 29 January 2014 Professor McCrone was questioned about the suppression of his "report"; his response is enlightening: (Emphasis is mine)

  • "Professor McCrone pointed out that this report was a briefing paper written when he was a civil servant.  Briefing papers by civil servants, especially those prepared in advance of a possible change of government, are never published. The paper had not been suppressed"
I strongly recommend you watch this > The McCrone Report: In his own words
It was one man's view and in fact offers a far more balanced and nuanced perspective than many seem to think .  But putting that aside I still get that something bad happened, I get that it's something we as a nation can be rightly pissed off about; but I don't get how the politically expedient suppression of a report (or more accurately maintaining the confidentiality of a memo) 39  years ago leads to the conclusion that we should vote for Independence now.

I've talked elsewhere on this blog about the concepts of inherited responsibility and guilt.  Are we really arguing that an entire political structure can no longer be trusted because of what happened in 1975? Are we expected to believe that some evil miasma seeps from the Palace of Westminster's limestone walls, infecting any who enter there with an uncontrollable desire to screw over the people of Scotland?

Sorry.  I'm capable of bearing a grudge as much as the next man but I can't extrapolate from the failings of some politicians 39 years ago to the conclusion that we can't trust an entire political system now because of where it's housed.  A Scottish parliament will still be populated by the same political class; politicians won't stop being politicians just because there are less of them.  Unless you believe that there's something intrinsically different about Scottish politicians?

But even if you don't share my emotional reaction on this, there's a more fundamental reason why to vote Yes "because of McCrone" is a bewildering thing to do.  As argued extensively on this blog, separating Scotland from the Union today sacrifices many tangible benefits of union - and for what? A desire to punish the rest of the UK, to ensure they inherit the guilt of those historical political failings? Even if you think that is a reasonable position (I certainly don't) it's still perverse to vote Yes; because it's a vote to "cut off the nose to spite the face", because the loss of benefits of union punishes us, the Scots most.

Did you scan the original document?  Because funnily enough if you actually read the McCrone report there's plenty in there about the downside of independence. for example;

"This is partly a question of the scale of the Scottish economy, but more of the extent to which it has become integrated with that of the rest of the UK [...] such measures would risk retaliation from England which, given Scotland's close trade ties with England, could cause damage far in excess of any benefit that may be hoped for. Such policies would also be incompatible with continued membership of EEC and withdrawal [...] would clearly have very damaging consequences [...]
But the Scottish labour market is so closely linked with that of the rest of the UK that it is hard to see how real earnings could be adjusted downwards without giving rise to the most serious difficulties. 
For such a small country heavily dependent on international trade, devaluation would, of course, have serious inflationary consequences since all imports would rise in price".
McCrone Report, 1975

Tuesday, 3 June 2014

Oil & Gas (Part II): The Oil Fund

In Oil & Gas (Part I): For Richer, For Poorer I tackled the question of how Oil & Gas revenues have been shared historically  between Scotland and rUK (with Scotland an integral part of the Union).

I argued in that post that historically it would actually be completely reasonable to have shared our Oil & Gas revenues on an equal per capita basis with rUK (as that's what being in a Union means); in fact the amount of public spending per capita that Scotland receives is greater than rUK by an amount that is equivalent to the greater tax revenues Scotland generates if you allowed us to keep our geographic share of oil.  On that basis I conclude that historically Scotland has not been 'done out of' our fair share of Oil & Gas revenue and has in fact done pretty well out of the Union (at least in this narrowly defined economic sense). I'm certainly not alone in reaching that conclusion.

So let's move on to another subject that is often raised when the Oil & Gas topic is discussed.

The Oil Fund (or Should've, Would've, Could've)
One of the arguments put forward by the Scottish Government is that we should have had an oil fund, that if we had we'd now be as wealthy as Norway.  That's all well and good but - at the risk of stating the obvious -  to have created an Oil Fund we'd have needed to not spend the money.  We (the UK) did spend the money and - as we've shown in Part I - Scotland received it's fair share of that money (actually more than its fair share if you consider fair within the Union would mean to share equally on a per capita basis).

