The SNP's Indyref2 Mandate

There's a lot of nonsense being talked about the SNP's mandate to request a second independence referendum, so I thought I'd try and very quickly clear it up.

Let's start with what most people will probably have seen and heard - what was actually said during the final Holyrood 2016 TV debate (02/05/2016, just 3 days before the election):

So no ambiguity there, couldn't be clearer: 

"what I'm talking about is the Scottish Parliament having the right to propose a second referendum if it becomes clear that a majority of people in Scotland want independence, it would have to be a majority of people that want it"

Is it so naive of me to expect that Nicola Sturgeon might actually stand by her words?

The response from the SNP would of course be that what technically matters is the Manifesto that the SNP stood on.

So I took a look at the "Easy Read" copy. It is indeed an easy read and makes only one reference to another referendum (my highlighting):

"We believe that the Scottish Parliament should have the right to hold another referendum if it is clear that more than half of the people in Scotland want independence."

At this point I would suggest that - given their rhetoric and their "easy read" manifesto - the SNP morally only have a mandate to propose a second referendum if it is clear that a majority of people in Scotland want independence.

Needless to say a quick visit to What Scotland Thinks confirms what any fule kno: the "clear majority support for independence" condition isn't close to being met:

So how do the SNP justify attempting to drag us into an inydref2 against our will? By falling back on the fine print. In the SNP's long-form manifesto you will find - not in the Summary, not in the Vision, not in the Next Steps, but on the left-hand side of page 23 - that an additional clause has been added (highlighting mine)

So technically it is correct to say that the SNP's manifesto states:

"We believe that the Scottish Parliament should have the right to hold another referendum  if there is clear and sustained evidence that independence has become the preferred option of a majority of the Scottish people – or if there is a significant and material change in the circumstances that prevailed in 2014, such as Scotland being taken out of the EU against our will."

Given we're into fine detail here, it seems fair to be picky about these words. Stating that you believe something should be the case is not making a manifesto commitment to do it or indeed asking for a mandate to call for it - it's simply a statement of belief.

Semantics aside, this is akin to Amazon pointing out that they can do pretty much whatever they like with your personal data because you ticked their Terms & Conditions box¹. The SNP may be able to argue that technically their manifesto gives them a mandate to ask for indyref2, but - given their pre-election rhetoric and summary messaging - morally they're on distinctly dodgy ground.

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1. I wonder how many people who shop with Amazon realise they've accepted "Terms & Conditions" that state Amazon "reserve the right to make changes to any Amazon Services, policies, terms and conditions including these Conditions of Use, and Service Terms at any time."?

Defacing the Facts: SNP MP Paul Monaghan

[The text of this article appeared in the Daily Record on 23/11/2016]

The problem with political debate in Scotland is not that people aren’t well informed, it’s that the SNP ensure they’re very well misinformed.

It’s not a sophisticated strategy, but it seems to be an effective one. By using Twitter, official party representatives can basically get away with saying whatever they like by avoiding having to deal with pesky journalists who tend to like to check facts before they report them. On social media, complete lies can be read by tens of thousands of people before they’re exposed and debunked, by which time it’s too late. People seeking to give themselves permission to ignore awkward facts have been satisfied and the tweeter’s mission is accomplished.

Take the example of the Scottish Government’s own GERS figures. When these showed Scotland’s economy being a positive contributor to the UK, they were rightly quoted by the SNP as authoritative statistics. Since the figures started showing Scotland effectively receiving cash from the rest of the UK (roughly £1,700 for every man woman and child in Scotland last year¹) the figures have instead been cynically and systematically undermined.

The SNP and their social media mouth-pieces have been so successful with their campaign of misinformation that, whenever GERS figures are debated now, the following points have to be endlessly repeated: there’s no missing whisky duty, there’s no missing export income, the figures aren’t affected by corporate head-office locations, London infrastructure costs aren’t allocated to Scotland and the figures are not guesswork compiled by HM Treasury, they’re qualified National Statistics compiled and published by the Scottish Government².

The problem, of course, is that those who want the comfort of not facing economic reality simply choose not to listen to those who patiently debunk the myths. In a world where many proudly proclaim themselves to be climate change deniers, in Scotland we now have a growing army of GERS deniers.

But this strategy of spreading misinformation through social media isn’t limited to falsely undermining the GERS figures.

Last week many of SNP MP Paul Monaghan’s 15,600 twitter followers were eagerly retweeting this message of his: “Interesting UK Gov reply today on question of proportion of Scottish exports to RUK [rest of the UK] destined for EU. They don't know. My figures suggest 75%.”

He went on to make clear that he was referring to exports “passing through rUK on route to EU. The implication is our exports are not attributed to Scotland.”

Now anybody with even a passing understanding of Scotland’s economy or the way our export statistics are calculated will know he’s making an extremely cack-handed attempt to mislead people here.

Export statistics are gathered based on the customer’s location³, so goods exported to the EU through an English port or freight-forwarder will correctly be recorded as EU exports (not rUK exports as Monaghan implies).

It’s also worth pointing out that no competent Scottish business would sell goods to an English customer for that customer to simply sell on to the EU without adding value. Factor in the knowledge that 56% of Scottish exports to the rest of the UK are services not physical goods⁴ and it’s clear that Monaghan’s 75% figure is complete balderdash⁵.

Of course it’s obvious why an SNP MP would want to falsely suggest that Scottish export figures to the UK are over-stated and those to the EU under-stated. One of the gaping holes in the SNP’s argument for Brexit as an independence trigger is the fact that Scotland sells more than four times as much to the rest of the UK as we do to the EU³. This means - if Brexit does turn out to mean UK/EU trade barriers exist - Scotland would risk damaging four times as much trade by ending up on the EU rather than the UK side of any such barriers.

So faced with a clear logical flaw in their argument, this SNP MP resorts to the tried and tested strategy of misrepresenting the facts and spreading misunderstanding. Unfortunately for Mr Monaghan, in doing so he exposes an embarrassing level of ignorance for all to see. Apart from showing that he doesn’t understand how export trade statistics work, he also shows he hasn’t even managed to read his own Government’s publication on the topic.

On Twitter he went on to say “the UK Gov told me today just 44% of Scottish manufacturing exports are to the rest of the UK”.

Well yes, they would have told him that by looking at the Scottish Government’s own “Export Statistics 2014” report where that information is found. If Monaghan had bothered to read this himself he would also have known that “just 44%” of Scotland’s manufacturing exports going to rUK is still 1.7 times more than go to the EU⁴.

You have to wonder: if independence is really such a good idea for Scotland’s economy, why do its supporters so consistently try to mislead us about the facts?

