Friday 5 June 2015

Stop Getting GERS Wrong

WARNING
If you've read my blogs before and are aware that Business for Scotland have no credibility and produce ludicrously misleading material, if you already know that those who suggest GERS figures are somehow flawed are talking nonsense and know how to rebut them ... then you really needn't read this blog.

I strongly suggest that your time would be better spent doing some combination of the following: go for a walk, play with your kids, call an old friend, speak to your partner, stare out of the window & think, potter in the garden, go for a bike ride ... these are all things I think I should have done instead of writing this frankly tedious post

If you're still reading you're either new to my blog - in which case: hello - you're a martyr for punishment - in which case: welcome to the club - or you've been sent here because you hold some misconception about how the GERS figures work - in which case: thank you for making the effort to understand.

A quick recap: most people are aware of the Government Expenditure and Revenue Statistics* (GERS) reports which hypothecate the finances of a stand-alone Scotland.  They are published in March every year and have been running for 15 years, ever since the Scottish parliament was established.

Any discussion on Scotland's economy inevitably references these GERS figures and  I've spent much of my time on this blog analysing, understanding and attempting to explain them. For those arguing for greater economic separation (or indeed full independence) the numbers have not made happy reading of late.

I've explained the detail elsewhere (> Full Fiscal Autonomy for Dummies) and my best attempt to summarise "the answer" is the following graph - it shows the historical actual relative economic position of Scotland and the rest of the UK (rUK) on a per capita basis.

* I ask those who dislike or attempt to dismiss the figures in Chokkablog to highlight any errors so I can correct them. So far (05/07/2015) this is all that has been spotted - the "S" in GERS of course stands for "Scotland".  Yes this really is the "best" example of a credibility destroying failing they've found in my 100+ detailed and data driven blog posts.

The solid red line is actual higher Scottish public spending per capita; the solid blue line is Scotland's lower onshore tax revenues per capita; the solid black line is Scotland’s actual higher tax generation per capita when “our” oil is included.

 The gap between the blue and black lines is oil & gas tax revenues.  The gap between the red and black lines is Scotland’s higher deficit (when black below red) or lower deficit (when black above red).


The gap between the red and blue lines is how much higher Scotland's deficit would have been (compared to rUK) without oil - this I hope definitively gives a lie to the "oil is just a bonus" line spun by the Yes campaign.  The graph also shows where the c.£8bn "black-hole" comes from - it's merely this long-term structural onshore deficit gap being revealed as oil revenues decline.

I honestly don't know why presenting this data seems to upset so many people (they become quite angry with me) - it's merely a graphical representation of the full 15 years of GERS data. The only adjustments I've made are to deflate figures to put everything in real terms, show the latest OBR oil income forecasts (the dashed black line) and to add the 15 year average figures for higher spend and lower onshore tax revenue generation.

If you're wondering what's led me to revisit this analysis, let me share a recent Twitter exchange I had with a chap called Donald Maclean.

It all started when he saw somebody had linked to my "Full Fiscal Autonomy for Dummies" blog (where the graph above features) and suggested they should instead be linking to Business for Scotland's website

Well.

Let's skip the irony of him trolling by accusing me of being a "troll". Let's leave for now the ongoing inconsistency of my detractors' attempts to pin down my political affiliations - it seems some people struggle to grasp that I write this blog because I'm more interested in honest presentation of data than I am about any specific political party.

If you don't yet know about Business for Scotland and think my response to Donald was a little harsh: I've had many run-ins with them and discovered that they are a thinly veiled SNP construct (> Business for Scotland and the SNP), they have very few significant businesses among their members and none involved in material trade with the rest of the UK (> Who Do Business for Scotland Represent?) and they have produced so much misleading or simply wrong output that they feature prominently as subjects of debunkings by me in the following posts: BfS and the Smith Commission, BfS and the Deutsche Bank Report, Response to Independence & the Economy: The facts, £8.3bn Better Off, Bank Bailout Myths, Oil Price & Scottish Tax Generation, Michelle Thomson: A Response. Let's leave all that aside as well.

I'll even skip the the fact that he blithely states my blog is inaccurate and then fails to highlight even one factual inaccuracy. I'm used to it. Whether it's Wings Over Scotland, Business For Scotland or the various cybernats who swarm over my Twitter timeline I always make the same offer: show me an error and I will correct it and tweet an apology. I have yet to receive a single example.

As an aside: one of the beauties of a blog (as opposed to print) is it is the work of moments to correct or clarify.  I don't ask people to "show me an error" because I'm confident there aren't any - it would be incredible if in the 100 or so posts I've written I haven't slipped up somewhere - I ask because I genuinely want to know and would correct it.

 As an illustration: after I'd written my posts Explaining the £7.6bn Black Hole, somebody on Twitter suggested a graph I'd included of long-term oil revenue generation was misleading because it was in nominal terms (it didn't take into account inflation). They were right, it under-sold the size of the 1980's oil boom, so I recreated the graph in real terms and amended the post (with a dated note) and left the original misleading graph there so my error is still there for all to see. If you wish to be trusted for accurate data and retain some integrity I'd suggest that's the way to do it. 

 Now I do this as a hobby, it's something I find spare time for. So if I can be bothered to correct something that might be misleading, why can't those who crowd-fund and get paid to produce their web articles do the same?  Wings Over Scotland is serially guilty of failing to do this, as covered in my blogs > Sowing the Seeds, Wings Over Scotland: An Apology and The Wee Blue Book of Lies 

What I do want to focus on is Donald's reference to the "accurate facts", to the "correct facts" that he tells us we can find by viewing Business for Scotland's materials.