Norway founded their "Petroleum Fund" in 1990 and it's informative to consider some of the public spending choices they made as a result. Let's take just one example, their health care system
  • The healthcare system is not free at point of use. According to NHH:
    • Consultations at general practitioners (GP) involve the patient’s charge: the typical fee is [£14] during the office hours and [£23] for an evening appointment.
    • Costs related to visits to specialists, dental care and radiology tests are entirely supported by the patients
  • The following comparisons are taken from a recent Commonwealth Fund Report
    • Adults able to get same/next-day appointment when sick: UK 70%, Norway 45%
    • Waited 2 month's or more for specialist appointment: UK 19%, Norway 31%
    • Experienced access barrier because of cost: UK 5%, Norway 11%
    • Public view of health system "needs to be completely rebuilt": UK 3%, Norway 12%
There's more on this topic in this Blog from a Norwegian Perspective where the blogger complains about the high cost of living in Norway. So I checked - Norway vs UK cost of living comparison - and sure enough the cost of living in the UK is about 30% lower than Norway.

Now don't get me wrong - the OECD better life index shows Norway comfortably out-performing the UK on most measures.  My point is not that Norway made bad choices but rather they made tough and at times unpopular choices to get to where they are.  It's all very well - with the benefit of 20:20 hindsight - to say "we could have had an oil fund". The question is not who is saying that now but who was saying that then; can we really assume that an independent Scotland would have made different choices?

So to see if we might have done I checked through the SNP manifestos back as far as 1997 (there is a limit to the suffering I am willing to go through for this blog and that was it).
I found one mention of the possibility of a Scottish oil fund in the 2005 manifesto; nothing before and nothing after. Norway is mentioned once in the 1997 manifesto and only reappears in 2007 (when it is mentioned 5 times).  I wondered if the manifesto check might be a bit too narrow an approach; so I Googled for mentions and found only a handful of stories prior to 2009, nothing prior to 2005.  Then it occurred to me that - given how relatively recently digital media has come all pervasive - Google is not a great historical news research tool.  So then I checked Hansard.  Well, there weren't many mentions there either and the earliest was an early day motion in January 2002.  To put the level of noise made about an oil fund into context: my Hansard searches turned up 68 results relating to "Oil Fund" compared to 674 results relating to "Scottish Gaelic".

I think we can conclude that the Oil Fund about which the SNP are so keen to talk now wasn't very near the top of their priority list when it could have actually made a difference in the 1990s.

So it's hard to argue that an independent Scotland would have had the political vision and conviction to make the sacrifices required to build an oil fund; we can't credibly say "we'd have had an oil fund if only it hadn't been for pesky Westminster". We didn't make the sacrifices at the time, we spent our share of the money. Should've, would've, could've.

Of course all of this is of academic interest only. The past is the past; Time's arrow flies and we can only change what's in front of us.

So what relevance is the Oil Fund debate to the future? Vote for independence and we will have an oil fund, right? Well, not quite.  The relevant passage from the White Paper is extracted below

Let's just pick out the key words: "will be started once Scotland's overall budget deficit is reduced to below the level of long-run economic growth and when debt is on a downward trajectory". That hasn't been the case for any of the last 10 years and it's hard to seeing it being the case for an independent Scotland any time soon.  If there is an opportunity to build an oil fund in the future then that opportunity will exist for the UK as much as it would for an independent Scotland. It's not an independence issues, its a broader question of political will and vision, of whether "we" would be willing to sacrifice "jam today" if we face the choice again.  For reasons outlined elsewhere in this blog, the economic capacity to build an Oil Fund in the future is more likely to exist for Scotland as part of the United Kingdom than for an independent Scotland no longer enjoying the economic benefits of Union.

I think we can conclude that the Oil Fund question is a bit of a red-herring in the independence debate.