Sunday, 29 November 2015

The Masters of Spin

There's a remarkable piece in today's Sunday Times in which Kevin Pringle (the SNP's erstwhile spin-doctor-in-chief) admonishes us silly Scots who keep casting our eyes back, those of us who ponder the fact that we dodged a bullet by voting No in last year's Independence Referendum. He asserts simply:
pointing to glaring inconsistencies between what was said before the referendum would be the case, and what has actually happened afterwards [is] pointless and irrelevant
You've got to admire the chutzpah of a man who can write that statement. It's obvious to even the most casual observer why a cheerleader for the SNP would rather we didn't look back at the case they presented; the SNP will be seeking our vote in May 2016, so of course they'd like us to think it "pointless and irrelevant" that they tried to persuade us to vote Yes on the basis of a false prospectus.

But he doesn't leave it there. He may no longer be employed by the SNP but old habits die hard and a spin-doctor's gotta spin. So - having asserted we shouldn't - he proceeds to cast his eyes back to try and score some rather weak points around risks to HMRC jobs and orders for type-26 frigates. There's an obvious "have your cake and eat it" hypocrisy to this rhetorical ploy and both of these are far more nuanced issues than he suggests - but I don't want to get bogged down in those arguments here. I want to focus instead on the following astonishing statement:
On the back of the plummeting price of oil, Unionist parties revel in the fact that North Sea revenues are only going to be £0.1 billion next year, compared to the £6.8-7.9 billion forecast in the independence white paper.
Of course, it should be pointed out that while the Scottish government’s central assumption was for the oil price to be $110 a barrel at the time of independence, Westminster’s department of energy and climate change predicted prices of $114-127 a barrel over the same period. And the Treasury publishes a monthly summary of figures produced by independent organisations - in May 2014 none of the 22 forecasters expected oil prices to fall to current levels, and 18 expected prices to remain above $100 a barrel in 2015.
Let's put aside the childish suggestion that Unionist parties "revel" in the drop in North Sea revenues and focus on what he's doing here. The first paragraph refers to North Sea revenues, the second talks only of the oil price. He's relying on the fact that the casual reader will accept this elision, will allow North Sea revenue forecasts and oil price forecasts to be conflated into being effectively the same thing. Well they're not, as we'll come on to see.

We need to get one basic point clear first though: the UK Government relies on OBR forecasts and has done since it was established in 2010. The OBR - the Office for Budget Responsibility -  the clue is in the name. If you want to budget responsibly you can't simply ignore it. Needless to say the Scottish Government's Independence White Paper did just that - it ignored the OBR's forecasts for North Sea revenues (whilst relying on them for the base case onshore assumptions)1.

Now if you read the second paragraph of that Pringle quote quickly you might have gained the impression that the White Paper was using the same assumptions as the UK Government. What he's actually asserting is that the White Paper oil price assumption of $110 a barrel was at the low end of the DECC assumptions that existed at the time. This is correct - I pointed out as much myself a year ago in "Oil & Gas: When Will We Ever Learn" - but it's not the same price assumption as the OBR were using. In March 2013 (fully 8 months before the White Paper was published) the OBR was assuming $97 for 2016-17 (revised to $97.4 in the OBR's Dec 2013 forecast)

But there'a bigger issue here. By focusing the reader's attention on the oil price assumptions he's distracting us from the actual oil tax revenue assumption. What's often overlooked here is that it's profit from North Sea production that is taxed by HMRC2 - so to get from oil price to North Sea tax revenue you also have to make assumptions about oil production volumes, production costs (hence profitability) and of course effective tax rates. So there are a lot of other assumptions we'd have to understand before we could judge whether the White Paper was in line with "Westminster" assumptions.

Fortunately we don't need to bother ourselves with the detail, we can cut to the chase by comparing the Scottish Government's White Paper revenue forecasts with contemporaneous OBR revenue forecasts. The chart below does just that: it compares the White Paper scenarios published in November 2013 with the OBR forecasts published in March and December 2013 and March 2014 (6 months before the referendum).

There is no ambiguity here: the White Paper was never using "Westminster" assumptions for oil and gas revenues. The White Paper explained its forecasting approach thus:
"we will plan Scotland's public finances and borrowing requirement on the basis of a cautious forecast for oil and gas revenue" - page 305
You don't need the benefit of hindsight to know that those are the words of a false prospectus; the lower of two scenarios they presented was £2bn- 5bn higher than contemporaneous OBR forecasts.

That's not cautious, it's downright reckless3.

