Let's take each of the six points in turn - this won't take long ...
As this blog has frequently highlighted, the Scottish economy's onshore revenue generation compares well with other UK regions. What the GERS figures show is that UK-wide pooling and sharing allows us to maintain a higher level of public spending than we would otherwise be able to sustain. Quite how the fact that - when oil has declined - Westminster allocates us more than our "fair share" of spending is a source of grievance escapes me.
This is a tired trope that I address in detail here (> Gers Deniers). In simple summary: the methodology has been completely overhauled since the figures were originally produced, are published now by an SNP-led Government with Scottish civil servants being willing to override the treasury's figures and who - for example - provide their own analysis of the Scottish Government's preferred definition of Scotland's geographical share of oil revenue
I've yet to see any evidence to support the bizarre accusation that the UK government "refuses" to give the Scottish Government access to relevant important data.
As for the quote from Merryn Somerset-Webb: if you read the original article (or are lucky enough to discuss it with Merryn, as I have done) you would know her substantive point was about assumptions around corporation tax allocation which - as this blog has also pointed out - can indeed be little more than guess-work. The point, of course, is that given it's the Scottish Government doing the guessing, the assumptions are more likely to be generous to Scotland than pessimistic.
For what it's worth, Merryn has quoted chokkablog's GERS and Price of Independence analysis at length in her FT column, and agrees with it.
This one's a cracker. As this blog has argued in painful detail and explained at great length, the "black-hole" (as identified by the IFS and this blog among others) is the amount by which Scotland's deficit is greater than our current share of the UK's. The deficit isn't the black-hole, the deficit gap is the black-hole. For example in 2014-15 Scotland's deficit was £14.9bn but the deficit gap (the "black hole) was roughly £8bn. See Full Fiscal Autonomy for Dummies if, like Wings, you still haven't grasped this basic concept.
GERS shows how our public finances stack up based on the revenue we currently raise (the taxes we're used to paying) and the money that we currently receive in public expenditure (yes, including reserved spending and shared UK costs). The whole point is that this is just the starting point, the run-rate, the pro-forma accounts from which anybody making the case for independence needs to build.
If this isn't clear, I address the argument in more detail here (GERS deniers)
As for the argument that a newly independent Scotland might establish its own currency or join the Euro after reneging on its share of UK debt - well it's a (to be kind) very debatable strategy, but it's not a "Fact about GERS". GERS explicitly shows our share of debt interest cost (£2.8bn in 2015-16) so anybody who believes they can argue for a debt free Scotland can easily see the theoretical debt cost saving.
This is effectively the same point as "Fact" 5 above. Nobody is arguing that things would remain the same. Those of us who argue for rational debate simply ask for those making the case for independence to actually explain coherently what the different "economic strategy" would actually be and provide a realistic assessment of how (and by how much) it would change the figures compared to those of Scotland being within the UK.
Of course to be robust, any such analysis also needs to take into account the downsides of leaving the UK, like finding and funding a currency solution and managing the impact of being on the other side of an EU/UK trade boundary.
As a parting observation: we don't know yet if a future EU/UK trade boundary will exist, but if it does and being on the UK side of it hurts our EU trade, the obvious mirror effect also applies - being on the EU side of it would hurt our UK trade - and we export four times as much to the rest of the UK than we do to the rest of the EU.
27 comments:
What the GERS figures show is that UK-wide pooling and sharing allows us to maintain a higher level of public spending than we would otherwise be able to sustain
No they don't. They tell us nothing about what we'd be able to sustain as an independent country because an independent country wouldn't have the same financial circumstances. That would depend on the independence settlement, policy choices, future revenues (including times in which Scotland's position was stronger than it is now, such as most of the past 30 years), the cost of borrowing, the outcomes of what that borrowing was used for (in terms of growth), etc etc etc etc.
Quite how the fact that - when oil has declined - Westminster allocates us more than our "fair share" of spending is a source of grievance escapes me.
Because it's not a gift. It's borrowing taken out on our behalf that we have to pay back, except we didn't get to decide what most of it was spent on.
I've yet to see any evidence to support the bizarre accusation that the UK government "refuses" to give the Scottish Government access to relevant important data.
You might learn some stuff if you visited the Cuthberts' website, in that case.