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Notes
1. for the simplest explanation of this, see The £9bn Fiscal Transfer

2. if anybody still doubts any of these facts, please see this blog post > GERS Deniers

3. see official Scottish Government website here which explains "Export Statistics Scotland (ESS) is based on the Global Connections Survey". I have filled in these forms so I know, but see actual form here and note wording of question 6;

4. These two simple tables provide an audit-trail between the figures in specified tables in the Export Statistics Scotland 2014 publication and the percentages and relative figures used in this blog (highlighted). The minor inconsistency in the tables included in the pdf were not significant enough to send me to the supporting excel tables.

5. When challenged to back-up his assertions Mr Monaghan claimed unspecified "academic research" and blocked me - at the time of writing he has still not offered further support for "his figures" which he ridiculously claims "suggest 75%" for rUK exports "destined for the EU"

Crazy Horses

Over the last few weeks the SNP's strategy for overcoming the awkward economic realities that stand between them and independence has become clear. It seems Sturgeon has decided to harness up the nationalist troika to three wildly incompatible horses.

On the right, former MSP turned corporate lobbyist Andrew "Acceptable Face of Capitalism" Wilson.

On the left, current Westminster MP George "Smash the System" Kerevan.

In the middle, a Pantomime Horse to amuse and distract the masses.

Each speaks to different constituencies

1. Andrew "Acceptable Face of Capitalism" Wilson

Andrew has been appointed Chair of the SNP's Growth Commission, tasked with creating a rational plan to "boost economic growth" and "consider the most appropriate monetary policy arrangements to underpin a policy for sustainable growth"

Given that the economic case presented for the 2014 independence referendum is now widely accepted as having been embarrassingly weak, you might think they'd use this opportunity to inject some fresh thinking, garner input from across the political spectrum and seek advice from a broad range of business voices. Then you'd look at the make-up of the commission and think again.

From the world of politics we have two former and five current SNP politicians alongside two leading lights from Yes Scotland¹. It's hardly surprising that a serious economic commission doesn't include anybody from the Scottish Socialist Party, but the Greens must surely be miffed that their "unconditional support" for independence hasn't been rewarded with at least a token seat at the table.

Add to that three academics - two of whom at least have nailed their colours pretty firmly to the SNP's mast² - and you start to get a sense that the Commission's thinking might be a little stale.

To be fair, they do also have two active Scottish businesswomen with real entrepreneurial credibility. They're pretty focused on the domestic Scottish scene and one of them was a proud champion of the discredited SNP front "Business for Scotland" (and holds some pretty "out there" views on hidden oil fields), but we'll let that pass³.

I confess I have some sympathy for Andrew. He is by all accounts a decent and intelligent chap, but his loyalty to the cause requires him to cook up a package of policies and then suggest they'll deliver unfeasibly high rates of growth.

The problem he faces is that one of the few certainties of independence is that Scotland would lose what is currently a £9bn annual fiscal transfer from the rest of the UK. To offset that transfer through growth alone requires Scottish GDP to grow by 17% more than the rest of the UK⁴. This isn't what would be required to eliminate the deficit, it's just what would be required to get us back to the level of deficit we currently share within the UK.

Coming up with a credible plan to deliver cumulative 17% superior economic growth in anything less than a few generations is some ask, particularly given we start from a position of slower growth⁵ and would need to overcome the negative impact of separation from our largest export customer (the rest of the UK). 

If all that wasn't hard enough, the Growth Commission is haunted by the ghost of SNP proclamations past. Their own independence White Paper proposed that a growth rate improvement of 0.12% a year would be a reasonable figure for the "bonus of being independent". It was a figure based on some pretty dodgy analysis, but the SNP liked it so much that they cited it five times in the White Paper⁶.

At plus 0.12% a year, it would take about 130 years to deliver the cumulative 17% superior growth required just to offset the existing fiscal transfer (through economic growth alone).

Andrew has his work cut out.

The Commission will surprise no-one by recommending some form of Sterling currency board and suggesting enormously optimistic growth assumptions based on a strategy of tax-cutting, investment incentives and financial services wooing. Reassuring messages will be whispered in the direction of big businesses and the wealthy - the Greens and Yes supporting enemies of neoliberalism will just close their ears.

2. George "Smash the System" Kerevan

You might ask why George (as a trained economist and member of the House of Commons Treasury Select Committee) isn't on the Growth Commission. The simple answer is that George is a bit too radical in his outlook to be allowed near the SNP's real plans, so he's kept on a loose rein and encouraged to make noises which appease the radical left and keep the anti-capitalists on side.

Regular readers of Chokkablog may recall that George is on record prior to his election as an MP as hoping to achieve the implosion of the UK economy: "after Home Rule, independence will follow as the UK economy implodes [..] I would relish the chance to take Scotland's fight to the enemy camp"

It appears that time at Westminster has done nothing to dampen George's revolutionary ardour. Let's look at some highlights of Citizen Kerevan's outpourings over the last few months:

• In July - he accepted the need for spending cuts under independence: "a separate Scottish currency pegged to sterling would necessitate fiscal consolidation to assuage the foreign exchange markets. It would certainly be doable, but would require independent Scotland to cut its budget coat to fit its fiscal means." - Cityam
• In August - he called for a revolution:"Popular, if often incoherent, opposition to this mad, mad system has suddenly boiled over into open revolt. Not enough revolt, in my opinion, but a line has been crossed. [..] The neoliberal order needed dismantling" - The National

• In September - he denied the need for spending cuts, converting instead to the growth cause (while suggesting that the higher public spending we enjoy in Scotland is due to "incompetence of Westminster"): "Growth is the only sure route to closing any temporary budget deficit bequeathed to Scotland by the economic incompetence of Westminster." - The National
• In October - he abandoned the growth cause and shifted into full-on "smash the system" mode (volunteering the Scots to be used as lab-rats in the process)

“a new political economy using Scotland as a laboratory – an agenda that rejects not simply the neo-liberal variant of capitalism but the entire system itself. [..]  to embed a non-capitalist economic practice [..] Such an outcome will not be stable. There will be social friction and resistance from the prevailing capitalist order

The era of neoliberal tax cuts and low interest rates is over", corporation tax should not be used as “a crude bribe to secure inward investment” there should be greater taxes on wealth, despite “an inevitable response from the business class and rich that such a move will hurt ‘incentives’, discourage inward investment and ‘force’ high net wealth individuals to migrate”  

- the Herald Oct 2016

Of course anybody vaguely paying attention knows that in fact the SNP embrace capitalism and are fans of "neoliberal tax cuts". The only significant tax moves they've suggested recently have been to cut taxes (corporation tax, Air Passenger Duty, VAT on tourism, "use the tax system to improve incentives for investment" etc.)⁷ and they balked at the idea of raising the top rate of tax to 50p (as Scottish Labour and the LibDems proposed).

