Wednesday, 6 April 2016

It's Time For An Apology

During last week’s live TV leaders’ debate, Nicola Sturgeon had the opportunity to question Scottish Labour leader Kezia Dugdale.  This was a chance to highlight the defining policy differences between the SNP and Labour, to establish the terms of the election debate. The finest minds in the SNP will have agonised over how best to use this opportunity, the question will have been endlessly discussed and carefully rehearsed.

So what was the defining opening question? Our First Minister suggested that the Scottish Labour leader should “apologise” for “standing arm-in-arm with the Tories” during the independence referendum, that this somehow made Labour responsible for the Tories “cutting budgets, penalising the vulnerable”.1  It’s hard to imagine a clearer illustration of the SNP’s single-issue focused, narrow-minded aversion to grown-up politics.

During the independence referendum, two political parties were willing to put generations of bitter rivalry to one side to campaign for something they both believed to be right. They agreed on an important issue, like grown-ups sometimes do. In the eyes of the SNP it appears this is something to be embarrassed about, something to apologise for. Apparently, if you agree with another party on anything that means you must agree with them on everything.  You’ll hear more sophisticated arguments in the school playground.

The suggestion that Labour are somehow responsible for Tory budget cuts as a result of campaigning together for a No vote is simply laughable. The fact that Labour (and the Liberal Democrats) agreed with the Tories on an issue as fundamental as Scotland remaining in the United Kingdom doesn’t make them responsible for the current Tory government, any more than the SNP standing for Westminster seats does. You don’t have to agree with Scottish Labour’s tax proposals to recognise that they offer a real alternative to Tory spending cuts.

The SNP themselves could choose to avoid “cutting budgets, penalising the vulnerable” through increasing the tax burden on those Scots who are in a position to afford it.  Scottish Labour, the Liberal Democrats and (to a more dramatic extent) the Greens all propose to do this, but the SNP don’t. The boldest proposal the SNP can muster is to not pass on a tax cut which would, for example, change the effective tax rate of somebody earning £100,000 a year by just 0.3%. This would translate into only £120m additional Scottish revenue next year, equivalent to less than 0.2% of total Scottish public spending.2

The party that offers to pass on the highest proportion of Tory spending cuts is the SNP, because they are the ones offering to do the least to prevent them through tax increases. On this basis the SNP are more responsible for penalising the vulnerable than any of the opposition parties.

Of course the SNP didn't want us to be here, they campaigned for a Yes vote. The latest Government Expenditure and Revenue Scotland (GERS) figures show that, had we voted Yes, Scotland would have started negotiating its independent life based on figures showing a deficit of £14.9 billion or 9.7% of GDP. That’s a bigger deficit than any EU country and twice as large as that we currently share within the UK. It’s now clear that the inevitable result of a Yes vote would have been far more severe cuts than those we're currently experiencing.3

In this context it’s worth reminding ourselves what the Independence White Paper (“Scotland’s Future: Your Guide to an Independent Scotland”) had to say on the matter: “On independence in 2016, Scotland’s estimated financial position will continue to be healthier than the UK as a whole. We will set out on a firm financial footing”.4

This statement has been shown to be flat wrong. Those who suggested at the time that this was an unjustifiable assertion were accused of “talking Scotland down”. Now it seems they’re expected to apologise for campaigning to avoid the economic trauma a Yes vote would have caused.

If we’re asking people to apologise for anything about the Independence Referendum, let's look at the oil revenue forecasts that were used to back up false assertions like the one above.

It's a matter of public record that the White Paper used two scenarios for oil revenues that were £2.5 billion and £4.0 billion a year higher than the Office for Budget Responsibility (OBR) were forecasting at that time. This isn’t hindsight, this is comparing forecasts that existed when the White Paper was being written.5 The SNP attempt to bluster over this by talking about oil price forecasts rather than oil tax revenue forecasts, but these are very different things6.

Given that the OBR have maintained a track-record of always being optimistic on oil revenue forecasts, the Scottish Government presented scenarios which at the time could have been fairly labelled “very optimistic” and “hopelessly optimistic”.

Which brings us back to the question of apologies and who should be apologising for what?