As this blog has argued in painful detail and explained at great length, the "black-hole" (as identified by the IFS and this blog among others) is the amount by which Scotland's deficit is greater than our current share of the UK's. The deficit isn't the black-hole, the deficit gap is the black-hole. For example in 2014-15 Scotland's deficit was £14.9bn but the deficit gap (the "black hole) was roughly £8bn.
Perhaps explain that to the media, who without exception issue banner headlines screaming "£15BN BLACK HOLE", not "£8bn". The media is what most people are refuting, not your small, angry and little-read blog.
The whole point is that this is just the starting point, the run-rate, the pro-forma accounts from which anybody making the case for independence needs to build.
No, it's a partial data set relating to something different - Scotland within the UK. The case for independence is built from what an independent Scotland could do. You're right that the GERS data isn't entirely useless in that respect - it has some basic utility, obviously - but it's very far short of the be-all and end-all you present it as.
As for the argument that a newly independent Scotland might establish it's own currency or join the Euro after reneging on it's share of UK debt
Your partisanship is showing (as well as your poor command of grammar). Scotland couldn't join the Euro, and its debt share, if any, would be negotiated by agreement with the rUK. It currently owns absolutely none of the UK's debt and would be legally incapable of "reneging" on it. It might or might not agree to take some part of it on during negotiations in return for other considerations, but it cannot "renege" on an obligation it doesn't have.
Your one-eyed approach also ignores the fact that the debate is now about an independent Scotland within the EU versus a UK Scotland outside the EU, which is a massive game-changer that you essentially choose to ignore because it makes your position extremely awkward to maintain. (Your only reference to the EU is one which paints Brexit as bad for an independent Scotland.)
It really is remarkable that anyone listens to you. You have an obsession with both Wings Over Scotland and GERS that acts like an entire fairground hall of mirrors on your "analysis". Meanwhile you're about to be dragged out of the EU against your will but all you can do is rant about the Nats.
It really does show how poor at present the independence argument is, that stu from Bath is their main source of info.
Wings over Scotland is a Saint compared to 2015-16 GERS!
How does one make the deficit look smaller than it actually is?
Easy to do in GERS
Change from a financial year to a calendar year (which hides the fall in oil revenue figures in Q4 of 2015-16
Great analysis as usual, it's a wonder people believe this stuff but I suppose once you get stuck on a viewpoint you seek anything that will confirm your views.
Hi Kevin,
'GERS explicitly shows our share of debt interest cost (£2.8bn in 2015-16)'
Excuse my ignorance here but what about the actual capital repayments?
Thanks
John H
Dee
a. They don't "tell us nothing" - that's just daft - we're all agreed its he base from which we'd build
b. we get allocated borrowing on a per capita basis so any spend above our per capita share is (to use your terminology) a "gift" - so your point here is flat wrong (unless you think we should start being hypothecated debt based on our actual contribution to the deficit?)
c. I've read all the Cuthbert's have written - you are clearly appallingly out of date
d. bless your naivety if you think walking away from our share of debt would have no consequences (I agree we couldn't join the Euro without massive concessions from EU and austerity-max commitments from Scotland). Ive been clear all along that Brexit is bad for Scotland (worse than from the UK) - read more of my blogs, I was responding here to Stu's rant. I have frequently made the point that if EU/UK trade barriers exist, we'd hurt more being on the EU side of that than the UK side because our UK trade is 4x our EU ...
I notice you don't offer a currency solution
e. Weird you take the time to post on my blog then - but if you read it more deeply you'd see I tackle the EU question in a more thorough way than your rather glib "dragged out against our will" mantra
try > The certainty of Independence and > Brexit and the Case for Scottish Independence for starters
John H
There aren't any (at least net there aren't) as our debt increases by the deficit amount
Kevin,
I have a question that I would like clarified. I was under the impression that although the Scottish Government does not actually keep the 'oil money', I thought Scotland received roughly 90% of the revenue via the Barnett Formula, or is this incorrect?
Thanks in advance.
@kevverage I think you misunderstand "Key Fact 4".
What W*nks over Scotland is saying here - I think - is an argument which amounts to "almost all governments run deficits to invest for growth, so Scotland is no different"
Which of course glosses over the issue, which is how much the deficit is. There's a difference between a deficit of £100 and £100 billion which W*nks doesn't want you to think about too hard.
There is also the new cybernat "argument" here - I think - that Scotland's deficit is less than England's - which is accurate on a purely quantitive basis.
in response to Dee Nyer re debt...
