Sunday, 29 December 2019

What GERS can and cannot tell us


This meme is frequently shared by independence supporters as if it's some kind of "gotcha!". The quote comes from a radio interview I did with the perpetually confused Richard Murphy. He was indulging in his usual schtick of dismissing the GERS figures as "made up" and criticising them for presenting actual historical figures instead of hypothesising some imagined future scenario of Scottish independence.

Here is the verbatim extract, you can check for yourself

Murphy: "[...] let's not pretend GERS gives any useful information to a politician in Scotland, because it doesn't, it's literally made up information from the the rest of the UK, we have no idea if it's accurate [...] GERS cannot tell us [...] whether Scotland can survive independently or not, this data is not fit for purpose"1
Hague: "Well,  I mean first of all, the key thing is they are fit for purpose - the most important thing is understanding what that purpose is. So Richard finished his piece there by saying they can't tell us what an independent Scotland's finances would look like - that is of course absolutely true; what the GERS figures do tell us is, historically, how do Scotland's revenue and expenditure figures look as an integral part of the UK [...] as long as you understand the data, as long as you understand what the data can and cannot be used for, it is good data [...] But Richard is right on one point, which is all it tells is is where we start from, it tells us how the Scottish economy currently performs as an integral part of the UK - and that is all it can do, that is all it is expected to do"

The fact that the GERS figures are historical actuals that describe Scotland's economy as an integral part of the UK should hardly be a revelation to anybody, but the nature of online debate is such that this observation is somehow considered meme-worthy.

If it needs spelling out any further2, then let me do so again here:
The GERS figures describe Scotland’s historical finances, with Scotland raising taxes and incurring public spending (including reserved expenditure) as an integral part of the UK. From the perspective of hypothesising a possible future independent Scotland, we are looking at what in financial accounting terms would be considered pro-forma accounts.
So of course the figures do not tell us what the future accounts of an independent Scotland would look like - how could they? They do however describe the starting point (the “run-rate”) from where we can start to consider the possible impact and fiscal implications of independence.
Precisely how independence would change Scotland’s economy is of course a hugely complicated subject that require us to consider, amongst other factors;
  • The outcomes of uncertain negotiations around inherited share of UK debt and potential EU membership
  • The challenges of either sustaining money-supply under Sterlingisation or of building the reserves requires to support a new independent Scottish currency [see here]
  • The explicit tax and spend choices that the government of an independent Scotland might make (inevitably constrained by the outcomes and decisions above) which would include choices around wealth redistribution, defence spending, industrial and economic policy, international affairs, debt and deficit management, social policy priorities and much more
  • The costs involved in replicating the delivery of services that currently rely on shared infrastructure with the rest of the UK (e.g DWP and HMRC functions)
  • Depending on the outcome of EU membership negotiations, the possible impact of trade friction between Scotland and  the rest of the UK (the destination for 60% of Scotland's exports)
  • The impact of factors outside the Scottish Government’s direct control such as how businesses and the labour force would respond (e.g. possible capital flight), the global oil price, international credit ratings and the cost of Scotland’s debt
  • The cumulative effect of all of the above (positive or negative) on Scotland’s economic growth

Now look again at the beginning of the Murphy quote above: when he says “let's not pretend GERS gives any useful information to a politician in Scotland, because it doesn't, it's literally made up information from the the rest of the UK, we have no idea if it's accurate" he is insulting: the Scottish Government’s own economists who compile them; the National Statistics Authority who award them National Statistics accreditation; the authors of both the Independence White paper and the SNP's own Sustainable Growth Commission who used the GERS figures as the basis for all of their analysis.

In fact, there are no respected economists who dimiss the GERS figures as "bad data"



I've dealt with the details of Murphy's publicity-seeking confusion over GERS before here but- for completeness - let's remind ourselves what happened when a well-briefed politician challenged Murphy on some of his more extreme assertions in front of a Holyrood committee:



/ends/

Notes

1. His opening ramble is over 2 minutes long - this is very much his style: he chucks out so many daft assertions in one go that it becomes impossible to refute them all in response without descending into a similarly lengthy and confusing statement. His objective is obfuscation and - give him his due - that's one thing he is good at it