So why is George allowed to go so far off-script in a party famous for its message discipline? He's allowed to because he serves a valuable purpose pacifying "useful idiots" like those at Radical Independence and The Common Weal. The SNP would never translate Kerevan's anti-capitalist ramblings into policy - he's just making the right noises to keep the "radical left" on board.


3. The pantomime horse

So with two of their horses so obviously pulling in different directions, the SNP need something to divert the attention of the masses, to stop them asking if either actually makes a coherent and credible economic case.

No problem: the actors inside the costume may change, but the red-nosed, trouser-dropping, reality-denying antics of the SNP's pantomime horse is a real crowd-pleaser. Let's look at who has donned the paper-maché head⁹;

• Here's Finance Minister John Swinney MSP claiming (during the indyref) that the early years of independence would coincide with a "massive North Sea oil boom"
• Here's journalist Paul Kavanagh perpetuating the myth of missing whisky export duty (no such thing exists) and asserting that VAT is allocated in GERS based on corporate head-office (it isn't)
• Here's journalist Kevin McKenna getting just about everything possible wrong about the IFS's analysis of Scotland's economy (analysis since fully vindicated by actual figures)
• Here's Alex Salmond telling us that an independent Scotland would have been £8bn better off (where "better off" means £8bn further in debt)
• Here's tame academic Prof Dunleavy trying to justify a figure of £200m for the set-up costs of an independent Scotland (a figure nearer £2bn is now widely accepted as more realistic)
• Here's Joan McAlpine MSP telling readers of the Daily Record that Scotland misses out on whisky tax revenue (we don't, it's correctly fully allocated in GERS)
• Here's (deputy convenor of Holyrood's finance comittee) John Mason MSP admitting to not knowing the difference between debt and deficit
• Here's Stuart Hosie MSP (3 min 20 sec in) blatantly lying about oil revenue forecasts
• Here's the SNP's favourite economist Professor Hughes Hallet suggesting the GERS figures don't conform to international standards (because he doesn't understand that oil taxes are raised on N Sea profits, not revenues)
• Here's Angus MacNeil MP⁸ spreading obvious lies about what costs are attributed to Scotland in GERS (London infrastructure costs aren't)
• Here's Alex Salmond again, this time telling people we could save £30 - 35bn from UK costs attributed to Scotland in GERS (the real figure, using his own optimistic examples, is less than £0.5bn a year)

Isn't it just hilarious? Doesn't this pantomime horse galumphing around the stage make you forget about all the real economic arguments?

It's worth noting that these performances don't just the keep less-than-fully-intellectually-engaged Yes voters amused and well misinformed - they also ensure opponents spend their time and energy debunking myths instead of engaging in substantive and constructive debate; it takes a lot less time to make up nonsense than it does to robustly disprove it.



So there we have it. Three horse pulling in different directions. A smorgasbord of truths, half-truths and downright lies. A menu of clearly incompatible options to suit all political tastes. Whatever you need to hear to make you support independence, you'll be able to find somebody from the Yes camp saying it.

So far Sturgeon has done an impressive job of holding the reins of these three horses and providing at least the illusion of being in control - but is she really driving the carriage or simply hanging on for dear life?

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Notes

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1. Growth Commission Membership - SNP/Yes Scotland members

2 x Former SNP politicians

• Andrew Wilson (Chairman)
• Jim Mather

5 x Current SNP politicians

• Kate Forbes MSP
• Derek Mackay MSP
• Shirley-Anne Somerville MSP
• Roger Mullin MP
• Cllr. Marie Burns

2 x Former Yes Scotland activists

• Dan McDonald - Yes Scotland advisory board
• Mark Shaw - consultancy role with Yes Scotland

2. Growth Commission Membership - Academics

• Prof Andrew Hughes Hallet - known to readers of the FT (and this blog) as a man who doesn't understand how North Sea taxes work and a member of the SNP's old Fiscal Commission
• Prof Iain Docherty - a man quick to leap to George Kerevan's defence when he asserted that GERS understates Scottish tax revenues - although to be fair he backed down equally quickly > twitter exchange
• Prof Catherine Schenck -  seen here offering 7 minutes on "the concept that Scotland would ever have monetary independence is rather an illusion" without a single mention of the lender of last resort function or foreign exchange reserve requirements (issues explained by Prof McDonald here and here)

3. Growth Commission Membership - Businesswomen

• Marie Macklin CBE -  chairwoman of The Klin Group. A Scottish property investment business (founded by her father). Under her stewardship "The KLIN Group is emerging as an ambitious, entrepreneurial adviser, bringing ideas, imagination, knowledge and resources to help businesses and organisations to optimise their potential" - seems good to me.  What seems less good to me is what I learn from a quick scan of her twitter feed: she distrusts the CBI, is a proud member of the discredited SNP front "Business for Scotland" (and is a keen recruiter for them and thinks they are a reliable source of facts). She also thinks the bbc is biased and appears to think there are secret oil fields in the Clyde (also here) and that oil will last another 100 years (because Salmond said so). She also (perhaps unsurprisingly) seems to be a big fan of tax cuts.
• Petra Wetzel - an entrepreneurial businesswoman with a number of Scottish hospitality venues and an emerging beer brand > The Big Profile: Petra Wetzel, WEST

4.  Price of Independence

"£9bn pa represents 13% of total Scottish public spending and is greater than Scotland’s entire education & training budget; it’s 17% of total Scottish onshore revenue and 77% of the total amount Scotland raises in income tax [..] to close the deficit gap with the UK – to be in a situation where becoming independent wouldn’t make Scots immediately worse off – would require Scotland to out-grow the rest of the UK by 17%"

5. Scotland's GDP growth

6. The Scottish Government's own White Paper: Scotland's Future: Your Guide to an Independent Scotland had a go at scaling how much faster an independent Scotland might grow when no longer shackled to the UK. In fact they were so pleased with their analysis that they quoted it five times (pp 23, 43, 88, 375, 619). Here's the wording from page 23;

"Similar countries to Scotland have seen higher levels of economic growth over the past generation. That is because they have the bonus of being independent and are able to make the right choices for their nation and economy. If Scotland had matched the levels of growth of these other independent nations between 1977 and 2007, GDP per head in Scotland would now be 3.8 per cent higher"

I think we can safely assume that the countries and timescale used were selected to make the strongest possible case - after all, why stop at 2007 when more recent data was available? - and just in case you doubt if that is a cumulative 30 year figure, it's clarified on page 619:

"The average rate among small European countries was 2.61%, a gap of 0.12% each year. Over a 30 year period the compounded effect of this gap totals 3.8% of GDP"

