More spending occurs in Scotland than tax revenues raised by Scotland.
In fact, more money is spent in Scotland than the sum of tax revenues raised by Scotland plus Scotland's per capita share of the UK's overall deficit (i.e. there is a fiscal transfer in Scotland's favour after allowing for Scotland's share of the increase in UK debt).
Both the statements above are true even before taking into consideration Scotland's share of defence costs, international aid and debt interest.
It is simply not true to argue that Westminster "keeps" any of Scotland's tax revenues
A grievance persistently pushed by nationalists on social media is that "Westminster keeps" a chunk of Scotland's tax revenues - if you've been directed to this blog post, you may even have joined this merry gang yourself
The numbers tend to differ because the people who make such claims tend not to be too interested in actual figures or data audit-trails, but the theme is consistent. For the purposes of illustration let me take one example that appeared in my timeline yesterday and quickly garnered over 1,000 likes1
I'll use the format of the above tweet to walk through the actual figures, always with reference to Scottish Government's GERS figures for 2018/19 . These are figures compiled by Scottish Government economists in St Andrews House and which qualify as National Statistics. In all cases I will reference page and table numbers from this latest GERS report.
"We raise £63bn" - This is correct
Scotland (including a full geographic share of oil revenues) raised £62.7bn of revenue in 2018/19 [p4. Table S.3]
"We keep £35bn" - This is incorrect
It's clear this figure is meant to be spending Scotland controls, because the other figures are money Westminster "keeps" or "Spends [..] on our behalf".
The correct figure is therefore £44.7bn, this being money spent by "Scottish Government, LAs and Public Corporations" [p33, Table 3.8]
"Westminster keeps £28bn [and] spends a further £12bn on our behalf" - This is also incorrect
The balance of spending allocated to Scotland that is spent by "Other UK Government" (aka Reserved spending) is in fact £30.6bn [p33, Table 3.8]
Sanity check opportunity: above we've accounted for £62.7bn of revenue and £75.3bn [£44.7bn + £30.6bn] of expenditure - that explains a deficit of £12.6bn which was indeed the GERS deficit in 2018/19 [p2. Table S.1]
So we now have the correct figure for the attempted grievance: the £12.6bn GERS deficit includes £30.6bn spent by "other UK Government" on Scotland's behalf (aka "Reserved Expenditure").
Sanity check opportunity: "Devolved expenditure including housing benefit" [p45, Table 4.8] is shown as £44.7bn "before Scotland Acts 2012 and 2016" - this is consistent with our £44.7bn figure above, hence our £30.6bn "Other UK Government Spending" is what is also referred to as "Reserved Spending" (being that spending which is not devolved). Table 4.8 shows that, of currently Reserved expenditure, an additional £3.1bn will be devolved once these Acts are fully enforced - all of this £3.1bn is related to additional powers over Social protection, as detailed on p43, Table 4.6
All we need to do now is understand how that £30.6bn is spent and we can decide how aggrieved to feel.
I'll run through the detail at the foot of this blog, but of that £30.6bn Reserved Expenditure:
£20.0bn is spent in and for Scotland, largely on Social Protection, but also Transport, Research Grants, Tax Credits etc.
£2.9bn is spent for Scotland on things like DWP, HMRC, the BBC and Nuclear decommissioning costs which also involve spending in Scotland. While £0.1bn less than BBC expenditure allocated for Scotland is actually spent in Scotland, the reverse is true in the case of Nuclear Decommissioning costs and very likely the case for DWP and HMRC costs as well. Scotland gets the "fiscal multiplier" benefit of this spending already and would still need to fund delivery of these services if independent.
Pause for breath: At this point we have explained Scotland raising £62.7bn, having £44.7bn of Devolved Spending and receiving a further £22.9bn of Reserved Spending spent in Scotland - so that's £4.9bn more spent in Scotland than raised in Scotland. Scotland's population share of the UK's deficit is just £1.9bn, so we're already receiving an effective fiscal transfer of £3.0bn by this point
£3.6bn is Public Sector Debt Interest - the SNP's own Sustainable Growth Commission accepted the principle that an independent Scotland would need to service this debt
£3.2bn is Defence Spending - in the most recent year this was 1.8% of Scottish GDP, compared with the NATO member target of 2.0%. Trident is likely to be responsible for just £0.2bn of this figure and of course some of that £3.2bn is spent in Scotland.
£0.9bn is International Services (basically Foreign Aid) and again: the SNP's own Sustainable Growth Commission accepted the principle of maintaining this expenditure.
Check this all adds up: we'd got to a £4.9bn deficit, now we've explained the remaining £7.7bn that gets us to the correct £12.6bn GERS deficit
So people can have a bun-fight about what these figures would look like for an independent Scotland, but it's simply nonsensical to suggest that under current arrangements Westminster in any way "keeps" any of the tax money Scotland raises.
More is spent in Scotland than Scotland raises in taxes and the big sums that are spent for but not in Scotland are (with the possible exception of some defence spending) costs that an independent Scotland would still expect to incur.
Addendum: I have now analysed in more detail how much reserved spending takes place in Scotland, and the answer is over £24 billion [see Addendum 2 here]
The Bad News
To do this properly you need to go through the GERS Supplementary Data: Detailed Expenditure Database. For each of the line-items in Table 3.8 you can see there the detail broken down as per the UK Government Country and Regional Analysis (CRA) Categories - you'll be surfing a database with 4,225 rows. In each case you can then see which items of expenditure are considered "Identifiable" (that is expenditure that can be clearly allocated to Scotland as having been spent for the benefit of Scotland) and which are not (aka "ID" vs "Non-ID"). Just because expenditure is considered "Identifiable" doesn't mean that expenditure is necessarily spent in Scotland - but you can then email the Chief Economic Adviser to the Scottish Government and ask for some help.
The Good News
I've already done this so can now summarise it for you.
The full audit-trail is only available for 2017-18 (because of the timing of CRA data and GERS data publications) - but fortunately Reserved Expenditure in 2017-18 was £30.7bn, so almost identical to the most recent year.
Of that £30.7bn, £20.1bn is considered Identifiable (spent for the benefit of Scotland):
£17.4bn = Social Protection (Pensions, Tax Credits, Allowances and Benefits)
£1.1bn = Transport (mainly Network Rail expenditure in Scotland)
£0.5bn = Science & Technology (Renewable Heat Incentive and various Research Council grants)
£0.4bn = Enterprise & Economic Development (mainly Tax Reliefs & Tax Credits)
£0.2m = Employment Policies (Department of Work & Pensions)
£0.5bn = Other (Lottery Grants, Medical Research Council, NERC, etc. etc.)
But what about expenses that are included in this £20.1bn of "Identifiable" expenditure that people might challenge as being "fair" or "appropriate" to allocate to Scotland? Well I've been through the detail and I'm used to the examples most often raised, so let's cover them off here. Of that £20.1bn considered "Identifiable" expenditure for Scotland, the following costs are not spent in Scotland:
£57m = High Speed 2 (based on Scotland's expected share of the economic benefit)
£35m = House of Commons and House of Lords
That's it - if you don't believe me go and look for yourself. So frankly those costs are no more than a rounding error: we can say with confidence that £20bn of Reserved Expenditure is considered as Identifable expenditure for Scotland and is money spent directly in Scotland.
So where does that get us to?
Revenue Raised = £62.7bn
Devolved Expenditure = £44.7bn
Reserved Expenditure For and In Scotland = £20.1bn
So at this point Scotland has a deficit of £2.1bn - so where does the other £10.5bn of deficit come from?
The big figures are well known - these are UK costs that are allocated to Scotland on the basis of Scotland's population share:
Public Sector Debt Interest = £3.6bn
International Services = £0.9bn (almost entirely Foreign Aid)
Defence Expenditure = £3.2bn
The first two figures were accepted by the SNP's own Sustainable Growth Commission, who proposed an annual "Solidarity Payment" to be paid to rUK by an independent Scotland of £5bn pa. They explained this £5bn pa as being: "debt servicing contributions, 0.7% of GNP for Foreign Aid and a further £1bn set aside for shared services"2.
The defence expenditure figure works out as 1.9% of GDP (1.8% in 2018-19) which should be compared with the 2.0% target expenditure level for NATO members. A common refrain at this point is "but Nukes" or "what about Trident" - well there are plenty of debates to be had there, but focusing purely on the economics: the annual cost of Trident included in this defence expenditure figure for Scotland is likely to be just £0.2bn3.
Of course Scotland could choose to spend less on defence - maybe choose not be a NATO member - those arguing the case for independence are free to make their case for what that £3.2bn cost would be replaced by in an iScotland.
The SNP's Growth Commission was clear that an iScotland would service its population share of UK debt (while trying to build credibility on the international stage and preparing to launch its own currency) and would continue to be a provider of foreign aid. But again: those arguing the case for independenec are free to make alternative arguments.