Those who campaigned for a Yes vote based on a set of hopelessly optimistic financial projections were responsible for placing the vulnerable at risk. Those who are too timid to make meaningful use of our tax powers are responsible for passing on Tory spending cuts.

Rather than demanding apologies, maybe it's time our First Minister considered offering a few.

****

This article appeared in the Daily Record on April 7, 2016




Footnotes

1. STV Leader's Debate ("Scotland Debates"), 29/03/2016 from 50:30
Sturgeon:
“Kezia, the last time you did a TV debate in this room was in the referendum. On that occasion you were in a [spits] team [/spits] with Ruth Davidson helping to ensure that Scotland was stuck with a Tory government we didn’t vote for. Now that you know what the Tories are doing to Scotland, cutting budgets, penalising the vulnerable, do you understand why people across Scotland are so angry with Labour? Do you regret your alliance with the Tories and will you take the opportunity tonight to apologise for it?”
Dugdale: [starts to respond]

Sturgeon [interrupting]:
“Do you regret standing arm-in-arm with the Tories?”

2.  BBC News Report on SNP Tax plans, 29/03/2016
In 2017-18 the SNP propose to increase the 40% tax threshold to £43,387 instead of £45,000 as will happen in the rest of the UK. This means for anybody earning over £45,000, £1,613 of their income will be taxed at 40% instead of 20% if we simply followed the UK's policy. This translates into £323 pa. of saving not passed on.


3. The Price of Independence, 24/03/2016

4. White Paper  page 4.

5. Oil Revenue Forecasts
  • The OBR March 2013 report (p.110) showed total UK oil and gas revenue forecast for 2016-17 of £4.8bn
  • Scotland doesn't get 100% of that figure - over the last decade Scotland's geographic share has ranged from 80% - 90% so Scottish revenue forecast for 2016-17 would be £3.8bn to £4.3bn
  • The White Paper was published in November 2013 and the only oil revenue forecasts included were for the year 2016-17 (p.75)
    • £6.8n was the low scenario: that's 57% to 77%, £2.5bn to £3.0bn higher than the OBR. This is the low scenario and it's more than £2.5bn higher than the OBR (than the OBR who had a track record of only ever being optimistic)
    • £7.9bn was the high scenario: that's 83% to 105%, £3.6bn to £4.0bn higher than the OBR
  • So the White Paper only included scenarios that were 50% to 100% (£2.5 to £4.0bn) higher than the OBR were forecasting at the time
6. Oil Revenue vs Oil Price
Oil tax revenues are generated by a tax levied on production profit. Production profit is driven partly by the dollar oil price but also by the sterling dollar exchange rate, actual extraction costs and total production volumes.  It’s possible to make identical assumptions about the oil price but reach dramatically different conclusions as to the amount of tax revenue that would result. The Scottish Government may have used similar price forecasts to the OBR but, given they produced vastly larger revenue forecasts, they must have been far more optimistic about exchange rates, extraction costs and/or production volumes.

25 comments:

Sam Duncan said...

Had Ms. Dugdale wished to sink to Sturgeon's level, she might have reminded her that Salmond's minority administration was propped up (for some unfathomable reason) by the Tories. Does she regret her party “standing arm-in-arm” with the bogeymen - albeit on the sly - between 2007 and 2011?

Anonymous said...

While Labour and Liberal rightly stood against the SNP and its fantasy invented economics on its White Paper the SNP took sides with Tommy Sheridan's Solidarity in campaigning for Independence.
http://athousandflowers.net/2014/06/03/the-trouble-with-tommy/
https://ahdinnaeken.wordpress.com/2015/09/27/hope-over-fear-sturgeon-over-mcalpine-you-decide/

It's now been shown that both the SNP White Paper was a sham and "Business for Scotland" was an SNP planned deception (all known at the top of the SNP). Both deceptions were deliberately designed to deceive Scotland with plain lies.

Sturgeon has a nerve asking anyone in Scotland for an apology, its the SNP that should be doing so. Whatever the SNP touches seems to turn into gross failure.

