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Showing posts with label independence. Show all posts
Showing posts with label independence. Show all posts
Thursday, 8 September 2016
Tuesday, 17 May 2016
An Open Letter to Nicola Sturgeon
Dear Nicola
First of all let me congratulate you on being returned as Scotland’s First Minister. Your party received a lower share of the combined vote than in 2011, you have fewer MSP’s and no longer command a majority - but nevertheless you can rightfully claim a strong mandate to implement your manifesto commitments.
So I’ve been checking the 36 “Next Steps” that were detailed in your manifesto, and see that independence is only mentioned in the very last one.
It would be nice to think that the other steps - things like investing in our NHS, improving our education system and creating a positive climate for business - are indeed more important for you right now than revisiting a debate you so recently lost. But if the headlines1 you’ve been making since the election are anything to go by, the question of independence remains a little higher than number 36 on your actual to-do list.
I’m teasing of course. The SNP’s formal constitution makes clear2 that independence is the first of only two objectives for the party (the second being the rather nebulous “furtherance of all Scottish interests”) - so of course independence is high on your list.
That 36th step in your manifesto talks of ”persuading a clear majority of people in Scotland that independence is the best future for our country".
Whether or not independence actually is the best future for our country is obviously not a question you’re willing to contemplate. You start with what for you is an unchallengeable conclusion and you work your way back from there.
This is hardly surprising. You joined the SNP when you were 16 and became their youngest ever parliamentary candidate as a 21 year-old. It’s probably fair to say you’ve dedicated your entire adult life to the party, that you’re wedded to the cause. In your position you have to show an unwavering belief that no matter the question, no matter the economic context or consequences, independence must be the answer. You clearly can’t ask whether separation from the rest of the UK actually is in our best interests - it’s an article of faith that it simply has to be.
So here’s what you need to understand to persuade people like me, people who don’t do blind faith.
You need to understand that we noticed your economic case relied on £6.8billion to £7.9billion of oil revenues every year3. We didn’t fall for “oil is just a bonus” because we saw that we’d need those revenues (and more) to continue enjoying the high levels of public spending we currently receive. We’ve noticed what’s actually happened to oil revenues, so know your suggested gamble wouldn’t have paid off. Those of us who’ve dug a little deeper also realise that the high extraction costs associated with our relatively mature oil reserves means that even a dramatic oil price recovery wouldn’t see North Sea tax revenues return to their historic highs3.
You need to understand that we know the UK currently transfers over £8bn a year to Scotland3. You know that too of course, because you worked hard to ensure that transfer remained in place when you negotiated the fiscal framework with Westminster. Some of us don’t see this transfer as anything to be embarrassed about either. We know that revenues generated from oil found in Scottish waters allows us to argue that (cumulatively) we’re net contributors to the UK since 19803. You need to understand that people who don’t share your ideological position see receiving funds from the rest of the UK now as the sensible result of neighbourly pooling & sharing of our resources then.
You need to understand that we know why you’ve stopped talking about “full fiscal autonomy”. We know that if we were to pay for our public expenditure with the taxes we raise in Scotland we’d have to find annual savings (or tax rises) of £8billion – 10billion a year just to match the deficit levels of the rest of the UK3. We remember that your own notoriously optimistic White Paper identified just £0.6bn of net savings (primarily from defence cuts) and you will have noticed how unenthusiastically voters reacted to Labour and the Liberal Democrats proposing we pay just £0.5bn a year more in tax.
You need to understand that we’ve also worked out that to raise those taxes simply by growing Scotland’s onshore economy faster than the rest of the UK would, even optimistically, take generations to achieve. We’ve worked that out because we read your Independence White Paper and we did the maths3.
You need to understand that we’ve seen through the barrage of misinformation that’s been spread on social media. We know that England’s costs aren’t unfairly allocated to Scotland in the GERS figures that your government produces. We know that myths about missing whisky export duties or taxes allocated based on corporate head office location are simply nonsense.
So before you look for a fresh set of Nobel laureates to try and come up with a workable currency solution, you need to address this simple truth: many of us have considered the idea that independence might be best for Scotland and have rationally concluded that, whatever the weight of emotional argument on either side, the economic case is overwhelmingly against separation. To be fair I’m sure you understand this way of thinking as as you seem to have grasped it in the context of the EU debate.
Of course you might rightly argue that this is about more than simple economics - but in that case you should have the courage and integrity to be straight with people about the fact that we’d be paying the economic price for independence for many generations to come.
This is the acid test of your faith: are you confident enough in your emotional case to be honest with us about the economic reality?
2. Extract from SNP constitution
First of all let me congratulate you on being returned as Scotland’s First Minister. Your party received a lower share of the combined vote than in 2011, you have fewer MSP’s and no longer command a majority - but nevertheless you can rightfully claim a strong mandate to implement your manifesto commitments.
So I’ve been checking the 36 “Next Steps” that were detailed in your manifesto, and see that independence is only mentioned in the very last one.
It would be nice to think that the other steps - things like investing in our NHS, improving our education system and creating a positive climate for business - are indeed more important for you right now than revisiting a debate you so recently lost. But if the headlines1 you’ve been making since the election are anything to go by, the question of independence remains a little higher than number 36 on your actual to-do list.
I’m teasing of course. The SNP’s formal constitution makes clear2 that independence is the first of only two objectives for the party (the second being the rather nebulous “furtherance of all Scottish interests”) - so of course independence is high on your list.
That 36th step in your manifesto talks of ”persuading a clear majority of people in Scotland that independence is the best future for our country".
Whether or not independence actually is the best future for our country is obviously not a question you’re willing to contemplate. You start with what for you is an unchallengeable conclusion and you work your way back from there.
This is hardly surprising. You joined the SNP when you were 16 and became their youngest ever parliamentary candidate as a 21 year-old. It’s probably fair to say you’ve dedicated your entire adult life to the party, that you’re wedded to the cause. In your position you have to show an unwavering belief that no matter the question, no matter the economic context or consequences, independence must be the answer. You clearly can’t ask whether separation from the rest of the UK actually is in our best interests - it’s an article of faith that it simply has to be.
So here’s what you need to understand to persuade people like me, people who don’t do blind faith.
You need to understand that we noticed your economic case relied on £6.8billion to £7.9billion of oil revenues every year3. We didn’t fall for “oil is just a bonus” because we saw that we’d need those revenues (and more) to continue enjoying the high levels of public spending we currently receive. We’ve noticed what’s actually happened to oil revenues, so know your suggested gamble wouldn’t have paid off. Those of us who’ve dug a little deeper also realise that the high extraction costs associated with our relatively mature oil reserves means that even a dramatic oil price recovery wouldn’t see North Sea tax revenues return to their historic highs3.