In the tweet above - having alleged my blog is inaccurate - he links to this article > Business for Scotland: The Case for Independence where he tells us "the facts are clearly set out". You might notice that article is not hosted on the Business for Scotland site. I've seen it before and not gone too hard against it as I presumed it was an internet legacy document - one they'd pulled when they realised it was error strewn.

But according to his LinkedIn profile, Donald has been Business Development Director at Business for Scotland since May 2013 - so he surely knows his own organisation's materials. If he points to this as his exemplar of Business for Scotland's presentation of "correct facts" it would be rude of me not to have a look. You might be able to tell where this is going: buckle in.

Let me cover some of the points on the first page of the document (that's as far as I managed to read before losing the will to live)

1. "The data in GERS isn’t disputed by either side"

It's true the accuracy has not disputed by the No side. When this document was written the 2011-12 figures were the most recently available and looked relatively favourable for Scotland (if you assumed, as the White Paper did, that oil revenues would remain at that peak level for the foreseeable future). What's slightly weird is that this document then goes on to dispute the accuracy of data.


2. "Figures and percentages given are from GERS 2011-12, although the picture they paint holds true for all of the last 30 years."

GERS data is only available back to 2000 so quite where this 30 year assertion comes from I don't know. At the time this was written the graph above would have looked liked this


The boxed area is the five year period widely quoted by the Yes campaign and White Paper. At a pinch you might argue they could get away with saying the picture painted holds true for the last 6 years - they are in no way "true for all of the last 30 years"


3. "While GERS is the closest that we have to a full set of national accounts, it is likely that they are pessimistic compared to the national accounts of an independent country"

These are the Scottish Government's figures (their Chief Statistician takes responsibility for them) and we've just been told the data "isn't disputed by either side" - but now BfS tell us the numbers are likely to be pessimistic?  Are they now disputing them? Given who's creating the figures you'd think if there was any bias it would be to favour Scotland, but let's see what's coming to substantiate this surprising assertion.

3. "For many companies, VAT and Corporation tax for the whole of UK operations are paid at company headquarters which is most often in London or the South East of England. It doesn’t count as Scottish revenue, despite the fact it’s a tax paid on sales / profit generated in Scotland."

A quick glance at the 2011-12 GERS Methodology Statement tells us that VAT is included in GERS based on Scotland's share of UK household VAT expenditure (using the ONS Living Cost and Food Survey Data). This remains true of today's GERS figures. It is correctly estimated based on where the expenditure takes place, it has nothing to do with where company headquarters are located.

Corporation Tax is estimated in GERS based on Scotland's share of profits from ONS regional accounts. To quote directly from page 13 of that same methodology statement: "GERS apportions a share of UK corporation tax revenues based on the economic activity undertaken in Scotland and not the location of companies’ headquarters".  This remains true of today's figures as per the 2013-14 GERS methodology statement: . This couldn't be clearer, it has nothing to do with where the company headquarters are located.

So the statement made by Business for Scotland in this document was demonstrably completely wrong at the time and remains so now.

They go on to say: "Put simply, if you buy a packet of Walkers shortbread in Tesco in Edinburgh, the VAT you pay is taken to be generated at Tesco’s head office in Hertfordshire."  Apart from being fundamentally wrong about where the VAT is effectively recorded for the purposes of GERS, they're also amusingly wrong about which products incur VAT.  Shortbread is zero-rated for VAT purposes (unless it's chocolate coated).

4. "There are other ways in which Scottish revenues are invisible in GERS. Much of the alcohol duty paid by the whisky industry is not counted as revenue from Scotland. Alcohol produced in the UK which is exported abroad becomes subject to UK alcohol duty at the point of export, and a large proportion of Scotland’s multibillion whisky exports gets shipped out from ports in England. The UK Treasury counts the duty levied on this whisky as income from the tax region in which the port is
situated."

This was debunked thoroughly in the addenda to my recent blog Sowing The Seeds (where I observed that this wording is identical to that used by Wings Over Scotland). In case you missed it (and so all of this is in one blog post),I highlighted that logic was explained very clearly in the 2008 GERS Report
"In GERS, VAT and excise duty estimates for Scotland are based on the consumption approach.
This is appropriate as the burden of the duty is borne by the final consumer rather than the producer. This is considered best practice as within a system of regional fiscal accounts, the VAT liability 'sticks' when the item is purchased by the final consumer. The location of production is of no relevance.
Tobacco and alcohol duties are only collected if the product is consumed in the UK. If the product is exported, the producer receives export relief. For example, while duty is levied on Scotch Whisky when it leaves a bonded warehouse, in reality it is only collected if the whisky is consumed in the UK. Consequently, the ultimate payer of the duty is the UK consumer of the product.
Therefore, GERS estimates duty collected from Scotch Whisky based upon the level of whisky consumption in Scotland, even though Scotch Whisky is only produced in Scotland. Similarly, the estimate of tobacco duty collected in Scotland is based upon the level of consumption of tobacco products in Scotland, even though most tobacco goods are produced outside Scotland."
A senior industry insider with decades of experience working at the highest level in the industry offered me the following quote
"No alcohol duty is levied on Scotch Whisky exported from the UK to the EU or third countries, whether from Scottish ports or from ports elsewhere in the UK. UK alcohol duty (excise duty) is only levied on Scotch Whisky when released from bond for consumption in the UK. Under EU law, the rate of excise duty has to be consistent across the territory of a member state. If Scotland were an independent country, the rate of excise duty on Scotch Whisky would be set by a Scottish Government within the parameters for excise duty on alcoholic drinks set by the European Union.The excise duty revenue accruing to a Scottish exchequer would only be the amount raised on the release from bond of Scotch Whisky for consumption in Scotland."
This has also been confirmed by the Scotch Whisky Association.