The news that the SNP has signed a £10bn "Statement of Intent" with a Chinese Consortium that was already highlighted as being involved in corruption should worry us all, the SNP seem desperate like Lemmings to run over a financial cliff and drag the rest of the Scots nation behind it. It's time that Scots woke up to the SNP's Russian Roulette attitude to financial governance with Taxpayers money in all its dodgy dealings before we end up in a hole we cannot climb back out of.

Anonymous said...

@ Sam Duncan. Absolutely correct, and Kezia Dugadale could also have made a robust dismissal of the "accusation" using Kevin's logic above. Why was she underprepared? To her credit, she did show a bit more spirit in the TV debates than previously.

Drew said...

I agree that calling for an apology is childish, as it is usually when any politician calls for an opponent to apologise or resign.

But the fact remains many people within Labour suspected being part of Better Together was going to be damaging.

Cynics might argue Gordon Brown set up 'United with Labour' was purely because he couldn't stand Alistair Darling but it can't be a coincidence Labour election leaflets where I live in Central Scotland were plastered with 'United with Labour' branding during the 2014 European elections and not 'Better Together'.

Key Labour figures are on record as saying Better Together was a mistake.

Henry McLeish:
"I believe that the Better Together campaign was created in London, and was delivered to Scotland to be implemented by the Labour Party.

"Speaking to many, many Labour Party people, they were totally dismayed by the fact that we could have a platform with the Conservatives because we have no platform with the Conservatives on anything else.

"It gave the SNP a field day and in the referendum what we found was it was the SNP and their voice of Scotland against the rest."

Jack McConnell
"The whole campaign design was wrong. There should have been an independent, non-party campaign for a No vote that the three political parties then each supported in their own way with their own supporters.

"This idea that you bring the grandees of the three Westminster parties together to come and tell Scotland what to do - it's a daft idea, it's always going to be problematic but nobody would listen, and organise the campaign in a different way.

"It is an example of what was wrong with the thinking - the idea that you can dictate to Scotland how it thinks instead of actually listening and engaging with people who are active in Scotland and have got some experience of the situation."


Dave Watson, of Unison, told the Scottish Labour conference: "While I appreciate the referendum campaign has to have a formal Yes and No campaign, most of us in the Labour movement have a huge difficulty with any campaign that includes the Tories."

Anonymous said...

Thank you for another great article. This sentence caught my eye :"The boldest proposal the SNP can muster is to not pass on a tax cut which would, for example, change the effective tax rate of somebody earning £100,000 a year by just 0.3%. This would translate into only £120m additional Scottish revenue next year, equivalent to less than 0.2% of total Scottish public spending.2"
John Swinney, in the tax debate this week, failed to explain where the 'extra' £1 billion revenue from their tax proposals would come from, when the tax proposals actually change very little from the status quo or from George Osborne 's budget.
Are you able to shed any light on this? My understanding would be that the 'extra' revenue is not 'extra' at all - it merely reflects what would happen by not passing on Osborne's tax cuts (although the figure of £1 billion seems very high).

Anonymous said...

'Kezia, will you apologise for being part of a winning campaign, that was endorsed by the vast majority of our fellow Scots, during a single-issue referendum that ended over a year ago and has nothing to do with this present election?'

Anonymous said...

"Are you able to shed any light on this? My understanding would be that the 'extra' revenue is not 'extra' at all - it merely reflects what would happen by not passing on Osborne's tax cuts (although the figure of £1 billion seems very high)."

Holyrood has got borrowing powers shortly to the tune of many billions, this borrowing is 'revenue'.

Kevin Hague said...

See the BBC article linked in footnote 2 for some more explanation on the SNP's revenue claims

Peter said...

Two overall responses to this:

1) Precisely, on all the key SNP positions and tactical decisions noted.

2) Given a year and more of often ugly abuse (alongside much rarer and fairer critiques), here as (almost) always there is remarkable forbearance from Kevin, as well as eloquence in the telling.

Any human-size wasp impersonator taking orders from Wasps' Nest Central in Bath, for example, appears to love nothing so much as to set upon anyone demonstrating a more conscientious approach, a clearer application of investigation and reflection, more scruple - and not least, more courtesy and patience - and to sting such an offender up into their own preferred mode of inflammatory, lump-raising frenzy.