You need to understand that we know the UK currently transfers over £8bn a year to Scotland3. You know that too of course, because you worked hard to ensure that transfer remained in place when you negotiated the fiscal framework with Westminster. Some of us don’t see this transfer as anything to be embarrassed about either. We know that revenues generated from oil found in Scottish waters allows us to argue that (cumulatively) we’re net contributors to the UK since 19803. You need to understand that people who don’t share your ideological position see receiving funds from the rest of the UK now as the sensible result of neighbourly pooling & sharing of our resources then.
You need to understand that we know why you’ve stopped talking about “full fiscal autonomy”. We know that if we were to pay for our public expenditure with the taxes we raise in Scotland we’d have to find annual savings (or tax rises) of £8billion – 10billion a year just to match the deficit levels of the rest of the UK3. We remember that your own notoriously optimistic White Paper identified just £0.6bn of net savings (primarily from defence cuts) and you will have noticed how unenthusiastically voters reacted to Labour and the Liberal Democrats proposing we pay just £0.5bn a year more in tax.
You need to understand that we’ve also worked out that to raise those taxes simply by growing Scotland’s onshore economy faster than the rest of the UK would, even optimistically, take generations to achieve. We’ve worked that out because we read your Independence White Paper and we did the maths3.
You need to understand that we’ve seen through the barrage of misinformation that’s been spread on social media. We know that England’s costs aren’t unfairly allocated to Scotland in the GERS figures that your government produces. We know that myths about missing whisky export duties or taxes allocated based on corporate head office location are simply nonsense.
So before you look for a fresh set of Nobel laureates to try and come up with a workable currency solution, you need to address this simple truth: many of us have considered the idea that independence might be best for Scotland and have rationally concluded that, whatever the weight of emotional argument on either side, the economic case is overwhelmingly against separation. To be fair I’m sure you understand this way of thinking as as you seem to have grasped it in the context of the EU debate.
Of course you might rightly argue that this is about more than simple economics - but in that case you should have the courage and integrity to be straight with people about the fact that we’d be paying the economic price for independence for many generations to come.
This is the acid test of your faith: are you confident enough in your emotional case to be honest with us about the economic reality?
***
1. Recent Headlines- Nicola Sturgeon: SNP leader rules out Holyrood coalition and vows to build independence case - IBT, 06/05/2016
- Scottish National Party leader Nicola Sturgeon says party will seek to 'persuade not divide' electorate on independence - Breaking news, 06/05/16
- Defiant Nicola Sturgeon; I’ll persuade not divide - Herald, 07/05/16
- Nicola Sturgeon vows to keep making the case for independence after failing to win an SNP majority - The National, 07/05/16
- Minority government will not be barrier to second independence referendum - The Press & Journal, 07/05/2016
- Nicola Sturgeon Confirms Intention to Relaunch SNP’s Independence Campaign - Herald, 08/05/16
- Sturgeon says summer independence Drive will go ahead - STV, 08/05/16
- Nicola Sturgeon Confirms Intention to Relaunch SNP’s Independence Campaign - Huffington Post, 08/05/16
- Nicola Sturgeon to launch new Scottish independence campaign - The Scotsman, 08/05/16
2. Extract from SNP constitution
The aims of the Party shall be:
(a) Independence for Scotland; that is the restoration of Scottish national sovereignty by restoration of full powers to the Scottish Parliament, so that its authority is limited only by the sovereign power of the Scottish People to bind it with a written constitution and by such agreements as it may freely enter into with other nations or states or international organisations for the purpose of furtheringinternational cooperation, world peace and the protection of the environment.
(b) the furtherance of all Scottish interests.
I remain confused as to whether the personal statement from Nicola Sturgeon under the "constitution" link on the SNP website has formally been adopted by the party as their new constitution. A very strange formal constitution and a very low-key change if it was3. The Price of Independence
Monday, 26 October 2015
Wee Blue Book of Errors Part II: Pensions
Guest blog written by Neil Lovatt who can be found on Twitter @neiledwardlovat
Neil is an Associate of the Chartered Insurance Institute and blogs on financial services. He offered to deliver a professional's critique of the section in Wings Over Scotland's Wee Blue Book entitled "Pensions" and I'm happy to publish it here. As with all my own blog posts: if I'm notified of any material errors I will be happy to correct and/or offer Neil the opportunity to clarify
As I say in the Live Red White & Blue Book, pensions are a highly complex topic. They need not be, but government tinkering over the ages has made them fantastically complicated. That’s why you can’t legally advise on pensions without being qualified in the UK. There's a very good reasons for this: it stops people who don’t know what they are talking about confusing others on the subject.
It’s a shame the Financial Services & Markets Act doesn’t apply in the circumstances of the Wee Blue Book as, in my professional opinion, it would be ruled illegal for failing the principles of “clear, fair and not misleading”.
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The first paragraph doesn’t get off to a good start:
Pensions are a matter of great concern to many Scots, and as a result the No campaign spends a considerable amount of its time trying to frighten people into believing independence represents a threat to their pension. Yet as with currency, pensions are one of the few aspects of the independence debate about which it IS possible to state the position with certainty.Before I take this apart, I'll let the Wee Blue Book do it for me. The last line of the Pension section itself refutes the first paragraph:
The idea that a No vote provides either security or certainty over pensions is simply a myth. Nobody can say what the next government England elects will do.This cuts both ways so the converse must be true. The idea that a Yes vote provides either security or certainty over pensions is simply a myth. Nobody can say what a government in an independent Scotland will do. It’s likely that Stu was tired - or more likely confused - when he wrote this last line; it completely contradicts the certainty that he set up at the beginning. For the record I agree with the latter sentiment.
There is no certainty over pensions in an independent Scotland other than the uncomfortable reality that we know with confidence that UK pensions would end on independence. The reason we can say this with such certainty is that both sides agree on this position.
The Scottish Government published a very good paper (> Pensions in an Independent Scotland) a full year before the referendum. In this they clearly set out the priorities for pensions and how they would operate in an independent Scotland.
The Scottish Government were unambiguous: existing pensioners in receipt of a UK State Pension and those currently accruing a UK State pension would - after independence - receive a Scottish State Pension paid for by the Scottish Government rather than the UK Government.
It's there in back & white: the UK State Pension ends and moves to the Scottish Government. What makes this worse is I know Stu knew this because we have had conversations about it at the time.
Conclusion : Factually inaccurate - the UK pension would have ended on independence.