So what are we left to make up the "other" £2.8bn of non-identifiable expenditure allocated to Scotland in GERS?
£0.5bn = Social Protection: This is DWP benefit delivery and what appears to be some legacy pension costs - as my colleague @staylorish has pointed out before, 12.4% of DWP employees are in Scotland, so there is probably more DWP benefit delivery cost spent in Scotland than allocated to Scotland (based on population share in GERS)
£0.5bn = Public and Common Services: this includes £299m of HMRC costs and - again as @staylorish points out - 14.2% of HMRC employees are in Scotland so again probably more HMRC cost is spent in Scotland than allocated to Scotland (based on population share in GERS). The £0.5bn figure also includes c.£0.2bn of Cabinet Office, DfID etc. costs.
Mea culpa: the 12.4% and 14.2% figures above are incorrect. They form no part of the analytical audit trail, but were wrongly used to illustrate my point that "probably more is spent in Scotland than allocated to scotland" in those areas. This is hardly a material issue, but I care about getting things right, so here we go:
As Sam Taylor points out in the thread I link to above, he made a (quickly corrected) error in his intitial calculation which I mistakenly quoted - he has subsequently updated the analysis anyway (see here) and the correct figures for share of employees are DWP 10.3% and HMRC 11.7%.
In both cases these percentatge are still materially greater than 8.2% (the population share of the non-Identifiable elements of these costs allocated to Scotland in GERS) so I think my "probably more is spent in Scotland than allocated to scotland" point still stands - but I'm happy to hold my hands up, admit to the error on those specifc figures and offer the correct figures here - it's what I've always said I'll do if an error is spotted on Chokkablog,
In addition, some confusion seems to have arisen because at this point I am discussing the non-identifable element of DWP benefit delivery costs, which are as I correctly say allocated on a population share basis. In GERS there are also identifiable DWP benefit delivery costs (as shown in the first of the back-up tables below) of which 10.3% are allocated to Scotland in GERS. This means that of all DWP benefit delivery costs (ID and non-ID), Scotland is allocated an 8.98% share.
I accept that my slip above did overstate the share of DWP and HMRC FTEs in Scotland and could have led a careless reader to believe that all DWP delivery costs are allocated on a population share basis.
Somebody got very excited on Twitter about this, claiming that spotting this slip was "sufficient to defeat your point". This is like dancing on the head of a pin while steel girders are falling about your ears, but for those who might not have grasped the materiality here;
£0.3bn = Recreation, Culture and Religion: this includes £0.3bn for BBC of which £0.2bn is spent in Scoltand
£0.2bn = Environment Protection: mainly £197m allocated Nuclear decommissioning costs - in fact £57m more than that is spent in Scotland [GERS Table A.6]
£0.7bn = Accounting adjustments - this is just technical stuff to get the figures in comparable format with other National Statistics
£0.2bn = EU Transactions - let's not go there
£0.4bn = "Other" - I'm getting tired and bored of this, so see the tables below if you have the enthusiasm to chase this detail down futher (I have and can assure you there's nothing exciting to see)
The following tables back-up each rows of the table above based on querying the GERS supplementary expenditure database - column headings are Total, ID and non-ID:
NOTES
1. I replied with a brief thread explaining why that tweet (which had been retweeted by high profile campaigners for Scottish independence including at least 1 SNP MP) was wrong - it has since been deleted so I am not including the twitter handle in the screen cap
2. Sustainable Growth Commission report, p37, 3.139
3. According to Full Fact, the annual running cost of Trident is c.£2bn, of which Scotland's population share would be just £0.2bn
****
The Painful Detail, for the super-keen
The Bad News
To do this properly you need to go through the GERS Supplementary Data: Detailed Expenditure Database. For each of the line-items in Table 3.8 you can see there the detail broken down as per the UK Government Country and Regional Analysis (CRA) Categories - you'll be surfing a database with 4,225 rows. In each case you can then see which items of expenditure are considered "Identifiable" (that is expenditure that can be clearly allocated to Scotland as having been spent for the benefit of Scotland) and which are not (aka "ID" vs "Non-ID"). Just because expenditure is considered "Identifiable" doesn't mean that expenditure is necessarily spent in Scotland - but you can then email the Chief Economic Adviser to the Scottish Government and ask for some help.
The Good News
I've already done this so can now summarise it for you.
The full audit-trail is only available for 2017-18 (because of the timing of CRA data and GERS data publications) - but fortunately Reserved Expenditure in 2017-18 was £30.7bn, so almost identical to the most recent year.
Of that £30.7bn, £20.1bn is considered Identifiable (spent for the benefit of Scotland):
£17.4bn = Social Protection (Pensions, Tax Credits, Allowances and Benefits)
£1.1bn = Transport (mainly Network Rail expenditure in Scotland)
£0.5bn = Science & Technology (Renewable Heat Incentive and various Research Council grants)
£0.4bn = Enterprise & Economic Development (mainly Tax Reliefs & Tax Credits)
£0.2m = Employment Policies (Department of Work & Pensions)
£0.5bn = Other (Lottery Grants, Medical Research Council, NERC, etc. etc.)
But what about expenses that are included in this £20.1bn of "Identifiable" expenditure that people might challenge as being "fair" or "appropriate" to allocate to Scotland? Well I've been through the detail and I'm used to the examples most often raised, so let's cover them off here. Of that £20.1bn considered "Identifiable" expenditure for Scotland, the following costs are not spent in Scotland:
£57m = High Speed 2 (based on Scotland's expected share of the economic benefit)
£35m = House of Commons and House of Lords
That's it - if you don't believe me go and look for yourself. So frankly those costs are no more than a rounding error: we can say with confidence that £20bn of Reserved Expenditure is considered as Identifable expenditure for Scotland and is money spent directly in Scotland.
So where does that get us to?
Revenue Raised = £62.7bn
Devolved Expenditure = £44.7bn
Reserved Expenditure For and In Scotland = £20.1bn
So at this point Scotland has a deficit of £2.1bn - so where does the other £10.5bn of deficit come from?
The big figures are well known - these are UK costs that are allocated to Scotland on the basis of Scotland's population share:
Public Sector Debt Interest = £3.6bn
International Services = £0.9bn (almost entirely Foreign Aid)
Defence Expenditure = £3.2bn
The first two figures were accepted by the SNP's own Sustainable Growth Commission, who proposed an annual "Solidarity Payment" to be paid to rUK by an independent Scotland of £5bn pa. They explained this £5bn pa as being: "debt servicing contributions, 0.7% of GNP for Foreign Aid and a further £1bn set aside for shared services"2.
The defence expenditure figure works out as 1.9% of GDP (1.8% in 2018-19) which should be compared with the 2.0% target expenditure level for NATO members. A common refrain at this point is "but Nukes" or "what about Trident" - well there are plenty of debates to be had there, but focusing purely on the economics: the annual cost of Trident included in this defence expenditure figure for Scotland is likely to be just £0.2bn3.
Of course Scotland could choose to spend less on defence - maybe choose not be a NATO member - those arguing the case for independence are free to make their case for what that £3.2bn cost would be replaced by in an iScotland.
The SNP's Growth Commission was clear that an iScotland would service its population share of UK debt (while trying to build credibility on the international stage and preparing to launch its own currency) and would continue to be a provider of foreign aid. But again: those arguing the case for independenec are free to make alternative arguments.
So what are we left to make up the "other" £2.8bn of non-identifiable expenditure allocated to Scotland in GERS?
£0.5bn = Social Protection: This is DWP benefit delivery and what appears to be some legacy pension costs - as my colleague @staylorish has pointed out before, 12.4% of DWP employees are in Scotland, so there is probably more DWP benefit delivery cost spent in Scotland than allocated to Scotland (based on population share in GERS)
£0.5bn = Public and Common Services: this includes £299m of HMRC costs and - again as @staylorish points out - 14.2% of HMRC employees are in Scotland so again probably more HMRC cost is spent in Scotland than allocated to Scotland (based on population share in GERS). The £0.5bn figure also includes c.£0.2bn of Cabinet Office, DfID etc. costs.
** Correction / Clarification **
Mea culpa: the 12.4% and 14.2% figures above are incorrect. They form no part of the analytical audit trail, but were wrongly used to illustrate my point that "probably more is spent in Scotland than allocated to scotland" in those areas. This is hardly a material issue, but I care about getting things right, so here we go:
As Sam Taylor points out in the thread I link to above, he made a (quickly corrected) error in his intitial calculation which I mistakenly quoted - he has subsequently updated the analysis anyway (see here) and the correct figures for share of employees are DWP 10.3% and HMRC 11.7%.