7. SNP tax cutting proposals

"giving Scottish businesses a competitive edge by providing a clear timetable for reducing corporation tax by up to three percentage points; and improving international connectivity by cutting Air Passenger Duty by 50 per cent" - White Paper (p.6)

"One option for future governments to support manufacturing and boost innovation will be to use the tax system to improve incentives for investment, for example through more generous depreciation allowances for key growth sectors in Scotland." - White Paper (p.88)

"Tax based incentives that are aimed at encouraging investment in innovation activities can be applied to either expenditure (related to R&D) or income that results from investment in R&D. Following independence this Government will examine how best to develop and target such tax relief to encourage Scotland’s innovative industries" - White Paper (p.102)

 44 SNP MPs call on Treasury to reduce tourism VAT

8. Angus MacNeil MP retweeting a ludicrous meme (just one example of many)

9. This is an incomplete list of course - I've written entire blogs on the falsehoods perpetuated by the likes of Business for Scotland and Wings Over Scotland, the likes of Angus MacNeil and John Mason are serial offenders and there are many journalists I've not mentioned here who have shown themselves to be naively susceptible to an SNP press office briefing

The SNP: Running to Stand Still

Here’s how the SNP describe last week’s election result:

“The SNP has won an historic third term in the Scottish Parliament with 63 MSPs, over a million votes in Scotland’s constituencies – a first – and the highest share of the constituency vote ever achieved” - SNP Press Release

Of course there have only ever been five Holyrood elections, so the SNP’s achievement is “historic” and their constituency vote share the highest “ever achieved” only in the context of a rather short period of time, but nevertheless the statement accurately describes how the SNP have cemented their position as the dominant party in Scottish politics. But politics is all about the narrative, all about momentum and the direction of travel and (whisper it) the SNP are moving backwards.

Having 63 MSPs represents a loss of 6 SNP MSPs since 2011 and means they no longer command an overall majority at Holyrood. Coming within just 2 seats of retaining a majority in a voting system which is specifically designed to avoid that outcome is undoubtedly an impressive achievement, but it is also undeniably a step backwards.

Over 1 million constituency votes is a good headline number, but let’s not forget that it would have taken over 1.8 million votes for Yes to have won the independence referendum.

The SNP’s 46.5% constituency vote share was marginally up from the 45.4% they achieved in 2011 and compares extremely favourably with the 36.9% share with which the Conservatives won the UK general election. But you’d need to have been living in an isolation chamber for the last 3 months not to be aware of the “both votes SNP” campaign which focused on ensuring their supporters voted SNP on both constituency and regional ballot papers. Despite this, their share of the regional vote actually declined from 44.0% to 41.7%.

Add together the constituency and regional votes and the SNP’s combined vote share fell from 44.7% to 44.1%.

So the SNP achieved a thumping victory - but compared to 2011 they received a lower vote share, won fewer seats and lost their parliamentary majority. They can spin their “historic” victory as much as they like, but it is an observation of objective fact that the SNP are in a weaker position now than they were in 2011 prior to the independence referendum campaign.

As for the opposition, the Scottish Conservative & Unionist party saw a spectacular surge in their support while Scottish Labour took a pasting. This has gifted the SNP an explicitly unionist opposition who have to defend the current UK government’s record. It will now be easier than ever for the SNP to deflect attention away from their own record in office by rerunning tired independence referendum arguments and training their fire on the Tories.

Among the also-rans, the Greens passed the Lib Dems who effectively stood still. Some Nationalists argue that if you include the 6 Green MSPs you can say that “independence supporting parties” hold a majority at Holyrood. The problem with this argument is that every SNP or Green vote is not a vote for independence and that these parties combined still hold two less seats than they did in 2011 - so even on this measure support for independence has declined below 2011 levels.

So what does this mean for the prospects of a second independence referendum? Scots voted No to independence when presented with a case that assumed we’d benefit from £6.8 - 7.9billion a year of oil revenues. It’s now clear that the true figure is in fact going to be close to zero for the foreseeable future. That’s a difference between what the Yes campaign claimed and the inconvenient reality of around £1,500 per year for every man woman and child in Scotland. This is before we even start considering issues like what currency we’d use, what would happen to our EU membership terms and other costs of separation. The base from which the SNP have to argue we’d build following separation from the rest of the UK is far worse than they previously assumed. The economic case for independence lies in tatters and Nicola Sturgeon knows it.

The problem for the SNP is that they’re a one-trick pony. Their electoral success shows that it’s been a very good trick, but if you try to repeat any trick too often people eventually work out how it’s done and the magic is ruined. This particular trick only works if you have a credible economic case for independence, and that simply doesn’t exist.

In response to this problem Nicola Sturgeon has said the SNP will:

“undertake new work, starting this summer, with the aim of persuading a clear majority of people in Scotland that independence is the best future for our country”.

It's a shame that our First Minister isn't able to even consider the possibility that separation from the UK (like separation from the EU) may not in fact represent the best future for Scotland.

We can only live in hope that, despite their obsession with rerunning arguments they’ve already lost, our newly elected Scottish government finds time to use their extensive powers to improve the lot of those for whom they’re meant to be governing.

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This article appeared in the Daily Record on May 14, 2016

SRIT: A Blunt But Undeniably Progressive Tax

The SNP spin machine has been in full effect over the last few days. They need to be. How can they defend their decision not to use the Scottish Rate of Income Tax (SRIT) to protect us from the spending cuts imposed by Westminster's austerity policies?

The Spin is pretty simple: because the SRIT has to be applied to all tax bands equally (true) it would unfairly hit the poorest hardest (untrue).

Here's Swinney (our Finance Minister) to the Scottish Parliament

"By its nature, exercising that power would have a disproportionate effect on the amount of tax paid by the taxpayers on the lowest incomes."

... and being interviewed by the BBC

"It would have in fact been about double the effect on the taxable income of individuals at the lower income thresholds rather than people at higher income thresholds"

This is from the Scottish Parliament Information Committee (SPICe). Coming from the politically independent government body that is meant to inform MSP's I find this truly shocking - if you don't know why, read on

Here's SNP MSP Joan McAlpine on Twitter

I could find plenty of other examples but anybody with ears knows that variations on this theme are being hammered into the Scottish consciousness: the SNP aren't using SRIT powers because they would hurt the poorest most.

This (rather than governing) is what the SNP do best. It's a kind of mass Neural Linguistic Programming; they select a few simple statements and relentlessly repeat them until they are received as wisdom by their trusting supporters. All political parties do this to some degree of course, but the lack of scrutiny applied to the SNP and their sheer brass-neck sets them apart. The intelligentsia may expose their soundbites as being deeply misleading or (as in this case) simply wrong, but that doesn't matter. Their supporters are well trained to ignore dissenting voices.

