Sunday, 7 December 2014

Alex Salmond's Shameless £8bn Lie

Alex Salmond has declared his intention to stand in the constituency of Gordon in Aberdeen for a Westminster seat at the 2015 General election. The voters of Gordon should be aware that our erstwhile First Minister is quite happy to lie to win votes.

If you think that's an extraordinary accusation, let's take a look at his assertion that Scotland would have been £8bn better off over the last 5 years if we had been independent.  He certainly repeated it often enough.

May 2013 on the Today Programme
  • "Alex Salmond was in ebullient form on the Today programme this morning, rattling off statistics showing that over the last five years, an independent Scotland would have been £8bn better off" - New Statesman
  • "Speaking on the Today Programme, Scotland’s First Minister Alex Salmond [...] Over the last five years, Scotland would have been £8bn better off if it had been independent, he claimed" - Local Government Chronicle

March 2014 during First Minister's questions
  • "12.08: "Over the past five years we would have been £8bn better off" if separate from the UK, Salmond says." - The Telegraph 
  • "Mr Salmond repeatedly drew attention to Scotland's relative strength over a five year or indeed 30 year period. Scotland, he said, could have been £8bn better off over five years if in sole charge of her resources." - BBC News 
August 2014 during the Live Leaders' Debate on STV
  • "Over the last five years we have £8bn more into the Treasury than we have had out of it, in relative terms. That is £1,500 a head for every man, woman and child in Scotland." - Evening Times & Belfast Telegraph 
August 2014 during the Live Leaders' Debate on BBC1
  • AD: "....for 22 out of the last 23 years Scotland has spent more than is got in"
    AS: "that's not true .. in the last 5 years relative to the United Kingdom Scotland was £8bn better off or would have been as an independent country, Alistair you know that because it's in the GERS figures" - Broadcast Footage
Of course where the First Minister leads, his loyal supporters follow; Business for Scotland worked it up into this slide for one of their risible You Tube videos

So this wasn't a one-off slip - the £8bn figure was drilled into the consciousness of a significant proportion of the electorate.  Those who believed it were gulled.

I highlighted these outrages against data at the time of course (The £8bn Misdirection and  £8.3bn Better Off?) but this blog can hardly challenge the SNP's PR machine (and - I have to say - the failure of either the Better Together campaign or the Main Stream Media to call him out on it).

Checking these figures is a very straight-forward exercise: the argument has nothing to do with changes to expenditure - it is simply about "more into the Treasury than we have had out of it, in relative terms -  we are talking about historical actual figures and we know there is no debate about how costs or revenues were allocated as GERS is the source cited (by both Salmond and Business for Scotland).

GERS numbers are really straight-forward but Twitter debates have taught me not take anything for granted when it comes to people understanding the figures so bear with me;
  • The GERS figures present "Scotland" and "UK" - the figures for UK of course include the figures for Scotland.  For those who care I repeat the analysis using rUK = [UK - Scotland] at the foot of this post; it doesn't make much difference.
  • We are using "Geographic Share of Oil Revenue" - this means the figures for Scotland include "our oil" using the Scottish Government's favoured geographic share definition. The figures for UK include Scotland and therefore of course include all Oil revenue. The repeated version of the analysis showing rUK figures is included at the foot of this post for those who want to see rUK without "Scotland's" oil revenue.  Again; it doesn't make much difference
  • Because the quotes I have cited cover a period during which new GERS figures were published (12/03/2014) I show the two different versions of "the last five years" that will have existed
The actual data set we need is very simple
  • We need two numbers for each year for each of Scotland and UK
    • What we pay "into the Treasury" = Tax receipts
    • What we have "had out of it" = Public Expenditure (Total Managed Expenditure)
  • The only other figure needed is population to allow us to define Per Capita figures (so we can compare numbers in relative terms) 
The other figures are simply a function of these data and are presented below in the simplest form I can manage whilst still providing audit trail clarity.