In both cases these percentatge are still materially greater than 8.2% (the population share of the non-Identifiable elements of these costs allocated to Scotland in GERS) so I think my "probably more is spent in Scotland than allocated to scotland" point still stands - but I'm happy to hold my hands up, admit to the error on those specifc figures and offer the correct figures here - it's what I've always said I'll do if an error is spotted on Chokkablog,
In addition, some confusion seems to have arisen because at this point I am discussing the non-identifable element of DWP benefit delivery costs, which are as I correctly say allocated on a population share basis. In GERS there are also identifiable DWP benefit delivery costs (as shown in the first of the back-up tables below) of which 10.3% are allocated to Scotland in GERS. This means that of all DWP benefit delivery costs (ID and non-ID), Scotland is allocated an 8.98% share.
I accept that my slip above did overstate the share of DWP and HMRC FTEs in Scotland and could have led a careless reader to believe that all DWP delivery costs are allocated on a population share basis.
Somebody got very excited on Twitter about this, claiming that spotting this slip was "sufficient to defeat your point". This is like dancing on the head of a pin while steel girders are falling about your ears, but for those who might not have grasped the materiality here;
- The difference between 8.2% (the non-ID allocation) and the 9.0% (the total of ID and non-ID allocation) for DWP delivery costs being discussed here is just £21m
- The point still stands that a greater proportion of HMRC and DWP employees are in Scotland than the share of HMRC and DWP costs allocated to Scotland in GERS
- Before considering any of these non-ID costs, per the audit-trail above Scotland is already receiving £2.0bn more in expenditure than it "sends to Westminster"
- The "we send more to Westminster than we get back" nonsense involves ignoring £20.0bn of Identifiable expenditure and all non-identifiable expenditure - even if the above observations don't convince you that "there is probably more DWP benefit delivery cost spent in Scotland than allocated to Scotland", nobody can credibly argue that none of these cost are spent in Scotland
£0.3bn = Recreation, Culture and Religion: this includes £0.3bn for BBC of which £0.2bn is spent in Scoltand
£0.2bn = Environment Protection: mainly £197m allocated Nuclear decommissioning costs - in fact £57m more than that is spent in Scotland [GERS Table A.6]
£0.7bn = Accounting adjustments - this is just technical stuff to get the figures in comparable format with other National Statistics
£0.2bn = EU Transactions - let's not go there
£0.4bn = "Other" - I'm getting tired and bored of this, so see the tables below if you have the enthusiasm to chase this detail down futher (I have and can assure you there's nothing exciting to see)
The following tables back-up each rows of the table above based on querying the GERS supplementary expenditure database - column headings are Total, ID and non-ID:
NOTES
1. I replied with a brief thread explaining why that tweet (which had been retweeted by high profile campaigners for Scottish independence including at least 1 SNP MP) was wrong - it has since been deleted so I am not including the twitter handle in the screen cap
2. Sustainable Growth Commission report, p37, 3.139
3. According to Full Fact, the annual running cost of Trident is c.£2bn, of which Scotland's population share would be just £0.2bn
90 comments:
be the video of Mhairi Black thats been deleted where she in fact is telling a full audience that Gers is made up by westminster.
I think the point that you miss is that at the very least you need to recognise is that the money spent by WM (however much it might be - ie I dont necessarily accept your calculations - but lets allow that to pass) is not being spent necessarily as the Scottish electorate would have it spent. What do I mean? Well this. At WM there is a Tory majority of 80, having won 345 seats in England or just under 65% of the seats in England. In Scotland they won 6 of 59 or just over 8%. The money retained at Westminster is therefore spent in ways that may not be approved of by the Scottish electorate. For instance - while the present government haven't really had time to get going yet - would the Scottish electorate approve of the Bedroom Tax, the rape clause or Universal Credit? The problem with numbers Mr Hague - they don't tell the whole story.
Fantastic piece of work again , lots of effort and patience required. Thanks
"You can lead a Horse to Water but you can't make it drink..
........You can also lead a Nationalist to Data but can you make them think ?
SNP themselves have had control and design of GERS since 2007 when they were elected to Scot Gov , you can see all the current and previous SNP's own design's for GERS from present day back to 2007 here on the Scot Gov Website on the "Methodology" link.
https://www2.gov.scot/Topics/Statistics/Browse/Economy/GERS/Methodology
There is also a validation on GERS data made by Margaret Cuthbert the SNP's own long serving Nationalist Economist on the Scottish Parliaments TV Archive. https://www.scottishparliament.tv/meeting/economy-jobs-and-fair-work-committee-september-19-2017?clip_start=11:07:40&clip_end=12:05:33
hi “soccer doc” my perpetually anonymous friend
1. i have never suggested numbers tell the whole story - it just seems reasonable to me that if people are going to make arguments with numbers (see the set-up to this blog) then they should get them right, is all
2. if you want to read some of the wider arguments against separation, i encourage you to visit www.these-islands.co.uk
3. it’s wonderful that the three examples you choose where you assert that the Scottish electorate may make different choices are all examples where the Scottish Government - through their benefit top-up powers - already has the ability to make different choices (which is kind of awkward, isn’t it?)
Kevin, will you take it as constructive criticism if I say this was too long and techie for most people to understand?
I got lost very soon after "We raise £63bn - this is correct"
In contrast to the longer discourse, I took much more away from your recent tweet "Westminster spends our money on things we don't want, you say. What, like pensions?"
I say these things in the knowledge that I'm a lawyer (retired) and occasionaly write about legal things. I think I'm keeping them super simple but I know I lose most people after a line or two.
Tweeting's a fantastic discipline for forcing one to keep it short and to the point. Of course, there's also scope for added comment you can't do even in a thread of tweets. But, considering your heft in these matters, could I suggest you consider perhaps having a parallel blog which strips it down to as simple as "If I have four bananas and give my friend three of them, that doesn't mean what I'm left with is a plum." sort of thing?
I imagine you'll find this comment massively dispiriting. Sorry.
I did however love the line "... we can decide how aggrieved to feel." I have saved that up to tweet myself!
Thanks for the opportunity to comment.
Neil
I’m sure you know this, but the white paper advocated for maintaining defence spending at £3billion, or 2% GDP. The trope that an iScotland would save money cause it would not be spending money on nukes is irrelevant because the white paper is clear we’d just spend it on something else related to “defence”.
Kevin,
You say that £20 Billion is spent on social protection.
Table 3.1 here....
https://www.gov.scot/publications/government-expenditure-revenue-scotland-gers/pages/5/
...has that as £24.126 Billion.
?
FOI request confirming £45 billion spend by Scottish government, councils and public bodies
https://www.whatdotheyknow.com/request/gers_2018_19_devolved_expenditur#incoming-1434948
of the so called £18bn difference 'sent to Westminster' - £2bn can be deducted as it never left Scotland and was handed over to taxpayers as working tax credits.
Why do Scotland and Wales still send so many MPs to Westminster when they have their own assembly or parliament. How are the "excess" MPs justified or paid for? Would be interested to see how a similar sum would work for Wales? Not saying we should not become independent just that we should make an informed decision.
Excellent blog clear to the point. Thank you
An excellent article and one Nichola Sturgeon found so uncomfortable to answer in the A Neill interview.
A great post as ever- I occasionally blog myself and know how long these things take- especially if it involves any numbers. Thanks for taking the time to spell it out in the detail you do. It continues to be really striking to me how many independence supporters name call us as close minded, cowardly and erroneous, whilst apparently lacking the courage to face head on the reality of the fiscal position, and dismissing careful work such as yours without even bothering to read the smallest part of it. I checked the tweets this morning and found another batch of the usual nonsense.
The important point is that any vision for a progressive, fair and inclusive society that treats its citizens with equal concern and equal respect, must have as its basis the tax base and spending power to deliver decent public services. At present, it’s crystal clear an independent Scotland couldn’t provide public services at any remotely like the level people expect
from David Foss
Thanks for all the hard work. I have been trying to find this info for the last two years.
Hi Kevin, very interesting blog which I am just about getting to grips with. I would assume that these figures change each year and over the life of the Union, surpluses and deficits and could do so in the future.
Can you explain do your figures account for VAT? After the 2014 Referendum I understood only 50% of revenues raised in Scotland are retained, I assume that this is part of the money that "comes back" to Scotland. A bit like the argument over Brexit where it was claimed the EU money was actually "our money". It maybe insignificant in your figures, and may not, I am just curious.
The only other thing I will say at this point is 7bn or 12bn is no longer a lot of money, and should not deter Scotland from Independence only encourage it, that is not a lot to raise in todays world, you can disagree if you like. The reason I say is not a lot of money is that the UK government is seriously contemplating a train track of "plus" 100bn, an amount that is truly scary on one project and dwarf the 80bn or so required to run Scotland based on your analysis.