The Wee Blue Book then goes on to try and substantiate the certainty of UK pensions with evidence which is at best limited. It opens with a highly selective quotation from Ian Davidson:
For example, Labour MP Ian Davidson, chair of the Scottish Affairs Select Committee, made these comments in the House Of Commons in May 2014:
“The state pension of any individual in Scotland, in the event of separation, would not be adversely affected [...] they would continue to get the level of state pension, the same as everyone else in the UK… people themselves can be assured that their pensions are secure.”This was followed by a report from Steve Webb’s evidence to the Committee:
State pensions would still be paid after independence, a UK minister has told MPs, despite concerns raised by the Better Together campaign. Giving evidence to the Scottish Affairs Select Committee, Lib Dem pensions minister Steve Webb said that anybody who had paid UK national insurance would be entitled to their state pension whatever the outcome of the referendum. The intervention contradicts concerns raised by former Labour Chancellor Alistair Darling, the leader of the Better Together campaign.This is consistent with Stu’s usual style - he's being selective with the facts to try and avoid the awkward reality that these quotes were specifically in the context of the right to a pension which an individual would accrue. Ian Davidson clearly stated in his opening remarks that they wanted to talk about rights “as distinct of who is paying for it”. This important qualification seems to have been missed from the Wee Blue Book.
Furthermore Steve Webb’s evidence is very clear in his written evidence to the Committee on the subject of who is paying for pensions and the threat that independence posed to them. In this Webb states very clearly:
“I would think the Scottish people would expect their Government to take on full responsibility for paying pensions to people in Scotland including where liabilities had arisen before independence. Similarly people in the rest of the UK would not be expecting to guarantee or underwrite the pension of those living in what would then have become a separate country. The security and sustainability of pensions being paid to people in Scotland would, therefore, depend on the ability of Scottish tax payers to fund them.”Again this vital piece of information is missing - readers of the Wee Blue Book are denied the opportunity to see that there is a clear and real risk to their pensions.
Finally in this section Stu goes on to muddy the waters with references to the DWP letters on the subject of pensions:
And in any event the facts had been well established long before then, with the Department for Work and Pensions having made a similar statement in January 2013:This yet again misses the key point about rights of the individual: what matter is who those rights are against (i.e. -who is picking up the tab, the Scottish or rUK government?).
“If Scotland does become independent this will have no effect on your State Pension, you will continue to receive it just as you do at present. Anyone who is in receipt or entitled to claim State Pension can still receive this when they live abroad. If this is a European country or a country where Britain has a reciprocal agreement they will continue to receive annual increases as if they stayed in Britain."
The DWP letters were carefully worded; after all it was not for the civil service to comment on who would be administering or paying for pensions in an independent Scotland. These replies were designed to reassure voters without straying into politics, sadly this gave people like Stu the opportunity to wilfully misinterpret them to contradict the mutual position of the UK and Scottish Governments.
Conclusion : Factually inaccurate - and certainly fails the “clear, fair and not misleading" test: all Scottish pensions would have depended on the Scottish Government’s ability to pay
Stu’s claims about private pensions demonstrate nothing more than his limited knowledge on the topic. Whilst the cynic in me thinks that this was deliberate, it is more likely ignorance.
Private workplace pensions are the only area of uncertainty. EU rules impose funding requirements on pensions operating across national borders, which would apply to any UK-wide scheme.
However, there are numerous options available to circumvent this problem, the simplest of which is for the firms operating the scheme to set up a Scottish office and handle the Scottish and rUK sides separately. The decision as to which solution to adopt will be one for each company to make individually. Unfortunately it’s simply not possible to answer generically or in advance.There are indeed numerous options available to firms available to deal with cross border schemes but they are all complex and expensive.
The “simplest” is not to split the schemes setting up separate ones for each region - especially if the schemes were in deficit i.e. the value of the scheme was lower than the cost of future benefits guaranteed by the scheme (quite common and, within reason, nothing in itself to worry about). The reason for this is that a cross-border scheme would need to be fully funded (i.e. the value of assets must be brought up to equal the benefits) and that could cripple a number of employers, leading to the scheme closure.
Stu’s solution of setting up a new scheme in Scotland omits this crucial fact: it would have to be fully funded. The likely consequence (if the employer couldn’t afford to close the deficit) would be that at least the Scottish part of the scheme would be closed. As has happened in the past, it is likely that many employers would use the opportunity of change as an excuse to end their final salary (gold plated) pension schemes.
Conclusion : Fails the “clear, fair and not misleading" test: independence would likely place huge pressure on private cross border final salary schemes, presenting members with risk but no beneficial upside.
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If you want to read about 10 glaring factual inaccuracies in the Wee Blue Book relating to Economics, please see this post > Wings & His Wee Blue Book of Errors
Saturday, 18 April 2015
Full Fiscal Autonomy for Dummies
Full Fiscal Autonomy (FFA) means Scotland keeping everything we raise from taxes and using that money for our own spending (including paying the UK government for defence and foreign affairs and certain shared administrative services).
If we spend more than we raise we run a deficit. That is not in itself necessarily a problem; FFA doesn't mean we can't run a deficit.
Under FFA we would still be sharing a currency and a national debt with the rest of the UK, so to be paying our way we would simply need to be running a deficit at a similar rate1 to the rest of the UK.
If Scotland's deficit rate1 was higher there would be a funding gap (i.e. our fair share1 of UK debt would not be enough to balance the books). It's expected this would be handled by Scotland having its own limited borrowing powers. A limit would need to be agreed because we'd be sharing a currency meaning Scotland's borrowing could affect the UK's international credit rating and cost of debt.
Of course if Scotland's deficit rate was lower than the UK's we would be running a relative surplus. Under FFA any such funds would be kept for Scotland to pay for future tax cuts and/or public spending increases or - whisper it - to build a wealth fund.
In summary: for Scotland to be truly fully fiscally autonomous we would cease exceptional transfers to or from the rest of the UK.
Now let's remind ourselves of some of the rhetoric used by the Yes campaign and think what it would means in the context of FFA;
If these economic claims made by the SNP during the Independence Referendum can be taken at face-value then FFA would be a highly attractive proposition for Scotland.
The Numbers
We can see what FFA would have meant historically for Scotland’s finances by simply looking at the Scottish Government's own GERS report. We need to be absolutely clear about this: these are not Westminster's figures - the Scottish Government's Chief Statistician takes responsibility for them.
If you don't think the GERS figures are meaningful then please read footnote 2. If you still doubt them please read this > How Scotland's Economy Contributes to the UK. If you still doubt them after that please stop reading this blog.
Public Spending
The GERS figures shows how Scotland's public spending is consistently higher per person than the rest of the UK3. Over the last 15 years (adjusted for inflation) the average higher spend is £1,4564 per person or £7.8bn per year.
If we break this spend difference down by category it shows we spend more per capita in every major cost area5,6
These higher per capita spend levels should not be interpreted as evidence of some wild profligacy by the Scottish Government or excessive generosity on the part of the UK towards Scotland. Our population density is 80% lower than the rest of the UK and we have extensive island communities to serve - this obviously makes it more expensive to provide the same level of public services in areas such as education, health, and transport. There are of course other reasons for higher per capita costs in Scotland related to our demographics and health needs - but let's not get distracted by that topic here7.