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We could assemble a greatest hits list: the ones that intentionally mislead by ignoring our higher public spending ("we generate higher GDP per capita", "we send more tax per head") or the ones that are - by any reasonable analysis - downright wrong ("oil is just a bonus", "we'd have been £8bn better off", "our oil forecasts were in line with the market at the time"). To the second list we can now add "using SRIT would hurt the poorest most"

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So why is this assertion so misleading?

As I explained in my last blog (Swinney: Confused or Aiming to Confuse), the suggestion that a flat increase to all tax rates (which is all that SRIT currently allows) hurts the poorest most plays on a simple intuitive misperception: people think the poorest pay 20% tax and the richest 40%, so 1/20 is twice as bad as 1/40. Their are a couple of problems with this, the biggest being that we only pay tax above a threshold (the Personal Allowance) which means that a higher proportion of higher earners' income is taxed¹.

In my last blog I explained (using rounded figures) how an additional 1% SRIT would mean - because the first £10k of income (the Personal Allowance) is not taxed - someone earning £20k would pay £100 more tax but someone on £40k would pay £300 more tax .

The wider point here is that this additional tax money raised could be used to alleviate the impacts of "Westminster's austerity policies". The additional money raised could be recycled into public spending in a way that defends our essential public services and protects the poorest in society. A simple person might think that the SNP - having campaigned as the "anti-austerity" party - would lose all credibility if they failed to take this opportunity to put their words into action.

But back to the narrow "proportionality" argument. I've had time to refine the analysis a little so that it includes employees' National Insurance Contributions. This means we can see the impact on take-home pay (which is surely the key measure here);

It's a detailed table but the key row is the one showing "impact on take-home pay" (the first column is for somebody working full time on the National Minimum wage).  Taking the first four columns, all figures are full annual impact:

• Earning £14k: pay £34 more tax, a 0.3% reduction in take-home pay
• Earning £20k: pay £94 more tax, a 0.6% reduction in take-home pay
• Earning £40k: pay £294 more tax, a 1.0% reduction in take-home pay
• Earning £60k: pay £494 more tax, a 1.2% reduction in take-home pay

It is undeniable that the poor are affected, but to suggest (as Swinney has) that SRIT would have a "disproportionate effect on the amount of tax paid by the taxpayers on the lowest income" or "double the effect on the taxable income of individuals at the lower income thresholds rather than people at higher income thresholds" is at best intentionally misleading and at worst (as I would argue) it is frankly wrong. The last row in the table above is how the SNP attempt to justify the statement: you be the judge.

Now regular readers of Chokkablog will know I do like a graph and this data screams out to be graphically presented. Just two graphs should do it.

To help us understand how effective tax rates vary by income level (factoring in the impact of the Personal Allowance) and how an additional 1% SRIT would impact that;

Note how the red line (the additional 1% SRIT line) diverges from the blue line (current tax policies) - the effect is magnified for higher earners.

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As an aside: the first curved section of the line is of course tending towards 20% (the maximum tax you would pay if there were no higher bands). Similarly the second tends towards 40% (the proportion of income taxed at less than that rate declines as you head further right). The change in profile between £100k and £120k is simply because the personal allowance is phased out for higher rate tax payers over this range - effectively accelerating us towards the 40%. The final additional rate kicks in above £150k, sending us on a line which is asymptotic to 45%. If you earn £1m you pay 43.6% tax (somebody asked).

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Finally, let's look at the measure that I would argue is the best single measure of the proportionate impact of SRIT: what impact a 1% increase has on the take home pay of people on different salary levels:

Now: you can argue that the incremental pound matters more to a lower earner and that existing SRIT powers don't allow us to avoid impacting all tax payers. They are valid points. But when Swinney brazenly asserts that using SRIT powers would "have a disproportionate effect on the amount of tax paid by the taxpayers on the lowest incomes" or would have "about double the effect on the taxable income of individuals at the lower income thresholds rather than people at higher income thresholds" he is engaging in a conscious deceit.

I'm not alone here (for example this We Need to Talk About Tax piece by Graeme Cowie covers similar ground), The good news for the SNP is of course that hardly anybody reads blogs like this - they won't be losing any sleep.

For what it's worth: here's my attempt at a shareable single graphic summary:

Or if we'd rather keep it in his "amount of tax paid" terms;

1. The other problem is that taking percentages of percentages is nearly always a misleading thing to do.  It's been (correctly) pointed out in the comments that "the percentage increase in tax bill" logic allows the statement to be justified - the lower income tax bills goes up by 5%, declining to 2.8% at £150k. This is true and I covered it in the previous blog - but as I highlight, the impact on take-home pay (or total effective tax rate) is greater the higher the income bands because a higher proportion of their income is taxed. I'm comfortable this is what matters, is the only reasonable way to interpret the figures

The Masters of Spin

There's a remarkable piece in today's Sunday Times in which Kevin Pringle (the SNP's erstwhile spin-doctor-in-chief) admonishes us silly Scots who keep casting our eyes back, those of us who ponder the fact that we dodged a bullet by voting No in last year's Independence Referendum. He asserts simply:

pointing to glaring inconsistencies between what was said before the referendum would be the case, and what has actually happened afterwards [is] pointless and irrelevant

You've got to admire the chutzpah of a man who can write that statement. It's obvious to even the most casual observer why a cheerleader for the SNP would rather we didn't look back at the case they presented; the SNP will be seeking our vote in May 2016, so of course they'd like us to think it "pointless and irrelevant" that they tried to persuade us to vote Yes on the basis of a false prospectus.

But he doesn't leave it there. He may no longer be employed by the SNP but old habits die hard and a spin-doctor's gotta spin. So - having asserted we shouldn't - he proceeds to cast his eyes back to try and score some rather weak points around risks to HMRC jobs and orders for type-26 frigates. There's an obvious "have your cake and eat it" hypocrisy to this rhetorical ploy and both of these are far more nuanced issues than he suggests - but I don't want to get bogged down in those arguments here. I want to focus instead on the following astonishing statement:

On the back of the plummeting price of oil, Unionist parties revel in the fact that North Sea revenues are only going to be £0.1 billion next year, compared to the £6.8-7.9 billion forecast in the independence white paper.

Of course, it should be pointed out that while the Scottish government’s central assumption was for the oil price to be $110 a barrel at the time of independence, Westminster’s department of energy and climate change predicted prices of $114-127 a barrel over the same period. And the Treasury publishes a monthly summary of figures produced by independent organisations - in May 2014 none of the 22 forecasters expected oil prices to fall to current levels, and 18 expected prices to remain above $100 a barrel in 2015.