And common sense.


Remember: Business for Scotland's Business Development Director volunteered this document as a counter-point to what he calls my "inaccurate" blog, as an example of the "true facts" that Business for Scotland present ... and this is just the first page!

You'll forgive me - possibly thank me - if I don't go through the whole document (which includes such corkers as "In fact Scotland’s accounts have been far healthier than the UK’s for the last 30 years"). I think I've made my point.

Funnily enough former Business for Scotland MD Michelle Thomson (now SNP MP) is another who's referred to my blog as inaccurate
I have also asked her to provide any factual inaccuracies so that I can correct them - she has of course offered nothing.

** Clarification added 07/06/2015 **

Donald has since tweeted to accuse me of "fabricating" the article and that I "pretend" it is his

At some point I imagine he may delete the original tweet above (where you can see he linked me directly to that article - using a tinyurl - as an example of BfS "truth") - I'm not sure quite how he thinks I managed to get him to tweet the link to me. As for his claim that I am a "Tory troll", that "Scots see through you" and his use of the #indyref hashtag (in June 2015) ... I'm lost for words.

Following this latest interaction I checked further. The site that article is hosted on (branded as Business for Scotland and linked to by a Director of Business for Scotland) is called worldofstuart.com - regular readers of this blog will not be surprised to learn it is run by Stuart Campbell of Wings Over Scotland infamy. I look forward to BfS getting the article taken down - after all, a stupid person could easily tweet a link to it thinking it was an official BfS document.

Donald has asked me to point out that earlier in the thread I linked to that piece - I'd forgotten that when I wrote this initially but I'm happy to confirm I did - here's the tweet. Quite why that made him tweet a tinyurl link of that page back to me 40 minutes later (as an example of BfS "truth" is lost on me - but I'm all for full disclosure

** Ends **

I do find it incredible that people responsible for promoting such glaringly inaccurate material as the document above can have the sheer gall to accuse my blog of being inaccurate ... but not be able to back it up with a single example when pressed.

What's really concerning though is that Business for Scotland and Wings Over Scotland have been successful. There are hordes out there who seem able to handle the cognitive dissonance involved in happily dismissing GERS figures when they don't like them, but warmly embracing them when they do.

The fact that I am besieged on my Twitter timeline with folk who simply dont't "get" GERS  is just merely an annoyance - but I really do wish they'd stop getting GERS wrong.
I'm indebted to Brain Spanner for creating this dubbed version



Addendum


While we're debunking common misapprehensions about GERS let me record a couple of the other misconception so that this page can act as a reference for those tearing their hair out on social media. I envisage tweets referencing this blog saying something like "See number 3" - it'll save a lot of time.

5. The GERS numbers can't be trusted

This is often offered as a general statement by those who don't like what they show. It's worth reminding these people that

  • The Scottish Government's Independence White Paper (page 67) states: "GERS is the authoritative publication on Scotland’s public finances"
  • They are the responsibility of the Scottish Government's Chief  Statistician
  • As the report itself explains: "The United Kingdom Statistics Authority has designated these statistics as National Statistics, in accordance with the Statistics and Registration Service Act 2007 and signifying compliance with the Code of Practice for Official Statistics"

These are the same figures that are used to justify superior GDP/Capita claims (oil revenue of course contributes to GDP) and more fundamentally formed the basis for the economic case for independence (insofar as one existed).  It's ludicrous to now dismiss the figures as inaccurate just because they don't look rosy.

6. It's just a snapshot

 I've been very careful to present the full 15 year history and show figures in real terms. The people guilty of using a snapshot were those in the Yes campaign who doggedly stuck by quoting 11-12 figures long after (less favourable) 12-13 figures were available (which was 6 months before the indyref)

7. It only looks bad if you assume oil will never recover

 I've covered elsewhere on this blog (Oil Price and Scottish Tax Generation) that there has been a long-term decline in North Seal oil profitability (and hence tax yield) that predates the oil price crash. As I point out in that post, oil was at $99/barrel in 2014 and generated only £2.6 bn of tax revenue. It's frankly hard to envisage oil ever filling the c.£8bn gap again.  Even if you do believe that it will, surely now nobody can argue that "oil is just a bonus" and current market conditions are a striking demonstration of its volatility

 8. The corporation tax assumptions are still a punt

 That's true. The Scottish Government estimate the figure in the 2013-14 to be £3.8bn. This comparison of 12-13 figures shows that HMRC's estimate was £438m lower. So GERS uses a more optimistic assumption around a fundamentally uncertain number. It will be impossible to know the "true" figure unless companies have to start reporting profits split within the UK - but we can safely assume the figure used in GERS is on the optimistic side (being >10% higher than the HMRC estimate).

As a sanity check, the corporation tax per capita assumed in GERS works out at £527 versus £556 for the rest of the UK - just 5% lower.

So I'd argue any error is likely to be flattering to Scotland's finances. It's certainly highly unlikely that our corporation tax yield would be higher than rUK; even if it was the same we'd only be seeing £0.2bn more revenue.

9. Defence assumptions are wrong because not all of that money is spent here

As the GERS report itself explains (page 11): "For example with respect to defence expenditure, as the service provided is a national ‘public good’, the for methodology operates on the premise that the entire UK population benefits"

So under FFA I think there is little dispute - Defence costs (like those for International Services and Public Sector Debt Interest) would be shared on a per capita basis.