Best achieved by mobbing in swarms - whether spontaneous, or nest-orchestrated.

It's a mistake to be lured into such "exchanges" (especially without repellent handy). Such are the terms of exchange sought by those who - far from seeking reasonable solutions to the vital and measurable benefit of real people on the ground - make it their business to fight battles for the hell of the supposed Cause: to look for trouble in an online bar, where (to the casual observer) both scrappers start to look equally irrational, equally disrespectful of manners, equally at fault.

The human wasp's preferred solution is always to "take the opposition out".

I think we all know that fighting sting with sting, fire with fire, rage with rage, is sometimes emotionally-psychologically necessary, there are times you can't help it .... but it is the trap. (It also shows the same grim discourtesy to everyone else displayed by those turning up in the giant wasp costumes.)

Hence seeing the trap and sidestepping it wherever possible, despite provocations that would test any reasonable person's patience, is a small achievement in itself.

Hence my praise of Kevin's forbearance, however one-sided it may remain when another waspish onslaught starts. Precisely because it is (made) so difficult.

Craig Nash said...

I hope that Kevin is asked to join a question time panel with Sturgeon. Dugdale and Patterson it would make fascinating viewing

The Tree Stump said...

Excellent piece enjoyed reading it

Anonymous said...

Great work Kev, and well considered journalistic style. Brief and to the point without being sensationalist nor dumbing down. Look forward to the next one.

David GREEN said...

Kevin, You won't get an apology from Miss Nippy until Hell freezes over. Sorry about that, but she doesn't do apologies. It's a serious sign of missing cojones. However, that doesn't stop you getting the last, if somewhat macabre, laugh.

Because, if you read Olivier Blanchard's latest views, you will see that he thinks that, for the EU, we may be seeing "the election of populist “rogue governments” that let rip with spending in defiance of Brussels. “Investors would have serious thoughts about buying their sovereign bonds,” he said." Those he has in mind are current EU members (Italy, Portugal, Spain), but Scotland, under the SNP, is clearly vying to join these rogue governments. Sturgeon's vision for Scotland appears to be a near-egalitarian paradise where a higher-than-justified standard of living is paid for by extensive borrowing from others. Sturgeon's notions of austerity are ridiculous and nothing much more than an excuse for fiscal over-indulgence. Sadly, a fiscal policy based on self-indulgence will end in tears. The lenders are likely to go on strike pretty quickly in today's environment. Scotland may be egalitarian in future but it will not be wealthy; at least, not for the proletariat. There will be a small but wealthy cadre of SNP supporters, who benefit from SNP patronage. All so very Russian, so very Putinesque.

The result is that the SNP end-game for independence will end in tears. It will be even worse if it follows on from Brexit by rUK, because physical border control will be imposed by rUK. Travelling between Scotland and rUK will be tedious, whether by train, plane or boat, because security will be tight. Scotland may look longingly at Europe and vice-versa, but rUK will sit between them. If you think I exaggerate, go and ask the Irish Republic about impending border controls between the Republic and Northern Ireland.

EU deficit policies, adoption of the Euro, loss of the transfer payments from rUK, adoption of Schengen, etc. all beckon for an independent Scotland. The opt-outs that Sturgeon wants from the EU are all Thatcher opt-outs. They are unlikely to be transferable, but if they were, it would be a wonderful example of the SNP building on Tory foundations. An SNP/Tory alliance across the generations. What a wonderful vision!

You will be proved right in the end, Kevin, but Sturgeon, Swinney, and Salmond will largely escape. It will be the next First Minister that has to start picking up the pieces.

theambler said...

Olivier Blanchard's views differ from that of Paul Krugman, in that Krugman does not believe Japan (in common with other countries that control their currencies) has anything to worry about with regards their deficit. The big problem with large deficits in European countries is that they do not control their currency. Lacking a central bank, there is always the possibility they will run out of money if they cannot find lenders, such as Greece discovered a few years ago. Indeed, the problem with the Euro is that there is no fiscal union between nations, such that any deficits in one nation cannot be solved with fiscal transfers from surplus nations. This means the only solution is internal devaluation, which results in large unemployment and bigs falls in GDP and living standards. From what I read, I see no long term future for the Euro unless they adopt some form of fiscal transfer mechanism.