Let's put aside the childish suggestion that Unionist parties "revel" in the drop in North Sea revenues and focus on what he's doing here. The first paragraph refers to North Sea revenues, the second talks only of the oil price. He's relying on the fact that the casual reader will accept this elision, will allow North Sea revenue forecasts and oil price forecasts to be conflated into being effectively the same thing. Well they're not, as we'll come on to see.

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

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

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

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

There is no ambiguity here: the White Paper was never using "Westminster" assumptions for oil and gas revenues. The White Paper explained its forecasting approach thus:

"we will plan Scotland's public finances and borrowing requirement on the basis of a cautious forecast for oil and gas revenue" - page 305

You don't need the benefit of hindsight to know that those are the words of a false prospectus; the lower of two scenarios they presented was £2bn- 5bn higher than contemporaneous OBR forecasts.

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

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

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

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

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

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

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

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Notes

1. The White Paper mentions the OBR 5 times:

• page 602: explaining that OBR assumptions for UK onshore receipts have been used as the basis for projecting Scotland's
• page 603 (twice): explaining that OBR projections used for reserved social protection spending and onshore GDP
• page 604 and 605: explaining that the OBR projection for the total UK deficit is used for comparison purposes (which is of course inconsistent - if you choose to use a higher offshore projection for Scotland you should compare with a total UK figure using that higher projection ... but we'll let that pass).  

2. All of HMRC's North Sea revenues are based on taxes aplied to profits. Despite its name, Petroleum Revenue Tax (PRT) is a tax on profits arising from individual wells. There used to be a gross revenue royalty but that was abolished in 2002

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

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

Electoral Commission Response

Last week I wrote to the electoral commission. I enquired if recent news reports about leaked emails surrounding Business for Scotland may have implications with regards to the electoral commission's rules about separately registered campaign bodies "working together". If you're unfamiliar with the background you can read the detail here > Tugging at Threads.

The electoral commission responded publicly last week (without informing me, the "complainant") and their conclusion was unambiguous:

The Commission has found no evidence during its assessment that the SNP and BFS worked together in a way that broke the law. There is therefore no need to open a full investigation.

Fair enough. One of the roles of the electoral commission is to respond to enquiries from the public. If in the process this helps a wider understanding of electoral commission guidelines (I'll come on to explain what I think this judgment clarifies) then all well and good.

Of course there was some rather hysterical reaction to the electoral commission's findings from the usual suspects who referred to my enquiry as "nonsensical", "malicious" and "sensationalist". You can read my two emails for yourself and decide if that is fair.

I have since discovered I was not the first to raise these questions, but I presume Business for Scotland meant me when their press release referred to the "original complainant" being "a well known unionist blogger and social media troll" (translation: somebody who looks at economic data and challenges people like Business for Scotland when they blatantly misrepresent both the economic facts and the nature of their own organisation).

I of course did ask the Electoral Commission for some explanation of their judgement and received a brief email.  Their explanation fascinated me and I think may have very significant implications for how regulated bodies behave in future referendums.

Here's the reply I have sent them; I hope it speaks for itself.

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Thank you for your response.

It is unfortunate that you didn’t notify me of these findings on the day that both the Electoral Commission and Business for Scotland put out press releases about them. I of course accept your apology and explanation that this was simply an oversight on your part.

I would hope that you welcome engagement with people wishing to understand the rules you enforce and I'm sure you would not want to discourage other people from coming forwards with any concerns they may have. With this in mind I would be grateful if you could confirm whether or not you consider the nature of my initial enquiry to be in any way "nonsensical",  “malicious” or “sensationalist” (these are all words used by Business for Scotland in their press release following your judgement).

Turning to the contents of your email, there would appear to be two key elements to your conclusion and I hope you will be able to offer some clarity about both;

1. The point of law: what activities might be considered to constitute “working together”?
2. The point of fact: what would constitute “reasonable grounds to suspect”?

The point of law: What activities might be considered to constitute “working together”?

I know several campaigners during the independence referendum interpreted these rules more strictly than you appear to and may have compromised their effectiveness as a result. It strikes me therefore that your assessment may provide some helpful clarity as to what would not be considered “working together”.

You state:

“Under SIRA schedule 4 paragraph 20, campaigners were considered to be working together if they had agreed and implemented a common plan or joint campaign during the referendum period to promote or procure a particular outcome”

You go on to say

“… does not amount [to] having agreed a common plan to work together as defined in the legislation”

So it is clear that you assessed this enquiry on the basis of whether or not there is evidence that the bodies involved “agreed a common plan to work together as defined in the legislation”.

Here is the full text of the relevant clause in the legislation (the highlighting is mine):

“20 (1) This paragraph applies where— (a) referendum expenses are incurred by or on behalf of an individual or body during the referendum period, (b) the expenses are incurred as part of a common plan or other arrangement with one or more other individuals or bodies, (c) the common plan or arrangement is one whereby referendum expenses are to be incurred by or on behalf of both or all of the individuals or bodies involved in the common plan or arrangement with a view to, or otherwise in connection with, promoting or procuring one particular outcome in the referendum, and (d) there is a designated organisation in respect of each of the possible outcomes in the referendum.”

The semantics of this are clearly important. I know many campaigners have interpreted “other arrangement” to mean they should avoid coordinating ongoing decisions around activity and expenditure during the campaign (for example by attending board meetings of other bodies and/or directly discussing how resources should be focused).

One possible interpretation of your assessment is that an “agreed … common plan” would have to be seen to be in place before two bodies would be deemed as working together. Can you confirm if this is correct?

If this is correct could you formally confirm that this sets the precedent that campaign bodies are free to attend each other’s board meetings (and by implication any other planning and strategy meetings) and to contribute to each other’s decisions about how to focus resources, so long as a “formal plan” can’t be seen to exist?

I may have interpreted your judgement incorrectly. It’s possible that - although your explanation refers only to the lack of evidence of an “agreed plan” - you also concluded that there weren’t sufficient grounds for suspicion that some “other arrangement” may have been in place.

It would be helpful therefore if you could clarify whether you considered the wider definition of working together which your own guidance notes describe as:

if: you coordinate your activity with another campaigner – for example, if you agree that you should each cover particular areas, arguments or voters; another campaigner can approve or has significant influence over your leaflets, websites, telephone scripts or other campaign materials

It strikes me that these are all the sorts of things that might be discussed at board level. If the above only applies if the coordination happens as part of an "agreed plan" (as opposed to as part of an ongoing decision making process) then that clearly raises the threshold for what would be considered working together. I know I would not be alone in welcoming clarity around this point.