Of course you should take action against defamatory comment's , its the fact they get away with it is the reason they continue to do it , the more they get away with the more they escalate it and after a while they think they are completely untouchable.
Twitter is supposed to have a policy to deal with these sort of people.
Other people should be reporting those defamatory comments when they see them too.
no Neil not dispiriting at all - i take the view that lengthy and detailed blogs like these provide the “intellectual scaffolding” to support simple, pithy assertions like the tweets you mention - but this back-up is needed, it’s the scaffolding that supports the arguments we can build
when i say “ £20.0bn is spent in and for Scotland, largely on Social Protection, but also Transport, Research Grants, Tax Credits etc” i’m taking about the *reserved* expenditure - table 3.1 is both *reserved* AND *devolved* expenditure on Social Protection - see Box 3.1 for a (slightly confusing) split and see the table 3.8 page 33 (as referenced in the blog) for the split of that £24.1bn between reserved (aka “Other UK Government) and devolved
Just brilliant. Thank you.
Excellent piece of reading (work) it might make some of those SNP blinkered hellbent on independence sit up and take note . It beats me how they think that this Country could survive on it's own considering the amount of money it would take to run it . When you consider the amount of people that contribute in taxes etc in Scotland I dont think the sums would add up. Just to mention 2 things that are constantly brought to our attention. Oil and the revenue from it excuse me but it's not our oil and the forward motion is to go green and to that end the revenue that is gained from oil would all but disappear?? The Submarine base housing nuclear weapons for defence of the realm and Scotland might I add . Do they think for a minute if it was removed from our soil along with the loss of jobs etc it would safeguard Scotland from God forbid an external Nuclear attack on the UK in general . These are but 2 general points to consider and there are a lot of other financial issues that would come to the fore. Just a thought
John McDade said ...22 December 2019 at 07:28
''''The only other thing I will say at this point is 7bn or 12bn is no longer a lot of money, and should not deter Scotland from Independence only encourage it, that is not a lot to raise in todays world, you can disagree if you like. The reason I say is not a lot of money is that the UK government is seriously contemplating a train track of "plus" 100bn...., an amount that is truly scary on one project and dwarf the 80bn or so required to run Scotland based on your analysis.
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First John is that your Train line comparison is quite wrong, Investment in infrastructure comes from the Capital account budget and are "one off" investment project payments that are only made when they can be afforded while the "£7bn or £12bn" amount relates to the Current account budget and is an annual recurrent cost required every year ad finitum , its also not money that could not be spent if Scotland wants to even just keep the same Public Services as we have right now inside the UK (and without even any small improvements at all). So while "£7bn or £12bn is no longer a lot of money" for the UK population of 65 million to raise it IS a very lot of money for a Scottish population of 5 million to raise every single year. Perhaps it would be easier for you to quantify this amount if it was put into perspective that it would be approx. 16% Additional Taxes ON TOP of what Scots pay already, or a cut in Scottish Public Services of 14% (Cuts of about 3 times higher than Tory Austerity) or a combination of the two. You can see these numbers mentioned here https://youtu.be/9GeCRM37EkA?t=9 and also in some depth explained here including "growing the Scottish economy " to fill the spending shortfall which by using the SNP's own provided numbers in the White Paper would take a period of more than 120 years. https://youtu.be/-5jbRjoC3ak?list=PL-7OVl8SEba2KyZQc5Jkw8XuhfRTtrL3k&t=101
You say that 7 or 12 billion pounds may be a lot of money for Scotland's population of 5 million. This is one good reason for Scotland to have powers over it's own immigration rules so that we can increase our population and grow our economy.
Is there any analysis into true geographic share of North sea oil as the vast majority would be in IScotland waters?
Also any analysis into miss appropriated good that are actually produced in Scotland labeled as english exports as they leave from English ports?
Thanks.
https://twitter.com/kevverage/status/1209020730551214082?ref_src=twsrc%5Etfw%7Ctwcamp%5Eembeddedtimeline%7Ctwterm%5Eprofile%3Akevverage%7Ctwcon%5Etimelinechrome&ref_url=http%3A%2F%2Fchokkablog.blogspot.com%2F
Someone on Twitter should show Alan Johnson @Crantara that the SNP's own Economist Cuthbert says GERS are sound numbers and that she spent 10 years checking them and was given free access to any data she wanted to check ...in Her own words. https://www.scottishparliament.tv/meeting/economy-jobs-and-fair-work-committee-september-19-2017?clip_start=11:07:40&clip_end=12:05:33
On the “true geographic share of North sea oil” question: yes such an analysis exists - it’s how the “geographic share of oil revenues” figure is arrived at by Scottish Government economists and it’s the figure used above - that’s why i said “including a full geographic share of oil revenues”.
Why would you post a question like this when the answer is right there in the blog?
As to your second question re exports from English ports - firstly that makes no sense on the context of fiscal accounts (exports don’t generate tax revenues directly, so there is no export accounting involved in compiling GERS - secondly: when Scot Gov do report export figures (see ESS) they are based on end customer location not route or port of location, so the “English ports” argument is irrelevant in any case
In response to anonymous, The money for the train track will be added to debt and then we take a share of that. This will be on top of all rest of the over the top spending we now have no control over. Our "share" of the deficit can only get larger as long as the UK government spends the way they intend to do.
Kevin's figures look at Scotland only and lack a comparison with what is going on in England, Wales and Northern Ireland and possibly elsewhere in the world. e.g. Is there a deficit within the UK and if so what is driving this deficit? What can Scotland do about this, inside or outside the UK? Does it have the power or are we subject to decisions we cannot influence?
I would add the South Wales line upgrade at a mere £0.5m was cancelled for a plus £100bn project in North England. The decision seems less to do with improving infrastructure and more to do with buying votes. Wales are powerless to overturn this decision, and this simply cannot be right.
ps I still say £7bn-12bn is not a lot in todays money, again comparisons around the world might show this in terms of budgets and surplus/deficits. It is also a sorry state if after three hundred years we are in this position.
I agree with Isabelle Newlands on the immigration point, and would add we need inward investment from outside the UK, and from within Scotland, to improve this position. I should also add that a deficit of £7bn on £63bn raised is currently 90% of spend (at £12bn 84%). So what is the UK going to do from now on to balance this? I don't think it can or will, in fact the opposite is likely to happen in the short to medium term.
I would like to thank you Kevin for posting my comments as obviously I am in opposition to your views and the views held by your blog, but I do appreciate the difficulty in compiling an article such as this, it is good but in my opioion not the full story...
i have done a lot of work comparing with England and rUK - spending in Scotland is £1,700 per head higher than rUK and that’s why Scotland has a deficit *gap* to the rest of the UK of over £10bn — that’s not the deficit for Scotland, it’s the amount over an above our per capita share of the UK’s deficit that Scotland contributes, so that’s *after* our population share of UK debt
I’m afraid you’ve fundamental misunderstood what’s going on here - too much to explain in a comment her me but can i direct you to this (which i wrote and which has been reviewed and endorsed by senior economists) > https://www.these-islands.co.uk/publications/i311/gc_9_making_the_case_for_union.aspx
this comment makes no sense to me: what on earth does deficit is “currently 90% of spend” mean?
23 December 2019 at 02:47 Unknown said...Is there any analysis into true geographic share of North sea oil as the vast majority would be in IScotland waters?
Also any analysis into miss appropriated good that are actually produced in Scotland labeled as english exports as they leave from English ports?
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Kevin perhaps misinterpreted your question so here is my answer.
1: Scotland already gets FULL true 100% Geographical share of North Sea Revenues (both Oil AND Gas) you can find this description yourself on page 42 of the Scot Gov's own Methodology Document for GERS itself , you will need to open this link and scroll down to find the relevant page 42 https://www2.gov.scot/Resource/0054/00548138.pdf
2: For info on Exports via English Ports you can get this information again from the Scottish Governments own Website , see the questions and answers here (It clearly says Scotland gets credited with the correct Export Taxes no matter what Port in the UK that goods leave from, English or otherwise) https://www2.gov.scot/Topics/Statistics/Browse/Economy/Exports/ESSFAQ#_How_does_ESS
22 December 2019 at 17:14 Isabelle Newlands said...
"You say that 7 or 12 billion pounds may be a lot of money for Scotland's population of 5 million. This is one good reason for Scotland to have powers over it's own immigration rules so that we can increase our population and grow our economy."