I always find it remarkably naive when I hear nationalists say we should walk away from the debt. They should think about how this might pan out.
It would take c2 years (probably more) from a Yes vote to the independence date. If we say we walk away from the debt then why would Westminster provide any funding above the tax revenues collected to Scotland. So for 2 years we get £15bn immediate reduction in our funding. Westminster tells the SG to go and borrow this £15bn a year for those 2 years. The money markets would flay us or just not bother to provide the funding.
And for those who say this wouldn't happen then reverse the situation. If England were leaving and wanted us to assume additional debt until they walked away from it completely would we be happy to pick up the tab. Madness
Genuine question, Kevin: given that oil revenue cannot fall any further and non-oil revenue increased by just under £2bn last year, does that not suggest a brighter future for Scotland's finances?
i.e. if we can maintain increases in revenue of this order, the "Black Hole" would disappear in 4 years. I realise there are other factors which make it unlikely that it would be quite so quick (e.g. a reduction in the rUK deficit) but am I wrong in seeing this as a good sign?
Dee, you make some useful points in your post....if you lost the angry invective your questions and observations might advance the discussion.
Kev, excellent summary as usual. Thank you for spending the time to illuminate the minefield of macroeconomic analysis for those of us unconvinced by the nationalist narrative.
Kevin
I welcome the continued efforts of yourself, Neil Lovatt and Fraser Whyte (amongst others) in debunking Nationalist myths and spin. All you're doing here is instead presenting our own esteemed government's numbers in an attempt to get an honest, informed debate instead of the ludicrously optimistic, risk-free, baseless nonsense peddled by the bullshit brigade.
I would place Scottish separatists on a spectrum:
1) Those that accept the numbers as being a reasonably close starting point, and accept the reality it implies. That is, there would need to be significant spending cuts and tax rises in the early years of independence, and a reduction in our living standards for probably a generation. They think it will be worth it.
2) Those that accept the numbers, but then dismiss the implied reality by saying "but we'll do things differently", without thinking this through and without ever providing sensible, verifiable evidence that this on it's own will avoid the need for austerity on steroids.
3) Those that accept the numbers, but then say things will be different on independence as we will avoid this cost or get these hidden taxes etc etc, you know the hoary old myths they genuinely believe
4) Those that dismiss the numbers as being tools of the Tories/Wastemonster etc, completely unreliable and utterly useless.
I respect those that fall into 1), that's a genuine, honest position that I just disagree with.
Those that fall into 2) and 3) are just being utterly misled and have no idea what would follow a vote for independence.
Those that fall into 4) - well I cannot respect them. They are dangerous and if they get their way, it will cost us all. I suspect this category includes Dee Nyer.
People listen to him because his pieces are well researched, and more importantly sourced. Your post is just made up of pitiful excuses.
Dee Nyer.. Gers tell us nothing about the finances of an independent Scotland..? Why was the white paper created using Gers figures..?
Do you want the figures dumped and fantasy figures made up based on unicorn utopia economics instead? No doubt create by say Business for Scotland.
"Your one-eyed approach also ignores the fact that the debate is now about an independent Scotland within the EU versus a UK Scotland outside the EU, which is a massive game-changer that you essentially choose to ignore because it makes your position extremely awkward to maintain"
While your one-eyed approach assumes that an Independent Scotland will instantly enter the EU.. no doubt without taking the Euro or having to obey all the fiscal rules that have been brought in. No doubt Sweden will then send all their women to Scotland as a welcoming gift.. Of course we could also look at Spain's current position on Scotland as a sign of things to come. Guess you are one of the people who wants to leave the UK to become the EU's Northern bitch.
@RichardA, it's worse than that.
the RUK is the target for much of Scotland's exports. If Scotland simply abandoned it's share of the debt - even without thinking about anything else that would happen consequentially (all these threats assume there is no possibility of retaliatory action !) - the English especially would be very very fed up.
This would do wonders for the consumption of Scottish products, Scottish tourism etc. Rather like during the Falklands where Argentinian products weren't popular.