The point of fact: What evidence would constitute “reasonable grounds to suspect”

Quoting directly from your email to me you state:

“Our assessment looked at those press reports as well as the concerns you raised about their implications [..] You referred to comments attributed to Peter Murrell, and Tony Bank [sic] about Michelle Thompson’s [sic] employment, and Ivan McKee about Colin Pyle’s exclusion from BFS meetings. While the SNP and BFS were registered with commission [sic] as permitted participants supporting a ‘yes’ outcome in the referendum, this and the contents of these emails, if correctly reported, does not amount having [sic] agreed a common plan to  work together as defined in the legislation.”

Clearly what you deem to be an appropriate level of assessment will depend on your answer to the question surrounding the point of law: are you just looking for grounds for suspicion that a “common plan” existed or would some “other arrangement” (such as active involvement in ongoing decision-making) count as potentially working together?

If the threshold for “working together” is evidence that a plan existed – something that you could put your hand on and say “there’s the plan” - then I accept that my enquiry warrants no more than the apparently cursory assessment it has received.

If, however, you interpret the question of law more broadly (to include “other arrangements” such as attending each other’s board meetings), I think it is reasonable to ask more about the nature of the assessment you carried out.

You make no mention in your assessment (or your press release) of Yes Scotland. Obviously you know Colin Pyle was Head of Development for Yes Scotland which was a separately registered campaign body. I presume this is merely an oversight on your part and we are to infer that you have also concluded that there is no evidence (or there are insufficient grounds for suspicion that) BfS may have worked together with Yes Scotland.

You state that you “looked at the press reports” and refer to “the content of these emails, if correctly reported”. This seems to imply that your assessment did not go any further than reading the press reports – could you confirm is this is correct?

This matters because your email assessment refers to “Colin Pyle’s exclusion from BfS meetings” which seems to imply that you have concluded he did not attend BfS meetings. The blog by Paul Hutcheon (the source for these press reports) concluded “It is unclear how the Pyle issue was resolved”.

I recognise that this assessment process is simply about determining whether sufficient grounds for suspicion exist to launch a full investigation, but your process documentation states that the assessment process can include “making initial inquiries of the subject of the allegation and other individuals or organisations”. I would therefore be interested to know if you deemed it worthwhile to make enquiries in particular with respect to the specific questions I raised in my second email (which you acknowledged you would be considering):

1. Did Mr Pyle attend any BfS Board meetings (before or after this email exchange)?
2. If he did, did his attendance involve interventions or knowledge transfer that might constitute “working together”?

Of course depending on the “point of law” question above, you may be signalling that it is acceptable for members of different registered bodies to attend each other’s board meetings and so these questions are not relevant. If this is the case, among those who will be surprised will be Ivan McKee himself who, if the emails are correctly reported, stated:

“Frankly struggling to see how someone in the payroll of Yes Scotland coming to a BfS meeting can be classed as anything other than ‘working together’.”

In conclusion:

• It may be simply that your judgement helps inform campaigners that the threshold for what might be considered "working together" is in fact far higher than many thought. If this is the case I am sure a lot of people will welcome this new clarity
• It may be that you carried out a wider assessment than your brief email suggests and you have in fact confirmed to your satisfaction that Mr Pyle did not attend any BfS meetings. It may be that if you had reasonable grounds to suspect that he had attended BfS board meetings this may have triggered an investigation. Again, I am sure I will not be alone in wishing to know which is the case.

I hope you appreciate that my tenacity on understanding the detail here is motivated by nothing more than a desire to ensure that the rules you enforce are as widely understood as possible and fully adhered to.

I look forwards to your response.

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Let's Talk About Growth

Watching the latest round of SNP politicians' media interviews (and hearing the echoes on social media) it's clear they're working off a crib-sheet that reads something like this;

If Scotland was able to run its own affairs - if we had control over the levers of growth - then we would grow our way out of the £8bn black-hole that we keep being told about. It might be true that Full Fiscal Autonomy now would be "tantamount to economic suicide" (SNP MP George Kerevan) - would be "a disaster" (SNP MP Tommy Sheppard) - but it's still a sensible medium term aim.

Saying we'd have an £8bn deficit as if that's something we'd have to get rid of overnight when all countries (including the UK) run deficits is simply scaremongering. Anyway these figures are all hugely uncertain and based on assumptions that the SNP don't necessarily agree with ... and who would argue that Scots wouldn't be better at running our own affairs than Westminster Tories?

If I could be bothered I could find plenty of direct quotes (from the likes of Stewart Hosie and Pete Wishart) to back me up on this - but I think most will agree this fairly paraphrases the SNP line at the moment.

So let's unpick it.


"We would grow our way out of the £8bn black-hole if we had full powers"

Putting aside the obvious point that the SNP have yet to make any concrete policy proposals that would lead us to believe that they would somehow achieve this superior growth, let's just concentrate on the magnitude of the challenge.

The numbers are easy: Scotland generates £50bn of onshore tax revenue, so to increase that by £8bn means growing it by 16%.  If we're to make this additional tax revenue through economic growth (as opposed to through increasing tax rates) then we'd need to grow GDP by 16%.  [For those who care about such things, Scottish onshore tax generation consistently runs at about 37% of GDP].

It's important to understand that this growth needs to be growth relative to the rest of the UK because that £8bn figure is the deficit gap (on which more later). It's what we need to generate to be paying our way within the UK, for us to be making Full Fiscal Autonomy work. See my post Full Fiscal Autonomy for Dummies if you need convincing.

To get an indication of the scale of this challenge we need look no further than the Scottish Government's own White Paper: Scotland's Future: Your Guide to an Independent Scotland. As you might expect they had a go at scaling how much faster an independent Scotland might grow when no longer shackled to the UK. In fact they were so pleased with their analysis that they quoted it five times (pp 23, 43, 88, 375, 619). Here's the wording from page 23;

"Similar countries to Scotland have seen higher levels of economic growth over the past generation. That is because they have the bonus of being independent and are able to make the right choices for their nation and economy. If Scotland had matched the levels of growth of these other independent nations between 1977 and 2007, GDP per head in Scotland would now be 3.8 per cent higher"

I think we can safely assume that the countries and timescale used were selected to make the strongest possible case - after all, why stop at 2007 when more recent data was available? - and just in case you doubt if that is a cumulative 30 year figure, it's clarified on page 619:

"The average rate among small European countries was 2.61%, a gap of 0.12% each year. Over a 30 year period the compounded effect of this gap totals 3.8% of GDP"

So the Scottish Government's own attempt at scaling the economic growth benefits that "the bonus of being independent" might bring was 3.8% over 30 years. We're looking for 16.0% to grow our way out of the deficit gap. As one of my erstwhile American colleagues used to say: you do the math.