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Scotland's existing population is 5 million. The number of immigrants required to make a difference to Scotland's economy is 500,000 (0.5 million) ie about One tenth of the whole Scottish population , have you considered how much that amount of immigration would actually change Scotland culturally ? What would it do to the prices of Houses and to the employment prospects and indeed overall life prospects of young native Scots trying to get a foot on the employment and housing ladders in Scotland itself to be able to make lives of their own ? Have you ever considered these things or is it just simpler to parrot SNP propaganda without actually properly considering the eventual overall outcome and effects ? https://www.independent.co.uk/news/uk/politics/independent-scotland-would-need-500000-immigrants-to-balance-workers-and-pensioners-says-treasury-9430082.html
23 December 2019 at 10:58 John McDade said...
I should also add that a deficit of £7bn on £63bn raised is currently 90% of spend (at £12bn 84%). So what is the UK going to do from now on to balance this? I don't think it can or will, in fact the opposite is likely to happen in the short to medium term. "
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I presume you mean the imbalance of the budget between taxes raised and spending ? You seem to be missing the obvious point that Scotland has a Devolved Government responsible for Governing Scotland that could choose to cut spending on Public Services anytime it likes or to raise taxes anytime it likes to balance that budget ? You could consider perhaps why the SNP doesn't choose to do any of those things before you Vote for Independence , it might be because the Scottish electorate would not like it at all and Vote the SNP out of power.
Maybe I have looked at this quite simply but if we raise £63bn and we have a deficit of £7bn then we are spending £70bn. 63/70 is...
I don't think Isabelle or myself is saying one solution will solve everything. I'll also brush over the right wing fear mongering and ignore the SNP Propaganda slur as you try to make your point. I'll have a look at your article.
However, I do have a horrible feeling Christmas is going to be taken up digging out and reading my old economics books, I am bit (understatement) rusty.
I am interested though in the context of Scotland and the rest of the UK, individually and collectively and for that matter any other comparable nations in the world. How this gap will be closed for Scotland and the rest of the UK
I am also interested in whether you accept that only 50% of VAT is retained in Scotland, in other words 50% of VAT is kept by the HMRC. And whether you accept, given that, the claim that not all tax raised in Scotland is spent in Scotland is correct.
500,000 immigrants into Scotland would be a disaster. Firstly where would these immigrants who could contribute to our wealth suddenly appear from? The cost to put these people into homes etc and not disrupt the Scottish culture would be immense so the net benefit of bringing these immigrants in would be a negative. The health service could not cope with them or indeed education and policing. Allowing 500,000 immigrants into Scotland would spell disaster. A great article Kevin but sadly the Nationalists are not interested in the truth. SNP said in 2014 that it would cost £200m to set up our Independent Country. We are sue to the incompetence of SNP about to spend more than this figure on two ferries. SNP figures never add up. Since we have increased the tax levels in Scotland SNP have failed by a huge margin to hit the expected income and will once again require the UK to help again. What would happen in the Indy Country. Apart from the figures that Kevin explains the hard facts are that there is no desire by the majority of Scotland to gain Independence. Until this changes the debate should not even be happening. To claim that the majority of seats won (which boundaries have a massive effect on) is any reason to claim a mandate is utter nonsense. Until SNP are able to claim at least 60% of votes over all the matter should be closed and they get on with the job of running the country. If they were that good and carried this out well I am sure their vote share would increase. Even then not all would choose for Scotland to be Independent.
I need to ask a question when you say things like 'UK-wide pooling and sharing' and then refer to an amount. Is this a figure that will only be available as a UK amount and you then proportion it by population?
John & Isabelle. If the the deficit in Scotland is caused by additional spending per head, what happens if immigration causes an increase in Scotland's population? What happens to water, energy requirements? (increase). What happens to pollution & waste?(increase).. Immigration therefore is not necessarily the answer
The Scottish deficit is due to spending per head. Immigration could therefore make things no better..
it’s simply a description of what happens because Scotland only assumes a population. share of the UK’s deficit (via population share of UK debt servicing costs) - so if we contribute more to the deficit than our share of it we pay for, the difference is the fiscal transfer.
If you like, think about it as agreeing to split the restaurant bill and then your meal turns out to have cost more than the average
again you’re very confused i’m afraid
the GERS figures attribute 100% of VAT raised in Scotland to Scotland - what you’re looking at is the 50% VAT attribution that is used to adjust the blog grant so that going forwards Scotland would see 50% of the benefit of growing VAT revenues (and no longer “pool & share” that figure with rUK)
but again: 100% of VAT raised in Scotland is attributed to Scotland in these GERS figures (obviously)
Anonymous @ 23 December 2019 at 15:48
You wrote:
"2: For info on Exports via English Ports you can get this information again from the Scottish Governments own Website , see the questions and answers here (It clearly says Scotland gets credited with the correct Export Taxes no matter what Port in the UK that goods leave from, English or otherwise)
https://www2.gov.scot/Topics/Statistics/Browse/Economy/Exports/ESSFAQ#_How_does_ESS"
Having read this link supplied by you there appears to be no mention whatsoever of these so-called 'export taxes' to which you refer. I am unaware that there is actually a UK export tax on anything at all (which is of course why Duty Free shopping is so popular at airports). There may be Import Duties imposed at the other end, but they are of no concern to HMRC, the Scottish government or anyone else apart from the foreign customs and tax authorities (and please don't be so daft to suggest that these are somehow 'owed' to Scotland).
If you are aware of a single export tax could you educate the readers of this blog? I have a distinct feeling that that the export taxes, whisky or otherwise, so beloved by Scottish Nationalist supporters are as mythical as the unicorn and yeti. Even supposing they did exist then surely Scottish independence would mean that they had to be applied to future exports to the rest of the UK, encouraging British purchasers to seek to buy from sensible countries that do not impose them. This would seriously undermine the Scots export market south of the border.
Tell me where I am wrong. I await your answer with burning interest.
Anonymous I agree. That is why I focused on the total cost 63bn raised 7bn deficit so 70bn Spend. So why when I say 7bn is a small amount you immediately respond saying that would be xxx per person in Scotland make the link to population.
Closing that gap is nothing to do with how many population and more to do with reducing costs and finding investment, and that is not a huge amount to find. I am emboldened, very positive by the prospect, encouraged so why aren't you?
Hi Martin, that is why I said not the only answer.
To Anonymous
according to GERS. whisky consumed in the UK is subject to VAT and alcohol duty. This is assigned to Scotland on the basis of how much is consumed in Scotland. Whisky which is exported does not generate UK VAT or alcohol duty. There is no export duty in the UK
In an independent Scotland, yes 'could' be, but we can at this point only speculate, it would seem counter productive and I could see the Welsh turning of the taps from some of their valley reservoirs. More likely we will end up with some common interest trade/defence etc agreement which is where we should have been in the first place.
Reading this information is quite informative. In many cases costs are 'pooled' in anonymised figures we cannot see what that means, the 'public good' they say and I suspect in items like defence we will never know. Then their is 'apportionment' which appears to be in many cases 'population' not very well thought out that. As someone who has encountered this in business pooled cost and apportionment was like gravy to meat and hides a load of evils.
From what I can gather, and I could be wrong the UK is operating a deficit of about £30-£35bn (please correct if I am wrong) no deficit is good but Scotland's does not deter me in the current climate. The question should be what is the UK going to do to bring this down or does it accept it is OK, If Scotland decides that is not good enough then it should engage and if necessary cede.
the UK’s deficit is £23.5bn or 1.1% of GDP [Table S.1 in GERS, not a hard figure to find tbh) - it has been reduced by austerity (alternative approaches could have been taken) and is now well within manageable levels - and as Scots within the union we share that deficit, so as Scots we enjoy the benefits of a stable currency and public spending that is possible when the deficit it that low — what GERS shows is is that (if revenue stayed as it is and we continued to spend as much as we do, including spending that is managed by Westminster, all detailed in this blog) a stand-alone Scotland’s deficit would currently be 7% - the EU define the excessive deficit threshold as being 3% - if we “wanted to do something” about the GERS deficit we could reduce public spending by 15% or so; but as long as we pool and share within the UK we don’t need to - THAT’S THE WHOLE POINT
I don’t know how you have the patience. And why do so many of your critics choose anonymity? Thank you so much for performing an invaluable public service. If you didn’t exist we would have to try and invent you. The problem seems to be that we are dealing with a faith based belief that is impervious to reason. Let’s just hope that they don’t manage to ruin the country that we live in.
As an independentista I'm perfectly happy to accept your figures. What I don't accept however is that a Government with virtually zero representation in Scotland and without consultation, should make decisions on Scotland's behalf. You seem to believe that without the so called 'fiscal transfer' Scotland would struggle to make ends meet. This argument is exploded when we look at the small, independent countries surrounding Scotland that are not only surviving but thriving, e.g. Ireland, Denmark and Norway. None of these countries has any benefits of resources, civic processes or education that would give them any inherent advantage. So my question to you is, if them, why not us?
No need to shout!