Have you noticed the relevance of the above with Salmond's currency plan for Scotland? Is it credible, after having witnessed the havoc caused to Greece and to other southern European countries by having a monetary union without a fiscal union, that Alex Salmond wanted to break the fiscal union Scotland has with rUK, yet keep the monetary union? A deficit of the scale identified in GERS would always be painful to deal with, but with no ability to weaken a new currency, Scotland would right now be in a real pickle.

bucksboy said...

"On this basis the SNP are more responsible for penalising the vulnerable than any of the opposition parties."

They know votes from the less well off can be secured far more cheaply by banging the identity drum, laying the victim narrative on thick and a dishing out hope over fear rhetoric.

Gordon Millar said...

Excellent summary of the position from David Green - still cannot understand why SNP / Yes are desperate to be in EU yet equally desperate / aching to get out of the UK Union - surely Barnett and the prospect of the Euro and Brussels deciding on e.g. what shape a haggis should be must mean staying in UK with own Parliament with FFA is a preferable course ?

Gordon Millar said...
This comment has been removed by the author.
Anonymous said...

Oh I think it's fairly obvious why the SNP are very pro the EU. They know well enough that an "ourselves alone" position is pretty unbelievable/unattractive (well without a lucrative black gold revenue stream anyway) and the EU serves as a plausible response. I use plausible in a fairly loose sense of course as I don't think it stands up to scrutiny, but that's modern Twitter style politics for you.
Chris

David GREEN said...

Kevin, You and others have shown unequivocally that the current rUK transfer payment is about GBP 8.5 billion a year or about GBP 160 million a week. Interestingly, it is almost exactly the same as the net UK contribution to the EU budget after stripping out the rebate and EU money returned (and we know what the Brexiters think of that transfer payment). These are not trivial sums, even for the rUK/UK, and, as we have observed many times, a transfer payment to Scotland of GBP 160 million a week is certainly not trivial for Scotland to give up. On rational grounds, independence should be dead. But I am sure I am not alone in sensing that Sturgeon and the SNP are still itching for an opportunity for an independence putsch. If you don't think that working class Scotland could be so gullible, go and look at poor whites in the US and their detachment from the Democratic party by a Republican party that nowhere has the interests of poor whites on the Republican agenda. Fooling a gullible electorate can be done, and the SNP is very good at it.

These thoughts were provoked by the news from Edinburgh of the PPI schools' problem, and the almost simultaneous discovery that Sturgeon's flirtation with China had been some time in the making. The merits and demerits of PPI are not cut and dried, but, as a strategy, it certainly has the potential to take in the gullible, not least those in Treasury and Government. At first blush, Labour's history on PPI, essentially as an invention of Gordon Brown, ought to be a Godsend to the SNP; that awful Labour Party, etc.

But there is one snag. Brown's motive for introducing PPI was fundamentally to fiddle the books. PPI allowed capital investment by Government without the need to borrow the money directly and have the borrowing recorded as Government debt. Others stumped up the cash, built the hospitals, etc. and then charged the Government an annual fee. The Government's job was to pay an annual fee-for-service to the investors by opening the public purse for a long period of time, typically, 30 years. As I say, it should be a wonderful target for Sturgeon and the SNP.

However, the Scottish Government has its own borrowing powers crimped by Treasury under the Fiscal Framework. Enter the PPI model as a way of circumventing borrowing limits. And who better to cough up cash than the People's Republic of China? The intermediary may be a bit corrupt at the margins but, hey, we're big boys and girls now, and wheeling and dealing on the international stage is just what we need to show how street smart the SNP really is.

So, my cynical reading is that Sturgeon intends running a bath of infrastructure investment over the next 5 years, all on borrowed money. This will acclimatise the Scottish electorate, if they are not acclimatised already, to levels of public expenditure that are completely out of kilter with Scottish Government income. That part of the Devil's pact will be overlooked. Instead, Sturgeon will project the image of the canny, street-smart First Minister who can be trusted to go on getting good deals for Scotland under independence. There has never been a more dangerous time for Scotland, and the danger still has some way to run.