You won't see the £8bn figure in this table because that claim is transparent nonsense.  The observations we can fairly make are as follows;
  • Over the 5 years for which the data existed when Salmond made his assertions in May 2013 (and possibly for his March quote) the difference between Scotland's deficit and that of the UK was  an average of £112 per person per year or "in relative terms" £2.9bn over 5 years
  • Over the 5 years for which data existed when Salmond was making his assertions on the TV debates the the difference between Scotland's deficit and that of the UK was an average of £49 per person per year or "in relative terms" £1.2bn over 5 years
The figure was never £8bn.  In fact by the time he was speaking to his biggest audience during the TV debates the true number was £1.2bn or an average of £49 per person per year.  I think its fair to say that £49 per person is not a figure that has stuck in the minds of #the45.

I've highlighted the £1,515 as we often hear that Scotland contributes £1,500 more per person in tax than the rest of the UK.  If you attribute Scotland its geographic share of oil revenue that was true in 2011-12; the 2012-13 figure was £797 (which meant that the additional tax revenue generated generated fell well short of the additional public expenditure received, hence Scotland was running a higher deficit per capita than the rest of the UK in 2012-13).

The chart below shows these per capita deficit comparisons in graphical form (remember in all cases Scotland is given the benefit of its geographical share of Oil revenues).

Note the higher volatility of Scotland's deficit (because of the higher dependency on Oil revenues) and that in the most recent year Scotland ran a materially higher deficit per capita than the UK.  Of course with oil revenues plummeting we can expect that relative deficit to have deteriorated even further when we see the 2013-14 figures - but Scotland voted to remain in the UK so we are protected from the implications of that.

But I'm drifting away from the £8bn lie.  As a result of my blog post at the time (The £8bn Misdirection) and a live radio debate (John Beattie's Radio Scotland show) with a representative sent by BfS we know how the Yes campaign try to defend the £8.3bn figure. Read that blog post and the comments to-and-fro with Ivan McKee of BfS if you don't believe me but what follows is honestly how they get there (the radio debate also confirmed this but unfortunately is no longer on iplayer).

There are only two figures we can alter to make an hypothesised independent Scotland £8.3bn better off;

  • Tax Receipts: the GERS figures already give Scotland all of our attributable tax revenue including Oil revenues. Nobody suggest this number should change when explaining how we would have been £8bn better off
  • Public Expenditure: the argument that explains "£8bn better off" is based on having the same share of Expenditure as our share of tax receipts - that would mean spending £8.3bn more
So Alex Salmond's hypothesised independent Scotland would have been "£8.3bn better off" by spending £8.3bn more and running an even higher deficit.  As a direct implication, instead of being responsible for our population share of the debt we would responsible for our Tax receipt share (we are allocated our cost of the debt on a population share basis). 

Alex Salmond was saying that over the last 5 years an independent Scotland could have spent £8.3bn more, run an £8.3bn higher deficit than the GERS figures show and been responsible for an additional £8bn debt.  He either thinks that would have meant we'd have been £8.3bn better off or - as a qualified economist - he knows that's nonsense and he's willing to lie to win votes.  That should maybe give the voters of Gordon pause.


Below - for completeness - the longer form analysis comparing Scotland to rUK.  It makes very little difference.



Anonymous said...

Good stuff. One thing I'm slightly unclear on: have you any idea where the bail-out cash for RBS and HBOS is allocated? ie, is it recorded against rUK or against Scotland? Or is it even in these figures at all? Just by looking at it, it certainly doesn't appear to have been allocated to Scotland (as, I would contend, it ought to be), as the Scottish deficit would have been £65bn further in the hole.

Cheers, Derek

Anonymous said...

Utter Garbage as usual.

The author forgets that Scotland already pays a per capita share of the overall UK debt (over £4 billion a year) Debt that was not accrued to Scotland on a per capita basis...

Kevin Hague said...

Anonymous (why are they always anonymous?) - its not garbage; the fact that we are attributed a per capita share of debt is precisely the point. To have been "£8bn better off" we'd have had to spend *more* than our per capita share and therefore be allocated *more* than our per capita share of debt. I didn't see anybody arguing for Scotland taking *more* than our per capita share of debt if the vote had been Yes.

I fear you are in the "let's rerun the 1980's" camp. Look at current oil price impact - by being in the UK we get to benefit as our "standalone" deficit epr cpa will be way worse than UK - but as part of UK we benefit from pooling and sharing. Scotland net contributed in the 1980's - recently we've been running about equal - going forwards we will be net beneficiaries of being in the UK. Swing s & roundabouts.