Frankly I could stop here. The assumptions required for the SNP's "levers of growth" argument to work are exposed as ludicrous by their own analysis.  But I'll carry on because this SNP Hydra has many heads ...


"The IFS say we'd have an £8bn deficit"

The £8bn (or £7.6bn) is consistently referred to by the SNP as the IFS forecast of Scotland's deficit. This is simply untrue.

I've blogged about this before and this simple table summarises the key figures

Scotland's deficit in 2013-14 per Scottish Government's own GERS analysis is £12.4bn and is forecast by the IFS to be £14.2bn in 2015-16. This is the net result of (largely know) oil revenue declines offsetting expected deficit reductions (as a result of UK-wide policies).

It shouldn't be beyond the wit of any half-decent politician to understand and remember these figures. If they're going to engage in this debate they really should know what Scotland's deficit is. If they're going to write a press release about it surely it would unforgivable to get this basic fact wrong?

Well here's the SNP's official press release (posted on Thursday 11/06 at 07:44) which includes these words:

"The IFS figures they cite suggest that Scotland would have a deficit of £7.6 billion in 2015-16. But over the five years to 2013-14, the UK’s cumulative deficit has been worth over £600 billion."

I (and many others I'm sure) jumped on this howler within minutes - the BBC picked up on it and contacted the SNP for a statement (see at 22:30 in this broadcast of BBC R4's More or Less) and yet still (13:50 on Saturday as I'm writing) the Press Release sits there uncorrected.

There are only two possible explanations for the SNP and their spokespeople making and repeating this error: either they don’t even know what our deficit is or they know full well but think they can get away with simply lying about it. I don’t know if they’re insulting our intelligence and actively trying to deceive the electorate or they’re just spectacularly incompetent. These are the people negotiating Scotland's economic future - god help us.

To compare this (wrong) annual figure with the cumulative 5 year UK figure really is so obviously ridiculous that I'll treat it as an aside.

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For fun let's work out the scale of this misrepresentation of data

1. Using the £7.6bn increase instead of the £14.2bn total is a 1.9-fold misrepresentation
2. Comparing a single year with a five year total figure is obviously a 5-fold misrepresentation
3. Comparing an absolute number spread across the whole of the UK with an absolute number shared across just 8.3% of the UK’s population is a 12-fold misrepresentation
4. Comparing UK figures from the past (when the deficit was worse) with a Scottish figure for the future (when the onshore deficit is forecast to decrease) is – as it happens -  a 1.6-fold misrepresentation

So that’s 1.9 x 5 x 12 x 1.6 = a 185-fold misrepresentation. Bravo!

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Of course the right comparison to make is that Scotland's deficit is forecast to be 8.6% of GDP compared to 4.0% for the UK: so more than twice as bad.


"Suggesting we'd have to get rid of the deficit overnight when all countries (including the UK) run deficits is simply scaremongering"

Under FFA we would still be sharing a currency and a national debt with the rest of the UK, so to be be paying our way we would simply need to be (over a sensible period of time) running a deficit at a similar rate to the rest of the UK. That's what the £8bn defines - the amount we'd need to find from more taxes or less spending to be holding our own within the UK.  If you like: it's the amount we'd need to find to get back to the position we're in now by pooling and sharing within the UK.

Nobody's saying that under FFA Scotland would have to eliminate its deficit.

As for "all countries run a deficit" - no they don't. To put it simply: those running deficits borrow their money from those running surpluses.   It's been pointed out this is an over-simplification which I'm happy to accept - suffice to say there are plenty of countries who run surpluses from time to time


As for "we'd have a deficit but so do lots of European countries" - it's rather silly to talk about having a deficit as if it's a binary thing (you either have one or you don't). Clearly the scale of the deficit matters, so let's put that forecast deficit of 8.6% in context.

The graph below shows European Commission data on net lending / (borrowing) by country as a percentage of GDP in 2015;

Stop drooling over Norway; it's unseemly.

I confess I'm not sure how Norway's sovereign wealth fund plays in these figures (although it's clear in 2014 Norway was running a considerable surplus) - but for other countries this is basically the same as surplus/(deficit).

Let's repeat the graph without Norway (just so it's easier to read) and add a line at -3% (which the European Commission's Stability & Growth Pact defines as the threshold for "excessive" deficits).

I don't think anybody can seriously argue that Scotland running a deficit of 8.6% of GDP would be "just like other European countries running deficits".  Our deficit would be considerably worse than any other European country, worse than Croatia, Serbia and Montenegro.

This would need to be addressed and it could only be addressed by yet more borrowing (if Scotland's borrowing capacity would allow it), higher taxes or lower spending.  To imagine how this would be playing out had we voted Yes and been renegotiating our position within the EU - while grappling with currency issues, transition costs and business flight - is quite terrifying.


"These figures are all hugely uncertain"

Actually they're not really. All the IFS assumptions do is extend the consistent long-term relative onshore tax and spend generation levels and factor in the known impact of oil revenue declines.

Of course these figures don't reflect what actions a Scottish Government would take if given FFA. That's precisely the point: maintaining the tax and spend status quo would be unsustainable under FFA. What we need to hear is how the SNP propose to close this gap. These analyses present the problem with FFA and - given they're the ones asking for it - it's right that the SNP should be asked to explain what their solution would be.

I think we've shown that just saying "we'll grow the economy" is not a good enough answer - so it becomes a question of which taxes will go up and which costs will be cut?  The SNP are very reluctant to answer this question.


"It's based on assumptions that the SNP don't necessarily agree with"

As we've seen the assumptions are hardly controversial and it is - as ever - really just all about oil. The latest OBR Fiscal Sustainability Report is very thorough on the topic. We can argue about future oil prices but two points are undeniable;

1. The profitability of North Sea production is in long term decline due to rising costs, not just falling oil prices.
2. The decline of North Sea production is not a surprise - it's been forecast for years, the only question has ever been one of timing

Unfortunately during the independence referendum it appears summit fever led the SNP to present hopelessly optimistic forecasts; they've not been too keen on producing forecasts since. But if they don't like the OBR and IFS forecasts, they really need to show us some of their own.


"Who would argue that Scots wouldn't be better at running our own affairs than Westminster Tories?"

This is always the payoff. When all else fails (and it does) accuse those who argue against FFA of talking down Scotland, of suggesting Scot's aren't capable.

It's true that the SNP seem hell-bent on demonstrating that they don't understand Scotland's economy, but let's not make the mistake of conflating the SNP's leaders with the Scots people.

The question is not one of competence or who happens to be in power in Westminster right now. It's about understanding and valuing the benefits of UK wide pooling and sharing. FFA means sacrificing that and for some of us that seems like a wildly reckless and self-destructive act.