Pringle goes on to point out that nobody forecast a price crash as severe as that we've seen. As with all good spin this truthful observation invites an untruthful inference: if everybody was wrong you can't blame the SNP for being wrong. This is of course nonsense: the SNP used assumptions that were far more wrong than the OBR, at the same time as falsely asserting they were using cautious forecasts.

The fact that they presented two scenarios compounds this deceit. Anybody who understands planning knows scenarios are used to test a plan against a range of likely outcomes. Even a layman reading the White Paper would surely assume that the scenarios represent a reasonable range of probable outcomes. The authors were obviously aware of the OBR forecasts, so the only way using these scenarios could have been justified would have been if they'd labelled them  "optimistic" and "hopelessly optimistic".

The bottom line here is that the shortfall between reality and the White Paper forecasts is £6.7bn to £7.8bn a year. To put that figure in context: £3bn a year is Scotland's share of the UK's total defence budget; our total Education and Training budget is £7.6bn; £7bn is £1,300 for every man, woman and child in Scotland.  Against this figure most other arguments pale into insignificance. Let there be no doubt; if we'd voted Yes the people of Scotland would be facing far worse austerity than we are today. By choosing to continue to pool & share our resources with the rest of the UK, we dodged a bullet.

Mr Pringle and his fellow SNP cheerleaders discourage us from looking back on their false prospectus for one simple reason: if enough people look back and realise how close they came to leading us to economic disaster, they will be the ones getting the bullet come May 2016.

For completeness I've updated the graph to show how the OBR forecasts have progressed since the Referendum; nobody will be surprised to learn that they have continued their record of always turning out to have been optimistic. They were wrong, they were optimistic -  but they weren't half as optimistic as the Scottish Government.

For added giggles I thought I'd include what Wings Over Scotland's Wee Blue Book had to say4 about the prospects for oil revenues. As I concluded in Wings and His Wee Blue Book of Errors; he was very very wrong indeed.


1. The White Paper mentions the OBR 5 times:
  • page 602: explaining that OBR assumptions for UK onshore receipts have been used as the basis for projecting Scotland's
  • page 603 (twice): explaining that OBR projections used for reserved social protection spending and onshore GDP
  • page 604 and 605: explaining that the OBR projection for the total UK deficit is used for comparison purposes (which is of course inconsistent - if you choose to use a higher offshore projection for Scotland you should compare with a total UK figure using that higher projection ... but we'll let that pass).  
2. All of HMRC's North Sea revenues are based on taxes aplied to profits. Despite its name, Petroleum Revenue Tax (PRT) is a tax on profits arising from individual wells. There used to be a gross revenue royalty but that was abolished in 2002

3. The White Paper goes on to say "Production in Scottish waters could generate approximately £48 billion in tax revenue between 2012/13 and 2017/18 based on industry estimates of production and an average cash price of approximately 113 dollars per barrel" - page 510

4. On page 29 of the Wee Blue Book, having insisted that the UK government has been talking down oil (we now know the reverse was in fact true) he chooses to quote an academic who suggested "an independent Scotland's revenues in 2017-19 would be almost £32bn"


Anonymous said...

Just nit picking. white paper timescale of your graph starts several years too late?

Kevin Hague said...

That's the Year the White Paper was forecasting: 2016-17

The publication dates are in the little boxes beside each one

theambler said...

Even if the OBR was genuinely incompetent at producing its predictions, the Scottish Government is still responsible for using them as a source. If the OBR was not credible, it should not have been used in the White Paper and it was a failing of the Scottish Government if it was used. However, as we have seen, the OBR was much better at predicting oil revenue (if not price) than the Scottish Government.

The Financial Times journalist John McDermott wrote an excellent article about the White Papers oil forecasts before the referendum that is well worth reading by all.

kailyard rules said...

The price of oil will eventually go up sometime.That's the way of the market.

Scotland can be independent without it, but it is a nice wee bonus.

You are once again demonstrating you are in a desperate fankle of frustration.

Anonymous said...

Strange that the SNP are being chastised for quoting their $113 price, whilst the uk govt gave $165 we now see the price at $46...,seems the uk govt really got the facts wrong! I wonder if the J's why the debt is now sitting at £1.62t with interest payments of £1.5 a day......aye something smells but I'm sure Chokka will see some spin on that truth!

Kevin Hague said...

Good grief "anonymous" - are you unable to read?

1. where do you get that $165 assertion?
2. which UK gov oil revenue forecasts are you referring to?

Also - remember to keep breathing in and out.

Kevin Hague said...


Just because the SNP kept telling you oil was a "nice wee bonus" doesn't make it so - without it we are £9bn pa worse off than we are in the UK, so we would need savage public spending cuts.

As I've pointed out elsewhere, last time oil was at $100 we only generated £2.5bn, and tax yields have declined further since then - to think oil price recovery alone will fix the problem is hopelessly naive and betrays a lack of understanding of how the tax is raised.