Of course the argument were Scotland to be independent differs; the White Paper (page 59) assumes £0.5bn saving in Defence costs versus those allocated in GERS. It also assumea scrapping Trident without factoring in any negative knock-on employment and economic activity impacts but that's by the by.

So under independence, the most optimistic assumption (as surely the White Paper was using) we could maybe save £0.5bn on defence spending. Of course if we want to "bank" that figure against the c.£8bn deficit gap we'll need to start debating the financial downsides associated with currency, trade, employment etc.and I'm not going there again now.

 10. The underlying assumptions used in Chokkablog are flawed

 The main assumptions I use are those used by the Scottish Government when assembling GERS, the assumptions that were used as the basis for the case for Independence. I lay out the historical actual data, observe the run-rate figures and factor in known and OBR forecast oil trends. This allows us to ask the question: what would we need to believe we could achieve under FFA or Independence to prevent us being worse off?

It may be argued that we could be worse off in terms of our national accounts but still prefer to be independent. That's fine as long as that's being honestly presented - it certainly wasn't the argument put forward by the Yes campaign

11. But this just describes the past, it doesn't tell us how we'd look in the future if we had full control

 True. All I have been attempting to do is ensure we have clarity around our starting point. Were we to be independent of 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
at

43 comments:

  1. Ron Sturrock6 June 2015 at 10:16

    Point 9,
    As willing to be a NATO signatory, factor in recommended 2% of GDP annual expenditure as club membership

    ReplyDelete
  2. Ron Sturrock6 June 2015 at 10:34

    Talking of VAT on biscuits, an excerpt from the Finance Committee meeting on the 3rd.


    John Mason:
    That is great.

    VAT has been mentioned. There are different arguments about how it might be assigned. It seems important that we take account of value added in Scotland. Let us say that I have a biscuit factory in my constituency and that all the biscuits that are made there go south. If, in deciding on the VAT, we look only at the consumers who eat the biscuits, we would not get a share of the factory’s input, despite the fact that it adds huge value. It would be more logical if we got a share of the VAT at every step and not just at the final step.

    John Swinney:
    I acknowledge that the question about how VAT assignation takes place is a substantial issue for debate. Indeed, it is a material part of the conversations that we must have with the UK Government. I am not familiar with how the committee intends to conclude its inquiry or whether it will do so shortly but, if it reports, it would certainly be helpful to have input on the issues that it believes should be implicit in the fiscal framework and where particular conclusions should be arrived at.

    - See more at: http://www.scottish.parliament.uk/parliamentarybusiness/report.aspx?r=9994#sthash.PkPVgDAA.dpuf

    A real can of worms here that applies both ways.

    ReplyDelete
  3. Automatic_Wing 6 June 2015 at 19:31

    Haha. These guys are on the Finance Committee? They seem to have no idea how VAT works.

    ReplyDelete
  4. Anonymous7 June 2015 at 03:27

    Serious question to any legal bods out there: are the claims by Michelle Thomson and the guy libellous? I've just looked up the word 'libel' in the dictionary, and the first entry says: '1. defamation: a false and malicious published statement that damages somebody's reputation.' Seems like a slam dunk. And it's obviously not just the blog that's at issue here: an MP going around saying that Kevin's work is inaccurate could have serious implications for his businesses. As a former businesswoman herself, she must know this.

    ReplyDelete
  5. hello7 June 2015 at 08:46

    This comment has been removed by the author.

    ReplyDelete
  6. hello7 June 2015 at 08:47

    This comment has been removed by the author.

    ReplyDelete
  7. Anonymous7 June 2015 at 10:44

    It's been a wee while since I looked at the GERS methodology but I remember a lot of estimated figured being done on a population share of UK figures basis. Is that right? The consumption figures mentioned above, is there a Scottish source for those or are they estimated of Scottish consumption?

    ReplyDelete
  8. Unknown7 June 2015 at 13:25

    Hey Kev, i'm on a debate page with some pro indy supporters, this was on of the responses to you're blog.

    "The blog linked in in the original post is wrong. It states that GERS figures have been published for the last 15 years. They've been published for over 30 years. Starts at financial year 1980/81. http://www.gov.scot/Resource/0038/00389859.pdf

    This was easily found out. A simple google search did the trick. If the author of the blog in the link of the original post can't get a simple fact right then I would not trust anything they publish.

    Gers figures are accurate to a point. Most of the data in it is actual figures then there are things that are classed as UK wide which is divided up by population. For instance defence. The UK defence budget is £37.4 Billion. (source http://www.theguardian.com/.../ignore-us-and-nato-cuts-in... ) Scotland will have to pay £3.1416 Billion towards this. Or perhaps more accurately Scotland will have £3.1416 Billion taken from her by Westminster to fund spending elsewhere in the UK since we can only find roughly £1.7 Billion spent on defence in Scotland. That's over £1 Billion taken from Scotland to subsidise the rUK.

    The Scottish subsidy myth is easy to disprove really.

    If, during a time of "austerity" when the Westminster government is cutting everything it can while selling off everything that isn't nailed down. Why would they want to keep a debt? Have you ever known anyone to fight so hard to keep a debt before?"

    ReplyDelete
  9. Unknown7 June 2015 at 13:27

    This comment has been removed by a blog administrator.