The point is that today - based on the principle that where possible the same public service levels should be provided nationally - these higher costs are spread across the whole UK population. Of course under FFA (as with Independence) the burden of our higher "costs-to-serve" would have to be borne exclusively by Scottish tax payers.
As an aside: you might spot in the graph above that these figures expose the fact that under the SNP government education spending has been cut in relative terms. Widespread access to good quality education is surely crucial both to address "social justice" concerns and to ensure we have well-educated talent entering our working population to help grow the economy. This prioritisation of education spending is something we'll surely here more of come the Holyrood elections in 2016.
Tax Revenues excluding Oil
The GERS figures show that - before oil is included - we generate slightly less tax per person then the UK average. This is a remarkably consistent trend; over the last 15 years (adjusted for inflation) the average difference is £250 per person or £1.3bn per year
As with the costs it's interesting to break this figure down into its component parts8
What's striking is the extent to which Scotland's income and wealth tax generation lags the rest of the UK. Given that the same tax rates apply UK wide this is of course primarily a function of average employment and pay levels. Since 2006 the unemployment rate in Scotland has generally been near or below the UK rate (see UK regional employment stats over time) so we can infer that the difference is due to lower average wage levels. There does at least appear to be an encouraging trend in this respect.
As a slightly depressing aside it's worth noting that we generate just over £100 per capita (or £0.5bn) more than the rest of the UK through "sin taxes" on alcohol, betting and tobacco.
Relative Deficit Excluding Oil
During the referendum the SNP told us "Oil revenues will be a "bonus" but not the basis of the economy in an independent Scotland" [ Alex Salmond, July 2013].
So before including the "bonus" of oil let's look at the last 15 years actual difference in deficit per capita between Scotland and the rest of the UK;
Of course this will come as no surprise if you're following the logic here; we spend about £1,450 more and raise about £250 less per person so we'd expect an average deficit difference of about £1,700 per person and that's exactly what we see.
Gross that up by Scotland's 5.3m population and you get to an underlying (before oil) deficit gap of £9.1bn. This is not just a snapshot - this has been true (give or take9) for every one of the 15 years for which data is available.
At this stage somebody normally argues that this observation is evidence that the UK has failed Scotland - it must be Westminster's fault that our underlying deficit is so much worse. Let's just think about that for a moment. Of that £9.1bn gap only £1.3bn is due to lower tax generation (i.e. less successful economic activity); the balance of £7.8bn is due to higher public expenditure. It seems a little harsh to cry foul against the rest of the UK for making us suffer higher levels of public funding.
The Impact of Oil
So now let's move on to the "bonus" that is oil. The following graph shows the higher spend per capita (the red line) and the lower ex-oil revenue per capita (blue line) that we've just been looking at. The new black line is the total revenue per capita difference if we include Scotland's full geographic share10 of North Sea oil
Clearly when the black line is above the red line Scotland's deficit per capita is less than the rest of the UK's. That's happened three times in the last 15 years as the graph below perhaps more clearly shows (we're just plotting the difference between the red and black lines).
Surely by now its clear. Oil is not a bonus; in fact it's all about the oil.
Three times in the last 15 years the oil tide has risen high enough to submerge the underlying £1,700 per capita deficit difference and give Scotland a lower deficit than the rest of the UK. When the oil tide flows out we can see more of that underlying £1,700/person deficit difference, we see more of the £9.1bn.
So let's take a closer look at the oil figures.
For Scotland to cover the underlying £9.1bn deficit gap we' need total North Sea oil revenues of £10.1bn (because c.90% of North Sea oil revenues are attributable to Scotland11).
Let's look at that in the context of historical actual figures (grey bars) and the OBR's latest forecasts (sludgy bars). The solid green line is the approximate actual North Sea revenues we would have needed in each year to off-set our deficit difference to the rest of the UK; the dotted green line is the 15 year average requirement.
Roughly speaking: the gap between the bars and the green line is the size of the deficit gap that Scotland would have faced (or would be expected to face) under FFA.
This is where the IFS £7.6bn "black-hole" figure comes from; they're simply recognising that when Scotland's share of North Sea oil revenues slumps as low as £600m (as the OBR forecast for 2015-16) then more of the underlying deficit gap will be exposed. Note that the OBR forecast a further slight deterioration of North Sea oil revenues in 2016-17; the black-hole is not expected to be getting any smaller.
Note also that £7.6bn is not the size of Scotland's forecast deficit as some seem to think - the forecast deficit is £14.2bn or 8.6% of GDP.
The sharper of you will have noticed that our figure of £9.1bn - £0.6bn from oil = £8.5bn compared to the IFS headline "black-hole" figure of £7.6bn. There are good methodological reasons12 for the difference but frankly these are not worth arguing about in the big scheme of things.
Let's stick with the easy round number of a forecast £8bn deficit gap - this is the FFA "Black-hole".
Addendum: You might be thinking that a recovery in the oil price changes everything. It doesn't as I explain in detail here > Oil Price and Scottish Tax Generation. The problem - simply - is that it's profit that gets taxed and the profitability of North Sea oil production is in long-term decline because of increasing production costs. The tax that an oil price of $100 generated 2 years ago is a lot more than the tax a $100 price would generate in 2 years' time
So What?
Clearly for the SNP the undeniable reality of the FFA figures is a huge problem, particularly given the boldness of their referendum rhetoric. Remember:
So what of the Independence case now? Well there appear to be two approaches being taken to deal with the inconvenient economic truth;
1. The "No Detriment" Defence
This is the line taken by Alex salmond in what Kenny Farquharson (Deputy Editor of the Scotsman and Scotland on Sunday) described as "perhaps the most ludicrous political intervention of his career"
More fundamentally; arguing that Barnett needs to be maintained to avoid Scotland losing out financially as a result of FFA gives a lie to all of Salmon's pre-Indyref rhetoric about Scotland being better off, being "the 14th richest country in the world". Remember: those statements were not made about what Scotland could become, they were assertions about where Scotland already is.
2. The "Kick It Into The Long Grass" Defence
This seems to be the approach favoured by Sturgeon. The argument goes something like this
Even assuming a following wind and some combination of all of the above happening it's hard to see how things could particularly rosy for the Independence case even by 2020.
The possible exception I suppose is the possibility that the Barnett Formula could end up being scrapped. Given her antagonistic approach to the Tories maybe that's what Sturgeon is secretly hoping for? Sure Scots would suffer directly as a result - but if all you care about is achieving Independence, I guess you consider that a price worth paying.