Anonymous said...


@kailyard rules (and @Anonymous) - Of course Scotland can be independent without it. No-one is suggesting otherwise.

However we're facing a deficit gap of approx £9bn because of the loss of oil revenues. Answers on a postcard on how we fill this gap. Bonus points for using 'financial levers' and 'grow the economy' in your replies.

Oh, and before you suggest we borrow the £9bn, remember what you said about the UK national debt and explain how Scotland adding to its own national debt at a far higher number per-capita is actually better?

Does £9,000,000,000 a year (£1300 per person) sound like a 'wee bonus' to you? Did you read the blog at all before commenting, or is it just easier to parrot the nonsense spouted by the Yes campaign?

There's a very good reason why most are struggling to understand the facts. There are too many 'Yes' camps out there spewing nonsense in the hope to gain their favour. I've been on a few 'Yes' pages recently and had to walk away from the keyboard for fear of either ranting or insulting someone due to their obvious lack of intelligence.

The information is RIGHT THERE. Look up. Read it. Read it again. Read it until you understand the facts as they are laid out. Then ask why the information is different to what you're reading on your 'Yes' faithful pages? Do you really need it spelled out?

Stop being sheep. Assume the information you're being told is WRONG and do your own research. Failing this means you're just spreading nonsense and frankly we already have our society being dumbed-down by the Kardashians. We really don't need your contribution.

David GREEN said...

I can certainly see a spin pattern emerging from the SNP. Two days ago (i.e. before your post), I happened to come across the Andrew Neil interview in mid-October with Stewart Hosie. The interview was interesting for a couple of reasons. The first half was Neil running the loss of oil tax revenues past Hosie and its consequences for an independent Scotland's budget. Hosie attempted to confuse the issue, much in line with Pringle, talking of hypothetical problems becvause the referendum didn't say Yes. This leads me to suspect the SNP must have behind-the-scenes sessions in which it gauges the magnitude of the whoppers that the Scottish electorate will likely swallow, and how best to flossy up the lies as truth. They do an alarmingly good job! However, Hosie does appear to know the underlying facts, since he did a good impersonation of someone wriggling to avoid the economic suicide belt that is Scottish independence being strapped onto him. Destroying the history of the referendum White Paper is clearly a major current preoccupation of the SNP.

If the first half was bizarre, the second half was even more so, because Neil turned to the Scottish NHS. Now, as you know, Scottish NHS expenditure is transmitted in full by the UK government under the Barnett formula. If UK NHS expenditure goes up by 12%, so does the NHS revenue sent to Scotland. However, the SNP spends less than it receives. Of course, the SNP potentially cops the flak if the Scottish NHS fails to deliver on this reduced input. To avoid this conclusion, Hosie spent the second half of his interview explaining to Neil why the Scottish NHS had no problems. A few missed targets, but nothing serious. So, the rUK NHS has serious delivery problems, whilst Scotland is doing just fine on smaller per capita inputs and reduced efficiencies of scale due to geographical spread. How long is that one going to last?

To summarise, it appears that some people inside the SNP recognise that independence on current terms is economically suicidal. There appear to be a number of SNP strategies in play. Kick the independence ball along for 5 - 10 years in the hope that oil tax revenues will pick up. Obscure any data that makes it easy to see the economic case underpinning independence is fraudulent. And keep planning for the putsch that an independence referendum will allow.

Nick B said...

I wish it were "laughs" to include the Bath Separatist's wisdom.

The unfortunate truth is that a sizeable amount of people were persuaded by his publication to vote for separation. And still there are people who trust him ahead of the "mainstream media" and "unionist politicians". I wish we could ignore him, but it's no laughing matter.

Anonymous said...

anonymous @ 02.31. You'll have to do better than that, chum. Round here people who spout rubbish only make themselves look like the simpletons they are. To justify independence the SNP used wildly over-optimistic forecasts of a volatile commodity, in spite of much more robust figures being available to them, and against the advice of many in the industry and the political world. Those speaking reason or caution were derided as fear-mongering unionists or talking Scotland down, anything that would prevent voters from looking closely at the figures and engaging brain. The fact is, a small business takeover would have more diligent scrutiny of forecast earnings and better scenario planning than the Scottish Government put together for the fate of an entire nation. It was reckless opportunism, based on the assumption that enough people in Scotland were gullible enough to believe the SNP were acting in good faith. The SNP were not acting in good faith, but luckily the majority of people were not so gullible. Pull your nose out of the electric soup and take a long look at what a disaster you've been spared - if you can bear to have your prejudices shattered.