    ReplyDelete
  10. Kevin Hague7 June 2015 at 14:28

    Hi Alan

    As the link they provided says:
    "The illustrative geography-based oil revenues were not included in the GERS publications before the review (i.e. earlier than 2002/03)."

    ReplyDelete
  11. Kevin Hague7 June 2015 at 14:30

    As for the rest - I cover the defence argument above. This is really quite tedious

    ReplyDelete
  12. Anonymous7 June 2015 at 14:43

    Alan,

    The Barnett Formula's staying for now because the Conservatives are very happy with all the SNP MPs. If they abolish it, they're more likely to get a load of Labour MPs elected again.


    ReplyDelete
  13. Sheumais8 June 2015 at 01:49

    If I may summarise the SNP/Yes to oblivion argument against this blog, "You don't support us, so you must be wrong." I don't believe it's any more complex than that.

    When I asked an SNP party member to tell me what his party's achievements were in office, all he could offer was the abolition of bridge tolls and parking charges at most hospitals. Perhaps they might deliver something more substantial before asking Scotland to leap off a cliff again. I don't think the proliferation of energy poverty is really the way to go.

    ReplyDelete
  14. Nial8 June 2015 at 01:53

    "Have you ever known anyone to fight so hard to keep a debt before?"

    Yes, the UK government during the 'troubles' in NI.

    The financial and cost in lives (mostly English) was massive, and NI get more out
    of the 'pot' per head than anywhere else in the UK. The reason, it's what the
    majority wanted.

    Scotland's extra support is a relatively small sacrifice.

    ReplyDelete
  15. User5128 June 2015 at 02:20

    For instance defence. The UK defence budget is £37.4 Billion. (source http://www.theguardian.com/.../ignore-us-and-nato-cuts-in... ) Scotland will have to pay £3.1416 Billion towards this. Or perhaps more accurately Scotland will have £3.1416 Billion taken from her by Westminster to fund spending elsewhere in the UK since we can only find roughly £1.7 Billion spent on defence in Scotland. That's over £1 Billion taken from Scotland to subsidise the rUK.

    A lot of defence spending occurs outside the UK. If you look at RAF equipment for example, almost all the surveillance aircraft come from the US, transport and tanker aircraft are a mix of US and European, helicopters are from the US, UK and Europe. Much of the spend on the F35 will be going to the US.

    The same is true of the army, with large numbers of armoured vehicles and transport vehicles being bought from abroad.

    For the claim that defence spending is a "subsidy" to the rest of the UK, you need a breakdown of spending not just in Scotland but in the rest of the UK as well.

    This is a similar argument to the one over the BBC, where nationalists claim that the BBC should spend 8.3% of its revenue IN Scotland. That would mean the rest of the UK having to pay for the royalties to show foreign TV programmes and films, to maintain the news departments around the world, for coverage of foreign sports events like F1, the Olympics, World Cup etc.

    Any organisation with an international aspect is going to spend some of its revenue outside the UK, and nationalists need to understand that means spending IN the UK adds up to less than 100%.

    One thing that's for certain is that a lot less of an independent Scotland's military spending would be carried out in Scotland. If you look at a small country like Denmark, almost all its military equipment is imported. http://en.wikipedia.org/wiki/Equipment_of_the_Royal_Danish_Army
    http://en.wikipedia.org/wiki/Royal_Danish_Air_Force

    ReplyDelete
  16. Anonymous8 June 2015 at 10:51

    FOI request to Scottish government regarding Whisky Export Duty!

    "Dear Scottish Government,

    What is the total value of Whisky export duty raised on Scottish
    whisky exported from

    Scotland
    England
    Wales
    N Ireland
    United Kingdom

    In each of the years since 2007

    Yours faithfully,

    Agnieszka Macierewicz"

    Answer from Scottish government implying Whisky export duty exists.

    "Dear Agnieszkia



    Thank you for your enquiry in relation to Whisky Export Duty.



    Scottish Government have no locus in the collection of Whisky export Duty,
    as this is a reserved issue."

    Neil Sinclair
    Food, Drink and Rural Communities Division
    Spur B1
    Edinburgh
    EH11 3XD
    Tel: 0300 244 9280


    https://www.whatdotheyknow.com/request/whisky_export_duty#incoming-661295

    ReplyDelete
  17. Martin Sinclair8 June 2015 at 12:16

    Yes if people could stop getting GERS wrong that would be great.

    In the spirit of not getting GERS wrong when are you going to update and recalculate for the GERS figures that were published since 1980/81?

    GERS has been around for 34 years not 15

    ReplyDelete
  18. Kevin Hague8 June 2015 at 12:33

    Martin - to quote GERS directly (as I already have in comment above) "As the link they provided says:
    "The illustrative geography-based oil revenues were not included in the GERS publications before the review (i.e. earlier than 2002/03)."

    That said - as I've laud out clearly on numerous occasions in this blog there is no doubt Scotland (if you consider it "our oil") was a very significant net contributor to the UK during the 1980's.

    I think that's great - all the more reason for us not to feel any guilt or shame that we are net beneficiaries now. See that's how pooling and sharing (over time) works.

    Isn't it great?

    ReplyDelete
  19. Kevin Hague8 June 2015 at 12:45

    I think I've answered the technicality of why only 15 years (download the spreadsheet from the SG website - theres a reason its only 15 years of data)

    More generally I thought (see posts circles within circles and on oil & gas scottish tax yield) I'd been very clear we have in the past been big contributors to the UK.

    That's one of the reasons why it's kind of nuts to turn our back as oil revenues decline and our onshore deficit gap is exposed.