Implications for Independence
Of course all of the above is about FFA, so some would argue that it merely proves that a compromise won't work and only full Independence can give the Scots what they want. Fair enough. All I've ever argued is that voters should be aware of the economic realities of what they're voting for and not be misled by the Yes campaign's rhetoric.
The possible upside differences between FFA and Independence are reasonably easy to describe in summary;
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Notes
1. I've intentionally referred to "deficit rate" and "fair share" of borrowing to avoid getting bogged down in definitions that make little material difference. Basically these can be defined as being on a per head basis or percent of GDP basis. There is an inconsistency in most figures used at the moment because debt costs tend to be allocated on a per capita basis but deficits compared on a % GDP basis. To make it easier for readers to relate figures to those widely quoted I'm going to follow this inconsistent method. If we defined deficit rate on a per capita basis instead of % GDP it would make the case look slightly worse for Scotland.
2. Although you won't hear the accuracy of GERS figures questioned by serious politicians, some disreputable commentators have been responsible for spreading ridiculous misconceptions about them. The likes of Business for Scotland and Wings Over Scotland have made startlingly misinformed statements about VAT and Alcohol Duty not being fully included in Scotland's numbers. If they were right it would be a terrifying indictment of the Scottish Government's incompetence. They are wrong of course: references to VAT being "paid at companies' headquarters" and Scotland not getting attributed "Alcohol Duty at point of export" demonstrate a fundamental misunderstanding of how these taxes work and how they are attributed in GERS. These are consumption taxes and GERS estimates Scotland's share of these based on consumption data. There is no such thing as "Export Duty" on whisky.
3. I compare Scotland to "rest of UK" (rUK) because otherwise we are comparing to a UK figure which includes us. I don't understand why so few others do this - maybe because it's a little more analytical work.
4. This figure is commonly quoted as £1,200. That figure is the non-inflation adjusted average from 07-08 to 11-12 (the period available when the White Paper was produced) based on comparing Scotland to total UK rather than "rest of UK". I f we update to the most recent available 5 years GERS (09-10 - 13-14) the figure would be £1,245; adjust to be vs rUK instead of vs UK and it becomes £1,360; adjust for inflation and it becomes £1,415; take a 15 year average it becomes £1,465. I'd say £1,400 is a good figure to use.
5. Note that defence, foreign affairs and debt interest costs are not included on this graph because in GERS figures they are allocated on a simple per capita basis so the per capita difference is of course zero. This is consistent with the principles of FFA.
6. The "Accounting Adjustment/Other" line is worth explaining. It's primarily the difference between capital expenditure and depreciation (and of course we are looking at the relative difference in this difference). In layman's terms it means Scotland is (very slightly and only in the latest year) at a point where it's rate of investment in capital programmes (compared to its historical average) is lower than rUK's.
7 A technical point is worth highlighting as mentioned in GERS - "water and sewerage services are a public sector responsibility in Scotland, and are therefore included in Scottish public expenditure, whilst in England they are operated by the private sector". This is of course balanced on the "tax generated" side by the operating surplus that Scottish Water contributes to our revenues
8. The Gross Operating Surplus (GOS) is mainly due to publicly owned Scottish Water; to some extent this surplus will offset associated higher spending compared to the UK where this utility is privatised
9. Th e actual range over the 15 year period is £1,405 to £2,003
10. Geographic share means we get to keep our oil - I'm stunned how often I still have to explain this
11. The percentage of North Sea Oil revenues attributable to Scotland varies because there are North Sea oil fields that lie in "rest of UK" waters and it depends on their relative production output levels. Using the Scottish Government's preferred geographic share methodology the average Scottish share of North Sea oil over the last 15 years has been about 90%
12. I've recreated the £7.6bn using the IFS assumptions here (> Explaining the £7.6bn "black-hole") and there are two factors that explain the difference. Firstly the figures above assume that the equivalent deficit rate we'd be required to achieve would be defined on a per capita basis. Given this is how debt costs are currently allocated in GERS I think that is a better assumption than the IFS's which requires the deficit to match as a percentage of GDP basis. Secondly the IFS analysis compares Scotland to UK total (where UK obviously includes Scotland). I have stripped Scotland out of the UK figures to compare Scotland and rUK which again I think is a better analysis
13. Defence spending allocated to in GERS is £3.0bn in 2013-14 which is exactly 2.0% of GDP
14. The House of Lords costs £87m to run - Scotland's share of that cost is therefore <£10m
If we spend more than we raise we run a deficit. That is not in itself necessarily a problem; FFA doesn't mean we can't run a deficit.
Under FFA we would still be sharing a currency and a national debt with the rest of the UK, so to be paying our way we would simply need to be running a deficit at a similar rate1 to the rest of the UK.
If Scotland's deficit rate1 was higher there would be a funding gap (i.e. our fair share1 of UK debt would not be enough to balance the books). It's expected this would be handled by Scotland having its own limited borrowing powers. A limit would need to be agreed because we'd be sharing a currency meaning Scotland's borrowing could affect the UK's international credit rating and cost of debt.
Of course if Scotland's deficit rate was lower than the UK's we would be running a relative surplus. Under FFA any such funds would be kept for Scotland to pay for future tax cuts and/or public spending increases or - whisper it - to build a wealth fund.
In summary: for Scotland to be truly fully fiscally autonomous we would cease exceptional transfers to or from the rest of the UK.
Now let's remind ourselves of some of the rhetoric used by the Yes campaign and think what it would means in the context of FFA;
- If the fact that Scots have "paid more tax per head of population every year for the past 34 years." means we're hard done by within the UK then FFA will fix that because we'll get to keep it all.
- If we really do "send more to Westminster than we get back" then FFA would put a stop to that immediately because we wouldn't be sending any of our taxes to Westminster.
- If the statement "Independence would have made Scotland £8.3bn better off over the last 5 years" has any meaning then FFA would allow us to keep our hands on that excess wealth in the future
- If "Scotland's GDP per head is £2,300 higher than UK as whole" meaning "Scotland is the 14th richest country in the world" translates into practical economic advantage then FFA will allow the people of Scotland to enjoy those riches without them be leached away by Westminster
- If "Oil is just a bonus" then the oil price decline shouldn't really matter
If these economic claims made by the SNP during the Independence Referendum can be taken at face-value then FFA would be a highly attractive proposition for Scotland.
The Numbers
We can see what FFA would have meant historically for Scotland’s finances by simply looking at the Scottish Government's own GERS report. We need to be absolutely clear about this: these are not Westminster's figures - the Scottish Government's Chief Statistician takes responsibility for them.
If you don't think the GERS figures are meaningful then please read footnote 2. If you still doubt them please read this > How Scotland's Economy Contributes to the UK. If you still doubt them after that please stop reading this blog.
