Wednesday, 23 July 2014

Response to "Independence and the Economy - The Facts"

You have probably been directed to this post because you have watched a rather slick video from "Business for Scotland" rather hilariously titled "Independence and the Economy - The Facts".  I'd provide a link but they block even the most mildly critical comments so I'd rather not boost their traffic figures. All of the exhibits used are captured below.

For those who are unaware, I have discussed this (self)interest group at length here > Who are Business for Scotland - this video represents a new low in their attempts to mislead the public.

Let me take each of their exhibits in turn

Notice how only tax take is mentioned not public spend?  This is because public spending was of course also higher over that period - if they showed expenditure as well it would be more informative and show a far more balanced picture1 (which is of course why they don't). This carefully selected 33 year time period includes the 80's when the main surge of Oil revenues was experienced.  The Union has been around for over 300 years; imagine what these figures might look like if we went back 60 years? (unfortunately we can't as such stats don't exist because reporting that splits Scotland from UK only starts at the point of "it's our oil").

This is true if you take a crude GDP/Capita measure.  There's a problem with this measure as has been widely commented (e.g. see this Guardian article): because so much of our GDP is owned by overseas firms (Oil & Gas, Whisky, Banking, etc.) the benefit doesn't fall to Scottish citizens.  Per the link above GNP (which factors in where the "production" is owned) is accepted by economists as a better measure. On a GNP/Capita basis (see the primary research)  iScot is behind the UK (probably - it's hard to work out).  The weakness of GDP/Capita as a measure is illustrated by the fact that Ireland ranks above Scotland on that basis (while suffering high unemployment, declining domestic demand, record business closures etc.) - hardly a "wealthy country" in any meaningful sense.

BfS have been throwing this £8.3bn figure around for a while now. They claim GERS as the source but the number doesn't appear anywhere in GERS.  They provide no further justification and have ignored several requests to explain it. Given the BfS track-record it's hard to take this number seriously. Update: since writing this post BfS have been shamed into explaining this number - and it's palpable nonsense.  Their "argument" is that we should have incurred a further £8.3bn of debt and that would have made us "better off". This is like saying I would have been better off if I'd been allowed to run up a bigger credit card debt. Full explanation here > £8.3bn Better Off? 

Can you spot the "per term" small print?  So presumably this means £875m pa.  There is no back-up for this figure of course and the White Paper doesn't help.  The IFS concluded"The White Paper outlined specific tax raising measures and spending cuts that would together save just under £500 million a year. On top of this there is an aspiration to raise a further £235 million through, as yet unspecified, measures to remove exemptions and reduce tax avoidance".  So £875m is a stretch.  For context: Nuclear is 5% of the UK defence budget and supports thousands of jobs in Scotland; scrap it and we'll be "anti-nuclear" so it's hard to see how we'll gain membership of Nato ("anti" is not the same as "non"). The House of Lords costs Scotland about £9m p.a. so is irrelevant in these figures. Every manifesto claims it will "reduce waste"; let's see how much waste Holyrood generates.  And what about the spending side of the equation?  The IFS go on to say "The spending increases and tax cuts described in the White Paper are more numerous and more costly – around £1.2 billion a year in the short term and potentially considerably more in the longer term if full aspirations for childcare and state pensions are met". So the IFS estimate that an independent Scotland would in fact be £500m to 700m worse off. This would at least help explain why John Swinney recently had to admit that in the first 3 years of independence an iScotland would actually be increasing borrowing by billions (£2.4bn in 2018-19 alone).

Developing renewable energy capacity requires massive investment; this currently comes from rUK subsidies.  If Scotland becomes independent the rUK would look to invest in their own renewable capacity (eg. offshore wind-farms) rather than those of a foreign country.  In addition the rUK would look to source cheaper renewable energy from eg. Iceland or Norway which offer a cheaper option than subsidising Scottish renewables (and the inter-connect capacity is coming on-stream to enable this). It's a downside of independence, a downside of breaking the single UK energy market.

Looks like they were running out of ideas by this stage.  This exhibit says *if* we increase exports by 50% then we'd create jobs. Hold the front page! What will drive this theoretical growth in exports is a mystery: the White Paper mentions that we will have a "a streamlined system of overseas representation focused on Scottish citizens and priority business sectors".  That means we will only partially replace the existing international diplomatic and trade network infrastructure. *If* indeed.

Cutting Air Passenger Duty? Hardly the most "green" policy I've heard of.  Lower VAT on tourism? That's a new one (not aware of it being Scot Gov policy) - wonder how that will fit with EU membership conditions around VAT harmonisation?

Well there are a lot of small independent nations and plenty of them are struggling too so not really sure what the point of this exhibit is.  And where's Ireland? It has an even better GDP/Capita than Scotland so following the logic of these exhibits it's "wealthier" ... there again we can't really say it's thriving can we?  And are we really comparing the Scottish Economy to that of Switzerland?

This entire video insults the intelligence of the viewer.


1. This is the net fiscal balance over that period sourced from the Fiscal Commission Working Group; as you can see there was a burst of net contribution from Scotland to the rUK in the 80's (we were in a Union, we shared our Oil & Gas windfall as we should have done) but since then in fact we have effectively "kept our oil" in terms of higher expenditure. Let me restate that: for the last 25 years Scotland have effectively "kept our oil" despite being in a Union with rUK.


Anonymous said...

You're wrong about Scotland not raising more than it received in the pre-oil period. See the linked graphic for how much we contributed to the UK (and how much we got back) from the years 1900 - 1921.

david > best of alba said...

Missing the facts...Re exports, fyi Scotland is currently exceeding export growth targets of 7% and is on track to achieve 50% growth by 2017. (Source; Global Connection Survey.)

Missing the point...We are not being asked if we COULD be an independent country, stupid. We are being asked if we WOULD choose to be an independent country. Got it yet?

Let's All Vote No said...

It's 'should', not 'would'. If you're going to attempt to be condescending please get it right, otherwise you're the one left looking a bit stupid. Got it yet?

Unknown said...

One of the slides says that Scotland has 25% of the EU's renewable energy potential. Hang on a minute, that simply can't be right. I have seen it claimed that Scotland has 25% of tidal, or 25% of offshore wind, but if you include Solar power, one of the obvious growth renewable technologies, then by no means can Scotland claim to have 25% of the EU's renewable energy potential. That is clearly completely ridiculous.