The whole point is that we have to take a share of "pooled costs" which we may have no oversight or ability to influence the spend. You cannot argue saving in Scotland 'controllable' and leave the uncontrollable which probably amounts to £35-£40bn of the cost. That I suspect is where the real 'savings' would come from.
Austerity only masks the UK's problem here. The problem you have highlighted is not just a Scottish problem it is a UK and an England problem. The problem here is the population, if you have to serve a population of plus £60m you have to fund those costs. How do we as the UK do this, why is the UK a 'large advanced economy' Oil. How are those costs apportioned in GERS I doubt the are apportioned by geographical waters probably by population why because it is easy for eminent economists to agree to it. What happens when it runs out? Well Scotland will be in a better position one because they haven't got used to the money in the first place as it funds mainly England but what of England they have to serve the costs of a huge population and that won't be easy.
Merry Christmas, Kevin
oh for heaven’s sake - i hesitate to publish your comment because its incoherence is frankly embarrassing - but i know you’d object if if didn’t so .... let me highlight just two things you say which prove you have no idea at all what is going on here:
1. “ Oil. How are those costs apportioned in GERS I doubt the are apportioned by geographical waters probably by population” - i mean not only is it extremely clear in GERS that oil *is* apportioned by geographical share, i also make that very clear in the text of this blog - so why do you “doubt” what is clearly and explicitly the case?
2. you say “Scotland will be in a better position one because they haven’t got used to the money in the first place as it finds mainly England [and then some incoherent waffle]” - well that just demonstrates that you either haven’t read or certainly haven’t taken the time to understand this blog - it makes very clear that we have “got used to” spending which is far greater than the taxes we raise
You’re taking the time to post multiple incoherent comments on this blog but not taking the time to either read the blog or - god forbid - read and understand how GERS is compiled. So, frankly, this is getting ridiculous. and for the record: unless your next comment demonstrates some level of understanding of what you’re talking about, i will not publish it
thank you - but for the avoidance of doubt: these are not my figures, they’re the Scottish Government’s
I’m afraid you can’t accept these figures and then say the “argument is exploded” by then simply ignoring the unavoidable implications of those figures and waving airily at some other countries.
Funnily enough that was the starting point if the SNP’s own Sustainable Growth Commission and - guess what - when they looked at the actual numbers the concluded (even with frankly hopelessly optimistic assumptions) that Scotland would “struggle to make ends meet” without at least another decade of austerity
So what about the assets ?
You have done a terrible job talking about the liabilities and ignored the assets completely ?
Government budget deficit = private sector surplus to the penny but you have not even mentioned it ?
The UK does the tax collection across the UK. Scotland is nothing more than a glorified county council. If you did the accounts for North Yorks County Council you would find it too has a 'deficit' that is filled by the block grant and whatever 'borrowing' HM Treasury permits.
so the leakage out of the arbitrary line of the Scottish border within the Sterling currency zone is to anywhere else in the world (including the rest of the UK) - and the rest of the UK saves a lot of Sterling. That leakage, plus any net savings within Scotland, is what causes the Scottish government sector deficit.
Ultimately in the same way that Greece needs to tax German savers, Scotland needs to tax UK savers. To have the power to do that you need UK savers saving in Scotland's currency which the Scottish government can control and if need be tax. Otherwise Scotland will run out of money as it all drains to the rest of the UK.
You have not even mentioned that leakage ?
So who holds the private sector surplus ?
Scottish households and Scottish businesses or rest of the world including rest of the UK households and businesses ?
You have no idea and that is what happens when you only see one side of the balance sheet.
Foreigners save your currency if they want to sell you more things than they want to buy from you. The floating rate would make sure that
export+foreign savings = imports in terms of the Scottish currency.
You can tax it because it is the Scottish currency, and therefore to transfer it to anywhere where it is anything other than inert it would have to go through banks that are licensed by the Scottish authorities to deal in that currency. They will do as they are told if they want to retain their licence.
Oil is a hug red herring. An enormous canard. It becomes important because although all the dealings are essentially in US dollars and most of the balance sheet is in US dollars, when it is reported in the national accounts it is declared in the reporting currency - which is the Scottish currency. So it's an accounting trick mostly to make the figures look 'good' superficially. The actual Scottish effect is just the fraction of the oil income that has to be physically exchanged for the Scottish currency - to pay staff, suppliers and of course the licence fee and other taxation for the resource.
Spending only comes back if you have your own currency. If you use somebody else's then it leaks into a different banking system. Greece spending ends up under the control of the Bundesbank. Similarly Scottish spending ends up under the control of the Bank of England, which is owned and directed by the UK government. As long as that arrangement stays in place, Scotland is owned and directed by the UK government - like any other county council.
That is the key issue with fixed exchange rates. You end up with control of the money under some other entity which you have to follow the directions of.
If Scotland became independent then what happens depends upon whether it floats its own currency or not. That is the only way to ensure that Scottish money doesn't leak anywhere. What the size of the government deficit is will still depend upon how many people want to net save in that currency.
You have not even mentioned it because you only see the liability side of the balance sheet.
why would i mention that in a blog post that is explicitly focused on rebutting the specific and oft-repeated claim that “Westminster keeps our taxes”?
you seems to be confusing balance sheet items (assets and liabilities) with those required to understand our fiscal P&L
if i’ve “done a terrible job” of summarising the Scottish Government’s GERS figures (which also ignore assets by the way, because they do know the difference between a balance sheet and a P&L) then i’m sure you can highlight what in the blog post that you’re replying to have i got wrong or misrepresented in any way?
I’m note sure if you’re the same anonymous poster as the previous comment (why so coy?) but you appear to also be confused between balance sheet, money supply and fiscal accounts - and frankly given that’s the starting point i can’t see there’s much value in me engaging with your exceptionally confused comment (other than to suggest you contact the office of ten Chief Economist to the Scottish Government to let them know you’ve spotted a massive flaw in their understanding of our fiscal accounts - i’m sure you’ll be hailed as a hero of the Scottish independence movement)
again a comment confusing what this blog post is about (our fiscal accounts, as presented in GERS and which show the claim that “Westminster keeps our taxes” is bullshit) with a completely different discussion about currency and money supply.
Not only are you mahoosively off-topic, i’m afraid you’re also just wrong - you confuse the fiscal deficit (which this post is about) with the current account deficit (which it isn’t)
To aid your understanding of the difference between the two, i heartily recommend you read this > https://www.these-islands.co.uk/publications/i330/choose_your_poison_the_snps_currency_headache.aspx
The Indy at all costs brigade has left you 2 open goals.
a) A faux independence
b) A different shade of faux independence via EFTA
EFTA is all you are going to hear about in the future. They think that is the solution to escaping the EU fiscal rules, 2 pack, 6 pack, stability and growth pact, excessive debt procedure and corrective arm when they sign up to the single market.
You can't see the open goals you have right in front of you because of your love for the government budget constraint’ (GBC), That does not exist in the real world.
That is a tragedy.
All of us have to Stop the SNP with their heart of Europe nonsense.
1. Will trap Scotland in a fiscal and monetary prison
2. Have Scotland crawling on our hands and knees in front of an EFTA court just to get policy through.
Kevin. On a completely different point to your blog.
Could you explain the mechanism by which all the regions in the UK who spend more than they raise in taxes receive the equivilent of a fiscal tranfer from Westminster? For N/Ireland, Wales and Scotland it is obviously the Barnett formula block grant which achieves this for the devolved nations, what mechanism exists for the regions? Do you have a wiki link for it so I can read more about it? Thanks.
Robert
Hi Robert - that’s a sensible question - but if you’re comparing regions in England with Scotland, then effectively all expenditure is reserved (bar Local Authority budgets) so there’s no equivalent of the Barnett formula or Block Grant as there are no devolved spending decisions to be made by devolved governments
We have to bring all sides of the argument to the table to improve the debate that helps everybody after brexit. Improving the debate is always a good thing.
Somebody said this to me during a debate….
” Deficits can NOT “help us fight a myriad of problems that plague our economy–inequality, poverty and unemployment, climate change, housing, health care, and more.
we can’t use deficits to solve problems if we continue to think of the deficit itself as a problem.” Deficits are ALWAYS the problem. Period. End of discussion.
Deficits are wrong in personal finance and more so in government budgets.
A deficit is the equivalent to a HIGHER tax. Think about it. All debts must be paid either by the debtors or the creditor. In the case of a deficit the taxpayer is BOTH. And who pays the taxes that pay off the deficits that pay for the wages of all those “helpful” government employees? Not the lazy SOBs that sit on their arses in council housing, but the productive hard workers who are trying to save so they can pay for their OWN housing and necessities.
Government deficits is NEVER the answer. FREEDOM always is. ”
Sounds reasonable and straight to the point and fits in with the narrative that has been created while we were in the EU.The narrative that runs through your blog like Blackpool rock.