2. I really have been very consistent about this - the following from 2016 alone
"Nobody is arguing that things would remain the same. Those of us who argue for rational debate simply ask for those making the case for independence to actually explain coherently what the different "economic strategy" would actually be and provide a realistic assessment of how (and by how much) it would change the figures compared to those of Scotland being within the UK." - Chokkablog August 2016
"We should be very clear about what this analysis of historical fiscal data can and cannot tell us. The figures only tell us how an independent Scotland’s finances would have looked if we had already been independent but were still raising taxes and incurring public spending (including reserved expenditure) as we have been as an integral part of the UK. We are looking at what in financial accounting terms would be considered pro-forma accounts. The figures do not tell us what the future accounts of an independent Scotland would look like. They do however describe the starting point (the “run-rate”) from where we can start to consider the possible impact and fiscal implications of independence." - Chokkablog March 2016
"All I have been attempting to do is ensure we have clarity around our starting point. Were we to be independent or fiscally autonomous now, what would our pro-forma accounts look like? What is our economy's run-rate? This frames the debate, shows the size of the challenge. If we are all honest about this starting point then maybe we can have an interesting and constructive debate" - Chokkablog June 2016
"This onshore deficit gap matters because it is revealed - it becomes real - as oil revenues decline. This is not to say that were Scotland to be independent this gap would remain; it might narrow, it might widen. It merely gives us an idea of the run-rate relative disadvantage we would be starting with if we sacrificed the benefits of UK-wide pooling and sharing (assuming the days of significant oil revenues are indeed behind us). If you like, it's the head-start we'd be giving to the rest of the UK." - Chokkablog February 2016 

4 comments:

Anonymous said...

We have to pull together to stop the Indy at all costs brigade from

a) Getting Scotland trapped in neoliberal, EU central, fiscal rules madness. That every other sane country is trying to escape from.

b) Stopping Scotland from getting down on our hands and knees and begging in front of an EFTA court just to get economic po!icy through.

https://m.youtube.com/watch?v=u_3GLAk2CPE


EFTA, EFTA, EFTA is all you are going to hear about. It is the Indy at all costs master plan to try to escape the EU fiscal rules.

A faux independence master plan. A plan put together by idiots.



Anonymous said...

If I used Twitter I would have posted this myself to some of the Anti Experts .. "“It’s entirely wrong, and it’s the road back to the cave. The way we got out of the caves and into modern civilisation is through the process of understanding and thinking. Those things were not done by gut instinct. Being an expert does not mean that you are someone with a vested interest in something; it means you spend your life studying something." https://www.theguardian.com/tv-and-radio/2016/jul/02/professor-brian-cox-interview-forces-of-nature?fbclid=IwAR37b2aZFbjyAkeOYyJzdvSn-vQXLp8yQFYu7b6iaf9N4z3mAMb2K_qxL4Y

It's now a Cult we are up against and I am sure it's a situation the SNP have done their utmost best to actually foster.

Anonymous said...

@anonymous 29 Dec

FYI not a single sane country is now "trying to escape from" the EU. The INsane, corrupt, suicidal fiasco that is Brexit has made any waverers immediately reconsider. Popular support for the EU is at an all-time high. So let's put that nonsense to bed.

But what the brainless, exceptionalist, posturing, consequence-free pursuit of Brexit *has* done is to give substantial "at any cost" legitimacy to the flag-wavers for Scottish independence. Neither Brexit nor Indy hard-liners have ever treated economic/social impacts or trading realities as important - unicorns are their common currency. Both discount without even considering it any expert opinion that challenges or disagrees with the end goal - to even question is just wrong and unpatriotic. Both ideas are nurtured by an entirely false victim narrative of escaping "vassalage" or an "abusive relationship", and even use the same self-deluding "lose a bad neighbour and gain a good friend" promise. Neither can understand the loyalty of their opponents to the concepts of EU or Union except in their own entirely self-interested terms. Both are based on lies, deceptions and obfuscations, the very opposite of trusting the people to decide based on full facts. And both are fuelled by narrow, vicious and toxic, exclusive nationalism, while proponents tell themselves that *their* nationalism is pure and good and inclusive, simply because it is theirs.

The two animals are identical in all but scale. Brexit in all its unpleasant manifestations has newly empowered Indy supporters. And as with Brexit, those supporters include the very ones who are likely to suffer most as a result.

Anonymous said...

@ anon

Ha hilarious !

See France, Greece, Poland, Hungary and Italy for details. Good luck with the next EU budget.

When the sky does not fall in or the ground open up after Brexit. The myths of doom will be seen for what they were. Lies and project fear.

They sold the £ after the Brexit vote and are now buying the £ because of brexit. The logic of liars.

Remainers views will be totally ignored with not a leg to stand on. A complete and utter joke. Middle class liberal metropolitan nonsense.

Wee Nicola and the SNP are finished with their heart of Europe nonsense.

Heart of Neoliberal globalist EU will go down in Scottish folklore as an even bigger mistake than keep the £.

You'll see.

If you think Scottish voters are going to vote for Brussels to run Scotland with their growth and stability pact, 2 pack, 6 pack, excessive debt procedure and corrective arm and the IMF.

You are more deluded than I thought.