Public Spending
The GERS figures shows how Scotland's public spending is consistently higher per person than the rest of the UK3. Over the last 15 years (adjusted for inflation) the average higher spend is £1,4564 per person or £7.8bn per year.
If we break this spend difference down by category it shows we spend more per capita in every major cost area5,6
These higher per capita spend levels should not be interpreted as evidence of some wild profligacy by the Scottish Government or excessive generosity on the part of the UK towards Scotland. Our population density is 80% lower than the rest of the UK and we have extensive island communities to serve - this obviously makes it more expensive to provide the same level of public services in areas such as education, health, and transport. There are of course other reasons for higher per capita costs in Scotland related to our demographics and health needs - but let's not get distracted by that topic here7.
The point is that today - based on the principle that where possible the same public service levels should be provided nationally - these higher costs are spread across the whole UK population. Of course under FFA (as with Independence) the burden of our higher "costs-to-serve" would have to be borne exclusively by Scottish tax payers.
As an aside: you might spot in the graph above that these figures expose the fact that under the SNP government education spending has been cut in relative terms. Widespread access to good quality education is surely crucial both to address "social justice" concerns and to ensure we have well-educated talent entering our working population to help grow the economy. This prioritisation of education spending is something we'll surely here more of come the Holyrood elections in 2016.
The GERS figures show that - before oil is included - we generate slightly less tax per person then the UK average. This is a remarkably consistent trend; over the last 15 years (adjusted for inflation) the average difference is £250 per person or £1.3bn per year
As with the costs it's interesting to break this figure down into its component parts8
What's striking is the extent to which Scotland's income and wealth tax generation lags the rest of the UK. Given that the same tax rates apply UK wide this is of course primarily a function of average employment and pay levels. Since 2006 the unemployment rate in Scotland has generally been near or below the UK rate (see UK regional employment stats over time) so we can infer that the difference is due to lower average wage levels. There does at least appear to be an encouraging trend in this respect.
As a slightly depressing aside it's worth noting that we generate just over £100 per capita (or £0.5bn) more than the rest of the UK through "sin taxes" on alcohol, betting and tobacco.
Relative Deficit Excluding Oil
During the referendum the SNP told us "Oil revenues will be a "bonus" but not the basis of the economy in an independent Scotland" [ Alex Salmond, July 2013].
So before including the "bonus" of oil let's look at the last 15 years actual difference in deficit per capita between Scotland and the rest of the UK;
Of course this will come as no surprise if you're following the logic here; we spend about £1,450 more and raise about £250 less per person so we'd expect an average deficit difference of about £1,700 per person and that's exactly what we see.
Gross that up by Scotland's 5.3m population and you get to an underlying (before oil) deficit gap of £9.1bn. This is not just a snapshot - this has been true (give or take9) for every one of the 15 years for which data is available.
At this stage somebody normally argues that this observation is evidence that the UK has failed Scotland - it must be Westminster's fault that our underlying deficit is so much worse. Let's just think about that for a moment. Of that £9.1bn gap only £1.3bn is due to lower tax generation (i.e. less successful economic activity); the balance of £7.8bn is due to higher public expenditure. It seems a little harsh to cry foul against the rest of the UK for making us suffer higher levels of public funding.
The Impact of Oil
So now let's move on to the "bonus" that is oil. The following graph shows the higher spend per capita (the red line) and the lower ex-oil revenue per capita (blue line) that we've just been looking at. The new black line is the total revenue per capita difference if we include Scotland's full geographic share10 of North Sea oil
Clearly when the black line is above the red line Scotland's deficit per capita is less than the rest of the UK's. That's happened three times in the last 15 years as the graph below perhaps more clearly shows (we're just plotting the difference between the red and black lines).
Surely by now its clear. Oil is not a bonus; in fact it's all about the oil.
Three times in the last 15 years the oil tide has risen high enough to submerge the underlying £1,700 per capita deficit difference and give Scotland a lower deficit than the rest of the UK. When the oil tide flows out we can see more of that underlying £1,700/person deficit difference, we see more of the £9.1bn.
So let's take a closer look at the oil figures.
For Scotland to cover the underlying £9.1bn deficit gap we' need total North Sea oil revenues of £10.1bn (because c.90% of North Sea oil revenues are attributable to Scotland11).
Let's look at that in the context of historical actual figures (grey bars) and the OBR's latest forecasts (sludgy bars). The solid green line is the approximate actual North Sea revenues we would have needed in each year to off-set our deficit difference to the rest of the UK; the dotted green line is the 15 year average requirement.
Roughly speaking: the gap between the bars and the green line is the size of the deficit gap that Scotland would have faced (or would be expected to face) under FFA.
This is where the IFS £7.6bn "black-hole" figure comes from; they're simply recognising that when Scotland's share of North Sea oil revenues slumps as low as £600m (as the OBR forecast for 2015-16) then more of the underlying deficit gap will be exposed. Note that the OBR forecast a further slight deterioration of North Sea oil revenues in 2016-17; the black-hole is not expected to be getting any smaller.
Note also that £7.6bn is not the size of Scotland's forecast deficit as some seem to think - the forecast deficit is £14.2bn or 8.6% of GDP.
The sharper of you will have noticed that our figure of £9.1bn - £0.6bn from oil = £8.5bn compared to the IFS headline "black-hole" figure of £7.6bn. There are good methodological reasons12 for the difference but frankly these are not worth arguing about in the big scheme of things.
Let's stick with the easy round number of a forecast £8bn deficit gap - this is the FFA "Black-hole".
Addendum: You might be thinking that a recovery in the oil price changes everything. It doesn't as I explain in detail here > Oil Price and Scottish Tax Generation. The problem - simply - is that it's profit that gets taxed and the profitability of North Sea oil production is in long-term decline because of increasing production costs. The tax that an oil price of $100 generated 2 years ago is a lot more than the tax a $100 price would generate in 2 years' time
So What?
Clearly for the SNP the undeniable reality of the FFA figures is a huge problem, particularly given the boldness of their referendum rhetoric. Remember:
- "We paid more tax per head of population every year for the past 34 years."
- "We send more to Westminster than we get back"
- "Independence would have made Scotland £8.3bn better off over the last 5 years"
- "Scotland is the 14th richest country in the world"
- "Oil is just a bonus"
So what of the Independence case now? Well there appear to be two approaches being taken to deal with the inconvenient economic truth;
1. The "No Detriment" Defence
This is the line taken by Alex salmond in what Kenny Farquharson (Deputy Editor of the Scotsman and Scotland on Sunday) described as "perhaps the most ludicrous political intervention of his career"
Just catching up with Salmond's piece in The National. Perhaps the most ludicrous political intervention of his career.