So I calmly showed them the real data graph that shows the budget deficit = The private sector surplus to the penny. Then replaced some words using the other side of the balance sheet.
https://www.google.com/search?q=stephanie+kelton+graphs&prmd=inv&source=lnms&tbm=isch&sa=X&ved=2ahUKEwij5fyEqNjmAhUfQhUIHTb0AHoQ_AUoAXoECA4QAQ&biw=800&bih=1280&dpr=1.5#imgrc=h-ncSWsDN48GLM
It now looked looked like this……
” A private sector surplus can NOT “help us fight a myriad of problems that plague our economy–inequality, poverty and unemployment, climate change, housing, health care, and more.”
we can’t use private sector surpluses to solve problems if we continue to think of the private sector surplus itself as a problem.” Private sector surpluses are ALWAYS the problem. Period. End of discussion.
Private sector surpluses are wrong in personal finance and more so in government budgets.
A private sector surplus is the equivalent to a HIGHER tax. Think about it. All debts must be paid either by the debtors or the creditor. In the case of a private sector surplus the taxpayer is BOTH. And who pays the taxes that pay off the private sector surplus that pay for the wages of all those “helpful” government employees? Not the lazy SOBs that sit on their arses in council housing, but the productive hard workers who are trying to save so they can pay for their OWN housing and necessities.
Private sector surpluses are NEVER the answer. FREEDOM always is.
Does not sound so reasonable now does it.
:)
That is where you have gone wrong for years now.
I am going to pick a few of your blog posts and replace the narrative you use with your addiction to the budget constraint and replace your narrative with the other side of the balance sheet mainly the assets. Leave everything else you write in its place. Just like I did above during the debate.
So you can read for yourself Kevin the absurdity of it all. Until You actually get it.
You could also do this to many newspaper articles so journalists can see the absurdity of their own journalism.
This debate needs to move on Kevin and not stuck in some gold standard, fixed exchange rate world as if we use the Euro.
27 December 2019 at 03:23 Robert said...
"Could you explain the mechanism by which all the regions in the UK who spend more than they raise in taxes receive the equivilent of a fiscal tranfer from Westminster? For N/Ireland, Wales and Scotland it is obviously the Barnett formula block grant which achieves this for the devolved nations, what mechanism exists for the regions? Do you have a wiki link for it so I can read more about it? Thanks.!"
Robert, You may find this link useful in that respect https://fraserofallander.org/scottish-economy/gers/gers-day-2-after-the-hullaballoo/ there is also an older article (2055) here https://www.telegraph.co.uk/finance/economics/11376569/If-London-treated-Britain-like-Germany-treats-the-eurozone-Londoners-would-pay-no-income-tax.html
25 December 2019 at 02:39Philip Maughan said...
"As an independentista I'm perfectly happy to accept your figures. What I don't accept however is that a Government with virtually zero representation in Scotland and without consultation, should make decisions on Scotland's behalf. You seem to believe that without the so called 'fiscal transfer' Scotland would struggle to make ends meet. This argument is exploded when we look at the small, independent countries surrounding Scotland that are not only surviving but thriving, e.g. Ireland, Denmark and Norway. None of these countries has any benefits of resources, civic processes or education that would give them any inherent advantage. So my question to you is, if them, why not us? "
Scotland has 44 MP's in Westminster so how has Scotland "No Representation" ?
Scotland's Public Services are 14% being paid for from taxes raised outside of Scotland so by leaving the UK that £10.7bn would stop , so with £10.7bn less how would YOU pay for the Public Services we already have ? Or do you envisage 14% Cuts to Public Services ? (Equivalent to Austerity 3 times higher than Tory Austerity)
The SNP's own White Paper in 2014 stated the savings they would be able to make would be only £600 million (Including from Trident) So where would YOU find the other £10.1bn from just to be able just to keep our Public Services even the same as now ? Perhaps you think Scots would be happy with being £10.7bn a year poorer ? Do you think there might be a reason for the SNP deliberately hiding this truth from Scotland ? https://www.heraldscotland.com/news/14679710.snp-chief-warns-yes-will-lose-again-if-scots-believe-independence-will-make-them-poorer/
Do you have any actual idea how Norway operates ? Do you think Scots would actually vote to have less than they have right now ? I don't think Scots would like the Norway model at all
http://mylittlenorway.com/2010/04/do-you-really-want-to-live-in-norway/
26 December 2019 at 06:13 Anonymous said...
"The UK does the tax collection across the UK. Scotland is nothing more than a glorified county council. If you did the accounts for North Yorks County Council you would find it too has a 'deficit' that is filled by the block grant and whatever 'borrowing' HM Treasury permits. so the leakage out of the arbitrary line of the Scottish border within the Sterling currency zone is to anywhere else in the world (including the rest of the UK) - and the rest of the UK saves a lot of Sterling. That leakage, plus any net savings within Scotland, is what causes the Scottish government sector deficit"
Well the obvious error you have in your thinking (or your "fantasy" perhaps) is that HMRC East Kilbride collects "Scottish Taxes" so does that mean in your eyes all those Scots working there are all 100% Unionists working as some part of a conspiracy plot to defraud Scotland of its own raised taxes ? Secondly Scottish Tax payers have all now got "Scottish Tax Codes" so last year Taxes raised in Scotland could be properly calculated and a large shortfall was found compared to what Scotland had previously been getting attributed with you can read more on that issue here https://www.holyrood.com/news/view,scottish-income-tax-raises-941m-less-than-expected_10592.htm
"Leakage" ? Is this a term you just made up yourself to support Indy ? It certainly doesn't appear that you understand much on Scotland's economic numbers at all TBH. The term "Leakage" doesn't appear at all in Scot Gov's own published accounts anywhere I have seen, surely if it were a real thing the Scot Gov would know about it too ?
24 December 2019 at 09:02 John McDade said...To Anonymous
According to GERS. whisky consumed in the UK is subject to VAT and alcohol duty. This is assigned to Scotland on the basis of how much is consumed in Scotland. Whisky which is exported does not generate UK VAT or alcohol duty. There is no export duty in the UK
In an independent Scotland, yes 'could' be, but we can at this point only speculate, it would seem counter productive and I could see the Welsh turning of the taps from some of their valley reservoirs. More likely we will end up with some common interest trade/defence etc agreement which is where we should have been in the first place.
Reading this information is quite informative. In many cases costs are 'pooled' in anonymised figures we cannot see what that means, the 'public good' they say and I suspect in items like defence we will never know. Then their is 'apportionment' which appears to be in many cases 'population' not very well thought out that. As someone who has encountered this in business pooled cost and apportionment was like gravy to meat and hides a load of evils"
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Why would an Indy Scotland create an "Export Tax" on Whisky and other goods and make all its Exports uncompetitive in World Markets ? Don't yo know there is "English Whisky" and Japanese Whisky" competing in the same markets ? Scotland also gets Alcohol taxes from German Wine and Russian Vodka etc consumed in Scotland.
"As someone who has encountered this in business pooled cost and apportionment was like gravy to meat and hides a load of evils"
How are "evils hidden" at all apart from your own imaginary invented ones ? SNP Scot Gov have been in charge for their own design of GERS since 2007/2008 since they were voted into power, maybe you need to take a closer look at that document yourself and stop blaming WM for frigging the numbers when GERS are actually owned and compiled by Scot Gov in Edinburgh itself ? https://www2.gov.scot/Topics/Statistics/Browse/Economy/GERS/Methodology
24 December 2019 at 05:17 Anonymous said...
You wrote:
"2: For info on Exports via English Ports you can get this information again from the Scottish Governments own Website , see the questions and answers here (It clearly says Scotland gets credited with the correct Export Taxes no matter what Port in the UK that goods leave from, English or otherwise)
https://www2.gov.scot/Topics/Statistics/Browse/Economy/Exports/ESSFAQ#_How_does_ESS"
Having read this link supplied by you there appears to be no mention whatsoever of these so-called 'export taxes' to which you refer. I am unaware that there is actually a UK export tax on anything at all (which is of course why Duty Free shopping is so popular at airports). There may be Import Duties imposed at the other end, but they are of no concern to HMRC, the Scottish government or anyone else apart from the foreign customs and tax authorities (and please don't be so daft to suggest that these are somehow 'owed' to Scotland).
If you are aware of a single export tax could you educate the readers of this blog? I have a distinct feeling that that the export taxes, whisky or otherwise, so beloved by Scottish Nationalist supporters are as mythical as the unicorn and yeti. Even supposing they did exist then surely Scottish independence would mean that they had to be applied to future exports to the rest of the UK, encouraging British purchasers to seek to buy from sensible countries that do not impose them. This would seriously undermine the Scots export market south of the border.