According to the GERS figures
Scotland had the highest growth then rUK on the following:
Scotland (rUK)
4.61% (4.46%) VAT
27.99% (27.85%)Capital Gains Tax
3.54%(3.29%)Income Tax
3.64% (2.42%)Alchol Duties
15.53% (15.31%)Climate Change Levy
25.24% (24.92%)Insurance Premium Tax
21.62% (21.23%)Betting & Gaming
5.52% (2.89%)Council Tax
1.73% (1.72%)Fuel Duties
Welcome to the world of fantasy GERS figures
Source
Table 1.4 Current Revenue Scotland and UK GERS 2015-16
@PaulR, and @RichardA. To add, constitutionally the exact terms and conditions of separation would have to be negotiated and agreed with the UK, including share of debt. Scotland cannot simply dictate the terms it wants, and if terms are not mutually agreed independence doesn't happen - it remains in Westminster's gift, unless Scotland intends to go the UDI route (which has its own special collection of downsides). IMO in those negotiations Scotland, having burned its bridges and effectively then being committed to gaining independence at any cost, would have no fall-back or compromise to adopt and so be in an extremely weak negotiating position.
rocoham
What a disappointingly weak and brittle response.
we're all agreed its he base from which we'd build
Who's "we"? I certainly don't agree with any such thing. I'd want an independent Scotland to have some fundamentally different policy positions and I believe it would.
unless you think we should start being hypothecated debt based on our actual contribution to the deficit?
As opposed to paying for other people's debt that we didn't take out and saw no benefit from? Yes please.
I notice you don't offer a currency solution
I didn't know I was being asked for one. There are numerous options with various pros and cons. You can find expert support for any of them, eg sterlingisation or a pegged Scots £. I don't profess to be expert enough to know which is best.
walking away from our share of debt
So you're just going to disingenously misrepresent the point - namely that any debt share would be AGREED by negotiation between Scotland and the rUK and so nobody would be "reneging" on anything - in order to twist it into one that suits your argument better? Okay. As I see that's also your approach on the "black hole" point I shan't waste any more of your time, and I already regret wasting mine. Bye.
@Dee_Nyer
Oh dear - that all fell apart quite quickly didn't it?
If you think an independent Scotland wouldn't start from here - that this tax and spend base isn't what your "fundamentally different policy decisions" would start acting on - then I give up.
I'll leave it to others to judge if you have succeeded in presenting a cogent response to the points raised in this blog
A few years ago, when I had the time and the inclination, I had a look at regional expenditure v tax revenue across the UK and that confirmed there is only one part of the UK that does not receive more allocated spending than it raises in taxation. The tendency of the media to treat England as if it is one whole unit ignores that only the South East, inevitably, raises surplus revenue. The lazy journalistic approach also ignores the substantial land mass and dispersed population of Scotland, allowed for by Barnett in his original assessment. That may not be of much interest or relevance to those who only wish to discuss "independence", but it is most certainly relevant in reply to anyone suggesting Scotland should live within its means, such as the Daily Telegraph.
" Sheumais said...
A few years ago, when I had the time and the inclination, I had a look at regional expenditure v tax revenue across the UK and that confirmed there is only one part of the UK that does not receive more allocated spending than it raises in taxation."
really?
According to the SNP Government
London + South East + East of England had a budget surplus
Source snp government
Country and Regional Comparisons GERS 2014-15
http://www.gov.scot/Topics/Statistics/Browse/Economy/GERS/RelatedAreas/NUTS12016
I must be a real dummy- please explain your response to "key fact 4"
I clearly haven't grasped this at all
I thought our black hole of a deficit was £14.9 billion but you are saying it is actually only £8bn- wouldn't the SNP be shouting this figure as the real black hole from the roof tops if it were the case or they could get away with saying so?
John
The SNP pretend people mean the whole deficit so they can say "everybody has a deficit" rather than dealing withe the actual issue
Some lazy journos also quote the deficit as a "black-hole" but I always pick them up on it when I spot it.
The "black-hole" on 2015-16 GERS is £9 - 9.5bn as detailed here > GERS 2015-16 Analysis ... the principle is explained most clearly here (with older numbers) > FFA For Dummies
No because revenue vis increasing in rUK (as is spending) so the 'black hole' or deficit gap with rUK remains the same.
"I've yet to see any evidence to support the bizarre accusation that the UK government "refuses" to give the Scottish Government access to relevant important data"
SNP Economist Margaret Custbert actually states here that she was given free access to all the "Books" and that all the UK Gov agencies were in fact very helpful to Her. https://www.scottishparliament.tv/meeting/economy-jobs-and-fair-work-committee-september-19-2017?clip_start=11:07:40&clip_end=12:05:33
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