    My argument is a rather pragmatic one - if wd want to be independent (or fiscally autonomous) lets just recognise that right now (and for foreseeable future) it makes us worse off.

    Is all.

    ReplyDelete
  20. Martin Sinclair8 June 2015 at 13:05

    Kevin I'm genuinely interested now.

    Do you have to try to be that stupid or does it come naturally?

    Is it Scotland's oil? United Nations Convention Law of the Sea (by the way that is what is used to draw up maritime borders puts over 90% of North Sea Oil in Scottish territorial waters. So yes it is Scotland's oil.

    You have been aware of your inaccuracy and outright lie (only 15 years of GERS reports) for a few hours at least now. You have not corrected it or published an update. This is now a deliberate attempt to deceive people.

    Let's see who do I trust on Scotland's economy? A blogger or a global credit rating agency? "even excluding North Sea Output an Independent Scotland would qualify for out highest economic assessment" - Standard and Poors Feb 2014. That's a triple A rating. The UK's is only AA - whoops.

    A blogger, who has already lied and refused to correct their lie, or the FT? "an independent Scotland could expect to start with healthier state finances than the rUK" Feb 2014 - again whoops

    I found the data for 1980/81 guess where I found it? Scottish government website.

    You can't cherrypick the parts that support your argument then lie about the rest for filler. Numbers don't work like that

    ReplyDelete
  21. Kevin Hague8 June 2015 at 14:06

    Oh Martin - you really should read the comments before flying off on one.

    Fist of all to the "15 years of GERS comment": when I am back at my laptop I will happily add a not to this effect - you are I assume referring to the SNAP "EXPERIMENTAL HISTORICAL FISCAL BALANCE CALCULATIONS" which state "This note and related spreadsheet provides users with some experimental fiscal balance calculations for Scotland from 1980/81 to 2010/11, consistent with the GERS 2010/11 publication. These estimates are not National Statistics, but are suitable for illustrative purposes."

    So that data is not to the same standard as GERS and if you download the "full" GERS data (at the level of detail I us for my analyses) it only goes back 15 years. So I'm not feeling like you have exposed me as some outrageous fraud for suggesting GERS only goes back 15 years.

    I will happily (when I'm back at my pc) add a note to the main post above referencing the SNAP data and have covered in detail before that Scotland was a massive net contributor in the 1980's - that has never been in dispute.

    Take for example Circles Within Circle where I say "When the windfall gain of North Sea oil appeared in the 1980's it meant that Scotland became a massive net contributor to the UK, we more than paid our way."

    If you prefer look at Explaining the $7.6bn black-hole where you will see the (in real 2014 terms) the oil contribution back to 1980.

    So really you are getting your self in an awful stew about nothing.

    That Feb 2014 FT article is hugely out of date - was based i 12-13 GERS numbers which as my graph shows made Scotland look relatively rosy.

    All of this debate (and your faux outrage) simply reinforces my central point - it is an always has been all about the oil. So let's just be honest about that and recognise that with oil revenues reduced as they are now we would (independent or fiscally autonomous) be placing ourselves at an economic disadvantage compared to where we are sharing within the UK.

    I'm sorry my presentation of this self-evident fact upsets you so much - I suggest you have a lie down.

    ps. I run businesses, I have a wife, I have kids, I have a dog - I do this as a hobby - maybe you should consider calming the fuck down about me not updating my blog or replying to my comments within a few hours?

    ReplyDelete
  22. Kevin Hague8 June 2015 at 14:11

    Martin

    pps. I moderate the comments on this post - I can choose not to publish what you write - but I publish your comments because I think its the right thing to do - think about that before accusing me of trying to obscure the truth. Take a look at BfS and see if they publish critical comments (they don't)

    ReplyDelete
  23. Nial8 June 2015 at 14:14

    > So yes it is Scotland's oil.

    Or Shetland's oil?

    > You have been aware of your inaccuracy and outright lie

    Don't be a cock. How does the data from 15-30 years ago affect the conclusions
    about our current financial situation?

    > This is now a deliberate attempt to deceive people.

    You say you have the data.

    Where are Kevin's numbers, or the conclusions, wrong?


    "Favourite Books - Harry Potter, Lord of the Rings, Game of Thrones, The Hobbit, Alex Cross Series"

    You are obvously keen on a good fantasy.

    ReplyDelete
  24. Wilson Logan8 June 2015 at 14:53

    I had a look at the GERS statement:

    Total expenditure for the benefit of Scotland by the Scottish Government, UK Government, and all other parts of the public sector was £66.4 billion.

    It is my understanding that of that £66 billion, £46 billion pays for all Scottish expenditure in Scotland.

    Were we to be independent I'm guessing we would be spending £46 billion a year. From a revenue of £54 billion, that looks quite good. Even with 10% of UK defence at £4 billion we're still quids in.

    No ?

    ReplyDelete
  25. andy thompson8 June 2015 at 15:10

    Martin Sinclair - you really are a narrow-minded, petty, arrogant little fool.

    maybe stick to wings in future, that'll suit your non-existent debating skills.

    ReplyDelete
  26. Anonymous8 June 2015 at 15:11

    Martin - you have quoted S&P out of context. "You can't cherrypick the parts that support your argument"

    "The report also notes that while Scotland’s economic backdrop would qualify for its “highest economic assessment”, S&P would worry about the reliance of Scotland on the financial sector. Much of the industry might migrate south of the border after independence." - http://www.ft.com/cms/s/0/3866b10a-9fa8-11e3-94f3-00144feab7de.html#axzz3cViyJrBM

    Please note that "assessment" is not the same as receiving a AAA rating. The basis of any rating would have been based on currency, EU membership and inherited share of UK debt as well as the state of the economy. Given what we now know about SNP/Yes bluster on this subject any claim to AAA status is simply not credible. Away from political bluster the collapse of the oil price amply demonstrates that a AAA status would not have been forthcoming.