Tell me where I am wrong. I await your answer with burning interest.
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That's sort of the whole point there are no export taxes so there is not loss of taxes for Scotland from Goods from Scotland being exported via "English Ports" as that is not how value of Exports are calculated (which is explained in the link already given) There is also another link on Scot Gov Website that states the same , however these statements still don't stop a significant number of Nationalists on social media from stating Scotland doesn't get all its due revenues..it is however invented fantasy on the movements part.
https://www2.gov.scot/Topics/Statistics/Browse/Economy/GERS/queries/008
Also a good write up here on the subject https://whytepaper.wordpress.com/2015/08/25/meme-busting-whisky-and-the-non-existent-export-duty/
Kevin, basing your argument that Scotland cannot afford to be independent based on GERS estimates of public expenditure is not credible. Scotland does run a deficit, as does most countries, with the UK at £42bn, not the £22bn you quote. Unfortunately we cannot borrow or tackle tax avoidance to invest or control our economy, whilst hamstrung by Westminster. I agree SNP have a blinkered approach, as shown in their Growth Commission, as they need to adopt the Scottish Green Party's approach of devolving power locally to raise taxes through property and car and carbon usage.
GERS is an estimate of public expenditure only, and is widely discredited as a measure of fiscal competence. You should refer to QNAS which covers all expenditure.
Westminster and all MSM use GERS as a scare tactic, but despite their blatant contempt for Scotland, know they cannot survive without our energy, water and intellectual resources.
the £30 billion is an allocation based on population share - not actual - that's just one of the areas where your assertions are flawed,
"Unknown" - even the most cursory of glances at the GERS methodology statements would show you that the £30bn is most definfitely not "an allocation based on population share" - why would you take the time to post such an obviously wrong comment on here?
How much of this "reserved expenditure" would the UK Government be obligated to continue paying in the form of Pensions after Scotland leaves?
What happens is the gees figures are estimated and not factual dickhead get actual facts from previous years the write article
Hi Henry
Can I suggest you use some of your “intellectual resources” to look at the GERS report for 2018-19 and look at Table S1. where you’ll see the UK’s Net Fiscal Balance is £23.5 bn ...
1 year...... lets try and aggregate scotlands figures for the last 10, 20 or 30 years?
So yet again, some non entity without as much knowledge of Scotlands economy as they like to think is basically stating that Scotland is the ONLY country on the planet incapable of running its own affairs. Even if the unionist nonsense written here and elsewhere where half true I would still support an Independent Scotland.
Scotlands contribution to the UK economy is in excess of 200 billion per year as has been previously confirmed by the UK Govt on several occasions.
I think a country with a population of around 5 million might just struggle by. Particularly when Scotland no longer has to "contribute", to things such as maintaining nuclear weapons (that no right minded person in Scotland actually wants anyway) or paying for vanity projects such as HS2 which provide no benefit whatsoever to Scotland. I could name so many more too.
No, even if Scotland's economy were to be seriously harmed by Independence it is really still the only pragmatic choice for Scotland now.
What with a calamitous no deal Brexit on the horizon and the most callous, self serving, incompetent, right wing Tory government ever running the UK (a Tory Government that hasn't won an election in Scotland for around 60 years) it is time Scotland had the chance to revisit the question, yes or no to Indy.
Ask yourself this. If Scotland costs the UK so much why are the UK govt so desperate to cling on to Scotland. The Tories will not even "subsidise", a spare bedroom for the poor. Does anyone really still believe they would "subsidise", an entire country?
SAOR ALBA
The problem with figures are that they can be used to justify any given point to be made by the writer. What Kevin clearly does not show is that a vast amount of money is raised by the back door ie it all goes straight to england to be taxed and as such is not shown on their Scottish figures of taxes but that of england,,,,,,,,,, whisky alone brings in around 5billion for the english coffers ,,,,,, as does billions more on their free electricity, gas, water, oil, etc etc etc if Scotland was to charge district england for these resources that appear to be given "free of charge" very un economical of a people to be giving things away for free... ,,,,,,,,, it would be somewhat good of you Kevin to show englands figures of spending and taxes without these Scottish figures being added as a plus for them indeed include the water etc used up by district england form Wlaes and im sure another few billion will be lost to their accounting............. and as for trident, royal family westminster,house lords and defence i feel you are being somewhat "grey" on the true costs,,,,,,,, its almost like you have a district england agenda,,,,,,,,, i do hope im wrong. It amazes me that Scotland with all its vast resources is seen as a basket case by so called qualified accountants like yourself,,,,,,,,,, but district england has a wealth of riches.??? unfortunalty,they are other peoples riches,,,,,,,,,
SAOR ALBA......totally agree,,,,, it does make you wonder why people like Kevin feel that Scotland is "useless" but district england is "great"............ they manipulate figures to show deficit when and where it suits them............ easy done,,,,,,, and im sure even i can make district england look the worst place on this earth,,,,according to my figures,,,,,
jack - I'd love to respond to your comment but, to be honest, there is so much incoherent nonsense in what you've written that it would take an entire blog post to respond to it all.
So I think it's sufficient for me to point out that it is the Scottish Government's own economists who produce these figures (I'm merely explaining them to you) and that these are the figures on which the SNP base their own case(s) for indepenence, as in both the 2014 White Paper and the more recent "Sustainable Growth Commission"
If you genuinely believe the SNP themselves have not spotted these billions of stolen tax revenues, I urge you to apply for the job of chief economist - you will be carried shoulder-high by supporters of Scottish independence and hailed as a saviour.
Slam dunk reply.....lmao
Spare bedroom subsidy comes from DHP which up until 2017 come to Scotland via Barnet consequentials as well as Scot gov funding.
Good returns to Scotland for the vanity project so far eh !
HS2 facts : Outlay Scotland HS2 (Millions): 2014 = 8.91 - 2015 = 10.94 - 2016 = 22.71 - 2017 = 57.28
Consequentials to Scotland HS2 (millions): 2014 = 33.78 - 2015 = 42.90 - 2016 = 87.14 - 2017 = 232.63
Notwithstanding Scottish company's tendering for contracts worth billions
You want to grow the economy and attract companies into Scotland, so your proposing to increase taxes to the population, this means higher wages to maintain standard of living, making the Scottish workforce less economically attractive, its a problem Denmark has and no doubt any other country with a small population, stay with the union I have no problem letting the rest of the country pay for us, just keep quite and don't shout about it!!.
Vast resources? 83% of the rapidly emptying oil fields are BRITISH territory. Territory well outsude what would be given to Scotland if they took their 6% sized ball and ran home.
What are these vast resources? Tell me about the vast plains if fertile farming land.
Thats the sane almost everywhere though. I've never understand that mentality.Almost no one gets what they want, but it's the best it could ever be. The SNP can't run the country, despite way more money per citizen than the English get. The English get the least of anyone of the 14 territories.
A few queries- you include on Scotlands tax debit items not paid for via taxation, such as the BBC(license fee and commercial operations), national lottery funding( raffle tickets) ..What is the rational for this? Furthermore uk gov costs spent in Scotland are counted as debits ,whether or not they are for Scotland, and your argument that there is an employment advantage seems reasonable. But you do not seem to add the benefit from UK government costs spent outside Scotland, whether or not they benefit the rest of the UK, to the rest of the UKs credit account. Why not?
Hi brambled
GERS includes those as income, in line with national accounting standards (i.e. it is not just taxation revenue that’s counted). As an interesting aside: BBC license fee income is allocated based on households but costs are allocated based on population ... this means Scotland gets a slightly higher share of licence fee income than BBC costs (because Scottish households are on average slightly smaller than UK average, so we have a higher household share than proposition share).
I have analysed the “in” vs “for” costs elsewhere (What’s £7 Billion Between Friends) - the simple answer is that net only c.£0.5bn of costs allocated to Scotland are spent in the rest of the UK - the fiscal multiplier effect on moving that spend would be immaterial (and more than outweighed by the fact that Scotland would no longer be able to allocate a proportion of Scottish Ferries, Creative/Historic Scotland or nuclear decommissioning costs to the rest if the UK).
More generally, this “why don’t you allocate tax revenues generated by spend outside Scotland” argument only makes sense if you also take away tax revenues generated by rUK spending in Scotland (eg. many of the HMRC and DWP employees who are based in Scotland are allocated as costs to rUK). That’s why the net effect is only £0.5bn and why Richard Murphy floundered so badly when asked to justify his rather unhinged assertions about the invalidity of GERS (Murphy goes to Holyrood)
Interesting and well researched and put together in my humble opinion. Not that any of that’ll matter though in the face of national fervent shouty moany after today’s Indys coming folks first ministers ramble
Well thought out and easy to understand, though from some of the comments you'd think you were explaining the 'Big Bang!'
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