— Kenny Farquharson (@KennyFarq) April 13, 2015
Salmond's argument goes something like this (forgive me but it's hard to paraphrase logical nonsense);The Smith Commission decided against full fiscal autonomy but instead recommended a far more nuanced solution that allowed a number of principles to be maintained, one of which was "no detriment". I want to throw away everything the Smith Commission recommended except "no detriment" and use that to suggest we couldn't be worse off under FFA because it would be a betrayal of the Smith Commission commitmentIs it necessary to spell out the insanity of this position? The Smith Commission had a number of principles (Frances Coppola covers the detail in her excellent Pieria piece on this topic) - you can't just cherry-pick one and throw away the rest. The "no detriment" principle is clearly intended to cover the fact that the transfer of any specific tax to Scotland would be off-set on day one by a commensurate reduction in the Barnett Formula so that no immediate gain or loss resulted for either party. Smith did not recommend devolving oil revenues to Scotland presumably at least in part because it is so volatile - the day chosen as "day one" for the transfer would make a huge difference to the long-run implications for both parties.
More fundamentally; arguing that Barnett needs to be maintained to avoid Scotland losing out financially as a result of FFA gives a lie to all of Salmon's pre-Indyref rhetoric about Scotland being better off, being "the 14th richest country in the world". Remember: those statements were not made about what Scotland could become, they were assertions about where Scotland already is.
2. The "Kick It Into The Long Grass" Defence
This seems to be the approach favoured by Sturgeon. The argument goes something like this
Look it won't happen soon anyway so don't bother looking at the numbers now because they'll all have changed before we could negotiate this. Ooh Look over there - see that foodbank? Torys are nasty bastards aren't they? Labour are just as bad but if you vote for us we'll make them better etc.Despite her best attempts to distract from the economic facts it's clear that the only ways the figures will get better for an FFA Scotland are
- If oil recovers dramatically. Which it might. But surely now every Scottish voter "gets" how volatile oil revenue is, understands that a decision to leap for fiscal freedom in a good oil year is likely to bite us in the arse come the next oil slump
- If we dramatically reduce public spending in Scotland beyond the levels of UK wide cuts (remember: its the deficit difference to the rest of the UK that counts here). Frankly that clearly won't happen unless it's forced on us through Barnett cuts.
- If we increase tax rates dramatically such that we raise an additional £8bn or so from onshore taxes. The current onshore tax take in Scotland is £50bn so that would be a 16% increase.
- If we manage to buck the trend of the last 15 years (at least) and start generating economic growth over and above that of the rest of the UK so that our tax take increases without having to increase tax rates. The sum is the same as the one above; this would require 16% growth over and above that achieved by the rest of the UK to close the FFA gap
Even assuming a following wind and some combination of all of the above happening it's hard to see how things could particularly rosy for the Independence case even by 2020.
The possible exception I suppose is the possibility that the Barnett Formula could end up being scrapped. Given her antagonistic approach to the Tories maybe that's what Sturgeon is secretly hoping for? Sure Scots would suffer directly as a result - but if all you care about is achieving Independence, I guess you consider that a price worth paying.
Implications for Independence
Of course all of the above is about FFA, so some would argue that it merely proves that a compromise won't work and only full Independence can give the Scots what they want. Fair enough. All I've ever argued is that voters should be aware of the economic realities of what they're voting for and not be misled by the Yes campaign's rhetoric.
The possible upside differences between FFA and Independence are reasonably easy to describe in summary;
- We'd get control of the defence expenditure that would remain devolved to Westminster under FFA. Given the SNP's commitment to NATO and their target of spending 2% of GDP on defence this is unlikely to be a significant cost saving: the GERS figure allocated for defence is £3.0bn or almost exactly 2% of GDP already13
- Similarly "International Services", but these are only £0.8bn and Scotland would need to create its own international diplomatic and trade networks
- We'd no longer have to pay our share of UK wide administrative costs - although these would likely be more than offset by the requirement to create our own administrative infrastructures14.
- If oil booms again as it did in the 1980's we'd get to keep the surplus riches for ourselves
- We'd get to pursue our own economic policies and not be forced to follow the Westminster led austerity plans.
Unless you're in favour of impotently waiting for the global oil market to recover and hoping our oil reserves have long-term economic viability ... the last of these is the big question.
I've yet to hear a compelling argument as to why an independent Scotland would achieve superior economic growth compared to being in the UK. If Westminster parties believed relaxing spending cuts would be self-funding through improved economic growth they'd be all over it - but they could of course be completely wrong and it may be that simply "not pursuing austerity" could make the difference.
I don't mean to understate the alternative choices that we would have under independence. One of the major frustrations of the indyref campaign was that so much bollocks was talked about what our economic starting position really was that we never managed to have a substantive debate about what we might actually do with the power that independence would give us.
Remember that what we've shown here is that our underlying (excluding oil) economic under-performance versus the rest of the UK is mainly down to higher spending not lower revenue generation - it's predominantly a structural cost-side issue which is not going to be easily overcome.
Of course it goes without saying that there are additional downsides of independence that we don't need to revisit in full here. Suffice to say that currency, hindrance to UK trading, risk of job losses as companies serving the wider UK market head south to avoid exposure to export risk, EU membership conditions etc. are all major uncertainties introduced by independence that would appear to offer us more downside than upside.
But let's run some simple numbers to think about what growing out of the deficit gap would actually require. We need to grow our tax revenue base by 16% over and above the UK's growth to off-set the underlying deficit gap.
The Independence White Paper itself provided an illustration of what might be a realistic superior growth rate to assume as the "bonus of being independent". I cover the detail in a separate blog post (> Let's Talk About Growth), but the summary is this;
What would the average deficit gap be over that period - how much would it cost us to get there?
Well given the strategy seems to involve spending more to make it happen (avoiding austerity cuts) the starting deficit gap would in fact be more than £8bn and - if we'd continue to spend more - it would take us more than 15 years to close the gap. But let's be highly optimistic and assume the average deficit gap would be £4bn over a 15 year period. 15 x £4bn = £60bn. Let's assume we fund that with debt - that's over £12,000 of debt for every man, woman and child in Scotland.
Now there are many who would still argue that independence is a worthwhile cause even if it incredibly optimistically would cost us £12k per head. If they are willing to recognise the reality of the economic challenges we face and still argue for Independence despite them, then I think we will have some very interesting debates ahead of us.
I've yet to hear a compelling argument as to why an independent Scotland would achieve superior economic growth compared to being in the UK. If Westminster parties believed relaxing spending cuts would be self-funding through improved economic growth they'd be all over it - but they could of course be completely wrong and it may be that simply "not pursuing austerity" could make the difference.
I don't mean to understate the alternative choices that we would have under independence. One of the major frustrations of the indyref campaign was that so much bollocks was talked about what our economic starting position really was that we never managed to have a substantive debate about what we might actually do with the power that independence would give us.