    Stop pedalling lies and cherrypicking.

    ReplyDelete
  27. Martin8 June 2015 at 15:26

    I'm rather saddened that another Martin is posting drivel on here :-)

    Anyway I've found the unicorn! Well, at least the mythical export duty.

    Take a look here:

    https://www.gov.uk/vat-exports-dispatches-and-supplying-goods-abroad

    "If you sell goods or services to someone in another EU country, who isn’t VAT registered, you charge VAT in the normal way. Sales to another country inside the EU are called ‘dispatches’ or ‘removals’. ‘Exports’ describes sales to a country outside the EU."

    So all an iScotland has to do is force all exporters to only export to end users, and only within the EU. Simple! Billions of pounds await! QED, Wings and BfS were right, and we're just putting Scotland down.

    Now I'm worried that saying something like this, even tongue-in-cheek, will be turned into The Truth by the committed. Oh well, you heard it here first.

    ReplyDelete
  28. Euan Carmichael8 June 2015 at 15:44

    @ Martin Sinclair, you should probably check that you've got your facts right before accusing someone of lying.

    As Anonymous said, at no point in Standard and Poor's ratings report was it suggested that an independent Scotland would achieve a triple A rating. The statement "Scotland would qualify for our highest economic assessment" means they would award Scotland an investment grade rating. There are a whole series of intermediate ratings within the investment grade band from BBB through to AAA.

    The report specifically states elsewhere that "The macroeconomic profile of the wealthy and open Scottish economy conforms with the typical profile of sovereigns rated in investment-grade categories (i.e., 'BBB-' or higher)" and also "In brief, we would expect Scotland to benefit from all the attributes of an investment-grade sovereign credit characterized by its wealthy economy (roughly the size of New Zealand's)".

    Next time, try reading the source document rather than just recycling quotes:

    http://www.scribd.com/doc/209646043/Standard-and-Poor-s-Key-Considerations-For-Rating-An-Independent-Scotland

    ReplyDelete
  29. Terry Summers9 June 2015 at 01:20

    @ Martin Sinclair
    Out of interest, I have looked at your blogs.My view of them is that whilst the verbiage is copious it is straight down the Line YES campaign press release stuff. I was tempted to leave a comment on your 'Myths about' blog but I did not want to despoil the pristine emptiness of the comments section.
    It prompted me to check all of your blogs, none of them have any comments, positive or negative.
    Does this mean that everyone who reads your blogs agrees with them but not enough to congratulate you on your acuity.
    It appears you have had more response to your writings by your criticisms of Kevin's work than you have had for your own blogging.
    Recognition at last?
    Cheers
    Terry

    ReplyDelete
  30. User5129 June 2015 at 01:34

    In reply to Wilson Logan:

    had a look at the GERS statement:

    Total expenditure for the benefit of Scotland by the Scottish Government, UK Government, and all other parts of the public sector was £66.4 billion.

    It is my understanding that of that £66 billion, £46 billion pays for all Scottish expenditure in Scotland.

    Were we to be independent I'm guessing we would be spending £46 billion a year. From a revenue of £54 billion, that looks quite good. Even with 10% of UK defence at £4 billion we're still quids in.

    No ?

    No. Central government spending on behalf of Scotland includes things an independent Scotland couldn't or wouldn't want to do without.

    For example, social security and pensions paid out to Scotland by central government come to more than £16 billion. If you cut that money the poor starve and the pensioners don't get their pensions.

    Whilst the UK government spends £3 billion on defence on Scotland's behalf, the SNP are still planning to spend £2.5 billion. That's the only major saving I've seen them identify.

    Debt interest is paid at a UK level, and that's something Scotland would be required to pay itself.

    Foreign aid and foreign affairs are paid at a UK level. I don't know whether the SNP are committed to maintaining their share of the foreign aid budget, but I can't see how a "progressive" Scotland could spend less per capita on foreign aid than a "Tory" UK.

    There are a whole host of other things funded by UK government for Scotland. Look at Table 5.8: Total Expenditure at http://www.gov.scot/Publications/2015/03/1422/8

    ReplyDelete
  31. Terry Summers9 June 2015 at 01:48

    Kevin,
    I was thinking about the 'Economic Suicide' that your MP predicts would occur if Scotland were to achieve true FFA or Independence. I wondered how Ms Sturgeon could sell this to her minions and I think I have come up with a slogan she could use.
    'Alba to Albania - Vote for FFA'. Do you think it would have the X's going into the SNP box on the ballot paper's.
    Cheers
    Terry

    ReplyDelete
  32. flash9 June 2015 at 04:50

    Martin,

    "Highest economic assessment" means in a band starting at BBB- or above it doesn't mean AAA also if you check the latest credit ratings for UK S&P AAA

    ReplyDelete
  33. Anonymous10 June 2015 at 02:20

    I'm assuming that the 80's GERS figures referred to by Martin Sinclair are the "experimental statistics" used by Prof. Brian Ashcroft (Strathclyde) to examine, much as Kevin has done, the changes in Scottish revenue and expenditure over time. See

    http://www.scottisheconomywatch.com/brian-ashcrofts-scottish/2013/07/has-scotland-already-spent-its-oil-fund.html

    and

    http://www.scottisheconomywatch.com/brian-ashcrofts-scottish/2013/04/scottish-tax-and-spend.html

    These blogs, obviously, reach the same conclusions as both Kevin and the IFS - Scotland is a net beneficiary from the Union.

