Wednesday, 6 April 2016

It's Time For An Apology

During last week’s live TV leaders’ debate, Nicola Sturgeon had the opportunity to question Scottish Labour leader Kezia Dugdale.  This was a chance to highlight the defining policy differences between the SNP and Labour, to establish the terms of the election debate. The finest minds in the SNP will have agonised over how best to use this opportunity, the question will have been endlessly discussed and carefully rehearsed.

So what was the defining opening question? Our First Minister suggested that the Scottish Labour leader should “apologise” for “standing arm-in-arm with the Tories” during the independence referendum, that this somehow made Labour responsible for the Tories “cutting budgets, penalising the vulnerable”.1  It’s hard to imagine a clearer illustration of the SNP’s single-issue focused, narrow-minded aversion to grown-up politics.

During the independence referendum, two political parties were willing to put generations of bitter rivalry to one side to campaign for something they both believed to be right. They agreed on an important issue, like grown-ups sometimes do. In the eyes of the SNP it appears this is something to be embarrassed about, something to apologise for. Apparently, if you agree with another party on anything that means you must agree with them on everything.  You’ll hear more sophisticated arguments in the school playground.

The suggestion that Labour are somehow responsible for Tory budget cuts as a result of campaigning together for a No vote is simply laughable. The fact that Labour (and the Liberal Democrats) agreed with the Tories on an issue as fundamental as Scotland remaining in the United Kingdom doesn’t make them responsible for the current Tory government, any more than the SNP standing for Westminster seats does. You don’t have to agree with Scottish Labour’s tax proposals to recognise that they offer a real alternative to Tory spending cuts.

The SNP themselves could choose to avoid “cutting budgets, penalising the vulnerable” through increasing the tax burden on those Scots who are in a position to afford it.  Scottish Labour, the Liberal Democrats and (to a more dramatic extent) the Greens all propose to do this, but the SNP don’t. The boldest proposal the SNP can muster is to not pass on a tax cut which would, for example, change the effective tax rate of somebody earning £100,000 a year by just 0.3%. This would translate into only £120m additional Scottish revenue next year, equivalent to less than 0.2% of total Scottish public spending.2

The party that offers to pass on the highest proportion of Tory spending cuts is the SNP, because they are the ones offering to do the least to prevent them through tax increases. On this basis the SNP are more responsible for penalising the vulnerable than any of the opposition parties.

Of course the SNP didn't want us to be here, they campaigned for a Yes vote. The latest Government Expenditure and Revenue Scotland (GERS) figures show that, had we voted Yes, Scotland would have started negotiating its independent life based on figures showing a deficit of £14.9 billion or 9.7% of GDP. That’s a bigger deficit than any EU country and twice as large as that we currently share within the UK. It’s now clear that the inevitable result of a Yes vote would have been far more severe cuts than those we're currently experiencing.3

In this context it’s worth reminding ourselves what the Independence White Paper (“Scotland’s Future: Your Guide to an Independent Scotland”) had to say on the matter: “On independence in 2016, Scotland’s estimated financial position will continue to be healthier than the UK as a whole. We will set out on a firm financial footing”.4

This statement has been shown to be flat wrong. Those who suggested at the time that this was an unjustifiable assertion were accused of “talking Scotland down”. Now it seems they’re expected to apologise for campaigning to avoid the economic trauma a Yes vote would have caused.

If we’re asking people to apologise for anything about the Independence Referendum, let's look at the oil revenue forecasts that were used to back up false assertions like the one above.

It's a matter of public record that the White Paper used two scenarios for oil revenues that were £2.5 billion and £4.0 billion a year higher than the Office for Budget Responsibility (OBR) were forecasting at that time. This isn’t hindsight, this is comparing forecasts that existed when the White Paper was being written.5 The SNP attempt to bluster over this by talking about oil price forecasts rather than oil tax revenue forecasts, but these are very different things6.

Given that the OBR have maintained a track-record of always being optimistic on oil revenue forecasts, the Scottish Government presented scenarios which at the time could have been fairly labelled “very optimistic” and “hopelessly optimistic”.

Which brings us back to the question of apologies and who should be apologising for what?

Those who campaigned for a Yes vote based on a set of hopelessly optimistic financial projections were responsible for placing the vulnerable at risk. Those who are too timid to make meaningful use of our tax powers are responsible for passing on Tory spending cuts.

Rather than demanding apologies, maybe it's time our First Minister considered offering a few.


This article appeared in the Daily Record on April 7, 2016


1. STV Leader's Debate ("Scotland Debates"), 29/03/2016 from 50:30
“Kezia, the last time you did a TV debate in this room was in the referendum. On that occasion you were in a [spits] team [/spits] with Ruth Davidson helping to ensure that Scotland was stuck with a Tory government we didn’t vote for. Now that you know what the Tories are doing to Scotland, cutting budgets, penalising the vulnerable, do you understand why people across Scotland are so angry with Labour? Do you regret your alliance with the Tories and will you take the opportunity tonight to apologise for it?”
Dugdale: [starts to respond]

Sturgeon [interrupting]:
“Do you regret standing arm-in-arm with the Tories?”

2.  BBC News Report on SNP Tax plans, 29/03/2016
In 2017-18 the SNP propose to increase the 40% tax threshold to £43,387 instead of £45,000 as will happen in the rest of the UK. This means for anybody earning over £45,000, £1,613 of their income will be taxed at 40% instead of 20% if we simply followed the UK's policy. This translates into £323 pa. of saving not passed on.

3. The Price of Independence, 24/03/2016

4. White Paper  page 4.

5. Oil Revenue Forecasts
  • The OBR March 2013 report (p.110) showed total UK oil and gas revenue forecast for 2016-17 of £4.8bn
  • Scotland doesn't get 100% of that figure - over the last decade Scotland's geographic share has ranged from 80% - 90% so Scottish revenue forecast for 2016-17 would be £3.8bn to £4.3bn
  • The White Paper was published in November 2013 and the only oil revenue forecasts included were for the year 2016-17 (p.75)
    • £6.8n was the low scenario: that's 57% to 77%, £2.5bn to £3.0bn higher than the OBR. This is the low scenario and it's more than £2.5bn higher than the OBR (than the OBR who had a track record of only ever being optimistic)
    • £7.9bn was the high scenario: that's 83% to 105%, £3.6bn to £4.0bn higher than the OBR
  • So the White Paper only included scenarios that were 50% to 100% (£2.5 to £4.0bn) higher than the OBR were forecasting at the time
6. Oil Revenue vs Oil Price
Oil tax revenues are generated by a tax levied on production profit. Production profit is driven partly by the dollar oil price but also by the sterling dollar exchange rate, actual extraction costs and total production volumes.  It’s possible to make identical assumptions about the oil price but reach dramatically different conclusions as to the amount of tax revenue that would result. The Scottish Government may have used similar price forecasts to the OBR but, given they produced vastly larger revenue forecasts, they must have been far more optimistic about exchange rates, extraction costs and/or production volumes.