Andrew Hamilton said...

Kevin, keep up the good work. You have got some interesting followers too. I was canvassing on Saturday in Dunbar for the Scottish Conservatives. Look out in the letters page of the Scottish papers for my account of a conversation with the SNP -God they are good at telling lies - and with a completely straight face!( If I get published you will see what I mean!)

Andrew Hamilton

sloppy said...

Enjoy as always Chokka and especially like the hyperlinking of Sturgeon's 'spitting' of the word 'team' and also when you used a similar technique to convey her chortle in a TV interview with Andrew Marr.

I suppose it conveys the smugness of the scottish nationalist party. They are a strange bunch.

David GREEN said...

Well, that didn't take long. Hardly was the ink dry on my previous comment than Sturgeon was promising GBP20 billion on infrastructure over the next 5 years. Assuming that an independent Scotland assumes its share of UK debt, its debt to GDP ratio is currently about 90%. The extra expenditure would take it to just over 100%, assuming it is paid for, either implicitly as PPI or explicitly as borrowing. Psychologically, over 100% is an interesting place to be. Ironically, it may be counterproductive, because a Scottish pound/UK sterling peg, post-independence, may not be sustainable. The Scottish pound would be an obvious currency to short.

Meanwhile, Fitch is taking a negative view of Spain's inability to achieve a budget deficit of a mere 2.8%, as is the EU Commission. An EU minnow, such as an independent Scotland, being allowed to run a budget deficit of >8% is inconceivable. Interesting that, even supposedly intelligent commentators such as Joyce McMillan cannot bring themselves to mention the cost of losing the Barnett transfer when it comes to evaluating Sturgeon's promised efforts to win the case for independence. Why can no one run the case for Scottish independence on the basis of "free, but poorer"?

Anonymous said...

Really it doesn't matter what the SNP do because they own the narrative. Whatever they say is the truth and that's all that matters. Any other political standing point or viewpoint is pretty much irrelevant. The Nationalists have captured the agenda and the public is engaged in that agenda.

No amount of asking for apologies or stating facts or the obvious will change that in the short to medium term. The only thing that will awaken the masses to the real state of affairs would be if the Holyrood budgets were tied to tax performance; akin to FFA. That's not going to happen though, the SNP couldn't afford all the popular freebies and the UK government ensure Scotland remains a subsidy junky without the Barnett flow of rUK tax revenues (in the absence of oil revenues) into Scotland.

The system is set towards the status quo and politicians in power rather like that. Scotland has entered a twilight zone where inaction is inbuilt, conflict is cool and entitlement is essentially part of the brief. Scotland will benefit from an extended period of decline as its politicians are increasingly locked into a cycle of underachievement and inertia.

CMac11 said...

@David Green,

It's an interesting position to judge SNP moves within the Union as if we were independent. If we can accept that independence means "poorer" now then the implicit conclusion is that if GERS figures stabilise then indy is a goer? Could the calculation be to increase infrastructure spend now to initiate increased growth rates. Tail that spending off in 5 years and suddenly the GERS gap begins to narrow for a few years (in a Scottish context anyway, forgetting relativity to UK) before the next push for indyref 2.

If in 10 years time GERS figures are back to what we saw pre-crash or even pre-oil-crash then the foundations are there for a Yes vote?

Anonymous said...

CMac, I think I see what you're getting at, but I'm not sure it computes as a strategy or even economic common sense. For one thing, the SG's preference seems to be to approach infrastructure projects via PFI (or whatever sound-better euphemism) so the up-front capital expenditure involved will be "off the books"; the only thing GERS will reflect is the eventual (much) higher annual cost of repaying the loans. So if anything the income:expenditure gap will be looking worse later.

A related concern of mine, given the almost total lack of objective financial scrutiny now in place in the Scottish parliament, is whether the annual block grant is (or should be) subject to any sort of economic audit at Westminster on behalf of the UK's taxpayers. Does anyone know? Rocoham