    Now the first of these articles has been used by Wings Over Scotland to suggest that the UK somehow 'stole' the money from 'Scotland's' early 80s oil boom. Wings likes to quote the small section of the article that reads as follows:

    "I estimate using 19 years of Government Expenditure and Revenues Scotland (GERS) that Scotland's share of UK debt interest amounted to £83 billion at 2001-12 prices. Subtracting this from total estimated Scottish spend of £1,440 billion we get a debt interest adjusted estimate of spend of £1,357 billion. Total estimated tax revenues are £1,425 billion. This means that Scotland was in overall surplus by about £68 billion."

    By this logic, if Scotland had been independent since the oil boom, and if everything else had stayed the same (Scotland had, thanks to oil, not accrued its own debt), it would have been in surplus, by a relatively small amount. However, as Wings is prone to cherry-picking, it's important to note that the the conclusions reached in the article but these numbers in proper context. Here is the final sentence:

    "Scotland has already spent most, if not all, of its oil fund, while the possibility of creating such an oil fund in a future independent Scotland will be significantly less, unless there are major cutbacks in spending."

    In other words, Scotland hasn't quite spent it's 'oil fund', yet. Given likely oil revenues, and Scottish structural budget deficits (under FFA or Independence, but not Barnett) that £68bn is dwindling fast. Someone should do a countdown.

    ReplyDelete
  34. Anonymous10 June 2015 at 17:46

    Kevin, thank you for the excellent analysis you provide.

    I'm in awe at your stamina in dealing with the (wilfully?) clueless responses to your blog posts and on Twitter. Not biting on the abuse does you great credit and like you I'm waiting to see all your obvious errors being pointed out.

    I get the idea why people want to be independent. It feels right. But why can't they accept that the current and medium term economic impact of FFA is bleak? That's the price, and the SNP know that and that's why they are running a mile from it. Their supporters don't want to believe it and will latch on to any claptrap that validates their world view.

    Instead, there's the insidious anti WM (i.e. English) bile and intolerance of nay-sayers. Unionist is used as a pejorative term.

    I'm English by birth, raised in Scotland from 5yo and married to a Scot. After university we moved south of the border for work; 30 years have passed by and we always planned to return 'home' . Sadly that won't happen now. Independence (or FFA) will be economically ruinous; the status quo will leave a poisonous environment, stoked up by, and tolerated by, those in power.

    It truly breaks our hearts.

    ReplyDelete
  35. Dointhebiz16 November 2015 at 11:23

    "What is inaccurate about my blog - I'll correct it".

    Promise now Kev?

    http://wingsoverscotland.com/the-limitations-of-gers/#more-78061

    Looking forward to the deletion of [in fairness] what you "thought" was correct, which turned out to be utter bollocks.

    PS. I'm sure Stu will be delighted with an apology from you :)

    ReplyDelete
  36. Kevin Hague6 November 2015 at 15:45

    Sorry dointhebiz - that article actually accepts that I'm using the best available data, doesn't challenge any if the figures I use and in fact (reluctantly) goes on to start to try and deal with the inevitable conclusion.

    If there is a data error you'll need to be specific - there is none highlighted in that post

    ReplyDelete
  37. Dointhebiz17 November 2015 at 05:17

    Exactly Kev, "The best available data", but what we now know is "that data", is now - admitted - nonsense, GERS was commissioned by the then Conservative secretary in 1992 Ian Lang for the sole purpose of political advantage.

    This what he said in a leaked memo to John Major:

    "I judge this is what is needed at present in our campaign to maintain the initiative to undermine the other parties. This initiative could score against all of them".

    Which in turn makes your assessment null and void, simply by the fact that the information source [which in fairness was what you used] was already skewed.

    ReplyDelete
  38. Kevin Hague7 November 2015 at 10:57

    Oh dointhebiz my poor confused friend - if we were analysing the 1992 GERS figures you'r have a point - its 2015.

    Try readinf this - it covers the relevance of GERS and responds to Wings wild-eyed rant on the subject > Wings confusion over GERS

    ReplyDelete
  39. Dointhebiz18 November 2015 at 02:40

    Indeed Kev. I AM confused, so what - exactly - has changed since 1992? With regards to how they calculate the GERS figures then and how they calculate the GERS figures now? Did they suddenly realize, "Oops! we've been doing this all wrong, our bad", or did they just continue to calculate these figures using the same methodology? And, IF so when and why was it changed?IF - as you say - "we were analysing the 1992 GERS figures you'd have a point", then surely if nothing has changed since then, then that point remains?

    ReplyDelete
    Replies
    1. Anonymous12 March 2016 at 14:17

      2014-2015 GERS just out.
      Boy, your conspiracy theory just gets thicker and thicker.

      Did I say thicker? I meant complicated.

      Delete
  40. Unknown24 August 2016 at 04:44

    Re. inaccuracy . GERS were first published from 1992 not 1999 as stated by you .

    ReplyDelete
  41. Kevin Hague24 August 2016 at 07:05

    GERS wasn't published in this full form until 1999 - that's why all timeline data statts 1998-99 (that's for as long as consistent data is available).

    SNAP data (which I also use in my blog) goes back to 1980-81

    ReplyDelete
  42. Unknown27 August 2016 at 10:27

    Thanks for the correction .

    ReplyDelete