Jock Tamsons Bairn said...

kailyard rules said...
The price of oil will eventually go up sometime.That's the way of the market.

Scotland can be independent without it, but it is a nice wee bonus.

You are once again demonstrating you are in a desperate fankle of frustration.
Kailyard ...Are you just one of Wings worker attack Rats ?
You post here often and despite Kevins patience in trying to help you see the real picture for yourself several times now it never seems to have sunk in yet ?

Your either being deliberately obstructive or don't have the knowledge to understand the data involved here, if the latter is the case then fine it IS reasonably complicated for everyone to understand and there will be people who cannot.
If anyone is one of those who don't understand whats presented to them on this Blog i suggest you go and read the "Endorsements" tab linked here and see the list of people who say that what you read on thse pages is "Honest" and can be trusted, look at who the people are ...real economists etc and understand that THEY do understand Kevins numbers and agree totally with them

After reading those endorsements..go back to Wings and try to find the a similar list of properly qualified people in Public life putting there reputations on the line to support him ? Can't find any ? Now why would that be ? You CAN trust the numbers on this blog.
See here
One thing you won't find on this Blog anywhere is Kevin saying "we could not be Independent" but do people still following the SNP's propaganda really beleive that if Scots were asked to Vote on an Indy 2 with the clear proven knowledge that it was going to make Scotland at least (and scots) 15%-20% poorer than the rest of the remaining UK that they would actually vote for it ? Do Turkeys vote for Christmas ?

Not just would we be a proven 15%-20% worse off , with all the other issues to sort out that we would inherit (ie finding a stable and trusted currency)there would be substantial financial market unrest and potential real financial hardships in family finances with a potential currency crisis never far away could very well mean a much higher interest rate in Scotland than in RUK, this would cause businesses to put investment on hold or simply move out altogether, this really isn't scaremongering they are all "mormal" happenings in countries with unstable economies. Please don't fall back on providing "past" credit rating "quotes" as that ship has sailed and with Oil revunues having fallen so far would be assessed differently now.
(some of credit ratings being often quoted were just Nationalist propaganda spin anyway )

Here is another REAL economist's view on the White Paper and on Wings "Wee Blue Book" written just pre-Indy can trust it too

Anonymous said...

Kevin, Mr Pringle and others like to claim (falsely as you point out) that Westminster was using inaccurate forecast figures, and so somehow that makes it okay that the Scottish Government did too. They miss the very obvious point that it was not Westminster who were proposing such a drastic change to the status quo. The responsibility was entirely on the Scottish Government to seek out, test and apply only the most accurate or realistic set of forecasts on which to plan the future of a nation, if they genuinely had the interests of the Scottish people at heart. That they did not says everything about their complete lack of scruple, and reveals their claim to be the Party of Scotland as the empty sham that it is.

Anonymous said...

Kailyard Rules says: "The price of oil will eventually go up sometime. That's the way of the market".

The way of the market is that sometimes prices rise, and sometimes they fall. End of story.

Anonymous said...

There is a simple way for you to gain the credibility and approval you crave.

Submit an article containing your figures and your premise to an academic journal to be reviewed by those who know better.

If it is not accepted, let your followers know why. If it is then it will be available to be scrutinized on a platform beyond the tiny bubble of approval by those who agree with you politically.

Are you up for it or do prefer to have no REAL scrutiny of your work?

Kevin Hague said...

My dear anonymous friend this blog is widely enough read and circulated that it is heavily peer reviewed and - much as it must pain you - I therefore already have credibility. The analysis I do is frankly simple (and therefore irrefutable) and the conclusions drawn simply require a basic level of common sense to understand.

Of course if you think my work would crumble under "REAL" scrutiny, feel free ...

Anonymous said...

This is all very, very boring stuff. Most people won't give a shit.

Anonymous said...

I'm sorry Kevin but as an academic who also reviews submitted work there is a marked difference between blogs and papers accepted for publication. My speciality is Medicine but the standards are similar. Perhaps some journals are less rigorous than others but certain criteria need to be met.

It does you no favours to assume your work would of a standard acceptable for citation. There is far too much opinion.

Common sense and basic facts is all it is - and I say this as someone who likes some of your work.

You have nothing to lose and a lot to gain should you choose this path.

Anonymous said...

What self-contradictory codswallop. This is a public essay, open for scrutiny - by anyone who cares to.
Why not cast your reviewer's eye over it for errors and give us the benefit of your expert opinion?
Meanwhile, since you've set the bar high:
1.publication and citation are not the same thing.
2. Medicine is a specialty. A speciality is a restaurant's "signature dish".

Anonymous said...

Well..... if politics constipates you, just don't vote.