Remember that what we've shown here is that our underlying (excluding oil) economic under-performance versus the rest of the UK is mainly down to higher spending not lower revenue generation - it's predominantly a structural cost-side issue which is not going to be easily overcome.
Of course it goes without saying that there are additional downsides of independence that we don't need to revisit in full here. Suffice to say that currency, hindrance to UK trading, risk of job losses as companies serving the wider UK market head south to avoid exposure to export risk, EU membership conditions etc. are all major uncertainties introduced by independence that would appear to offer us more downside than upside.
But let's run some simple numbers to think about what growing out of the deficit gap would actually require. We need to grow our tax revenue base by 16% over and above the UK's growth to off-set the underlying deficit gap.
The Independence White Paper itself provided an illustration of what might be a realistic superior growth rate to assume as the "bonus of being independent". I cover the detail in a separate blog post (> Let's Talk About Growth), but the summary is this;
The Scottish Government's own attempt at scaling the economic growth benefits that "the bonus of being independent" might bring a cumulative benefit of 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.But let's be incredibly optimistic and say we were able to consistently grow 1% faster than the rest of the UK - in that case it would take us 15 years (compound growth) to get there.
What would the average deficit gap be over that period - how much would it cost us to get there?
Well given the strategy seems to involve spending more to make it happen (avoiding austerity cuts) the starting deficit gap would in fact be more than £8bn and - if we'd continue to spend more - it would take us more than 15 years to close the gap. But let's be highly optimistic and assume the average deficit gap would be £4bn over a 15 year period. 15 x £4bn = £60bn. Let's assume we fund that with debt - that's over £12,000 of debt for every man, woman and child in Scotland.
Now there are many who would still argue that independence is a worthwhile cause even if it incredibly optimistically would cost us £12k per head. If they are willing to recognise the reality of the economic challenges we face and still argue for Independence despite them, then I think we will have some very interesting debates ahead of us.
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Notes
1. I've intentionally referred to "deficit rate" and "fair share" of borrowing to avoid getting bogged down in definitions that make little material difference. Basically these can be defined as being on a per head basis or percent of GDP basis. There is an inconsistency in most figures used at the moment because debt costs tend to be allocated on a per capita basis but deficits compared on a % GDP basis. To make it easier for readers to relate figures to those widely quoted I'm going to follow this inconsistent method. If we defined deficit rate on a per capita basis instead of % GDP it would make the case look slightly worse for Scotland.
2. Although you won't hear the accuracy of GERS figures questioned by serious politicians, some disreputable commentators have been responsible for spreading ridiculous misconceptions about them. The likes of Business for Scotland and Wings Over Scotland have made startlingly misinformed statements about VAT and Alcohol Duty not being fully included in Scotland's numbers. If they were right it would be a terrifying indictment of the Scottish Government's incompetence. They are wrong of course: references to VAT being "paid at companies' headquarters" and Scotland not getting attributed "Alcohol Duty at point of export" demonstrate a fundamental misunderstanding of how these taxes work and how they are attributed in GERS. These are consumption taxes and GERS estimates Scotland's share of these based on consumption data. There is no such thing as "Export Duty" on whisky.
3. I compare Scotland to "rest of UK" (rUK) because otherwise we are comparing to a UK figure which includes us. I don't understand why so few others do this - maybe because it's a little more analytical work.
4. This figure is commonly quoted as £1,200. That figure is the non-inflation adjusted average from 07-08 to 11-12 (the period available when the White Paper was produced) based on comparing Scotland to total UK rather than "rest of UK". I f we update to the most recent available 5 years GERS (09-10 - 13-14) the figure would be £1,245; adjust to be vs rUK instead of vs UK and it becomes £1,360; adjust for inflation and it becomes £1,415; take a 15 year average it becomes £1,465. I'd say £1,400 is a good figure to use.
5. Note that defence, foreign affairs and debt interest costs are not included on this graph because in GERS figures they are allocated on a simple per capita basis so the per capita difference is of course zero. This is consistent with the principles of FFA.
6. The "Accounting Adjustment/Other" line is worth explaining. It's primarily the difference between capital expenditure and depreciation (and of course we are looking at the relative difference in this difference). In layman's terms it means Scotland is (very slightly and only in the latest year) at a point where it's rate of investment in capital programmes (compared to its historical average) is lower than rUK's.
7 A technical point is worth highlighting as mentioned in GERS - "water and sewerage services are a public sector responsibility in Scotland, and are therefore included in Scottish public expenditure, whilst in England they are operated by the private sector". This is of course balanced on the "tax generated" side by the operating surplus that Scottish Water contributes to our revenues
8. The Gross Operating Surplus (GOS) is mainly due to publicly owned Scottish Water; to some extent this surplus will offset associated higher spending compared to the UK where this utility is privatised
9. Th e actual range over the 15 year period is £1,405 to £2,003
10. Geographic share means we get to keep our oil - I'm stunned how often I still have to explain this
11. The percentage of North Sea Oil revenues attributable to Scotland varies because there are North Sea oil fields that lie in "rest of UK" waters and it depends on their relative production output levels. Using the Scottish Government's preferred geographic share methodology the average Scottish share of North Sea oil over the last 15 years has been about 90%
12. I've recreated the £7.6bn using the IFS assumptions here (> Explaining the £7.6bn "black-hole") and there are two factors that explain the difference. Firstly the figures above assume that the equivalent deficit rate we'd be required to achieve would be defined on a per capita basis. Given this is how debt costs are currently allocated in GERS I think that is a better assumption than the IFS's which requires the deficit to match as a percentage of GDP basis. Secondly the IFS analysis compares Scotland to UK total (where UK obviously includes Scotland). I have stripped Scotland out of the UK figures to compare Scotland and rUK which again I think is a better analysis
13. Defence spending allocated to in GERS is £3.0bn in 2013-14 which is exactly 2.0% of GDP
14. The House of Lords costs £87m to run - Scotland's share of that cost is therefore <£10m
Saturday, 28 March 2015
How Scotland's Economy Contributes to the UK
The Government Expenditure and Revenue Scotland (GERS) figures continue to be widely misunderstood and misrepresented so I'm going to have another go at trying to explain what they mean, what they do (and don't) tell us and how understanding them might impact the way you choose to vote.
Firstly: these numbers are - within pretty limited certainty bands - a matter of historical fact. They are produced by and relied upon by the Scottish Government. If there is any natural assumption bias it is likely to be to flatter Scotland. In fact we should take confidence from the fact that the Scottish Government and HMRC are in pretty close agreement; GERS assumes only 0.36% more tax revenue for Scotland than HMRC.
Secondly: of course these are figures which show how Scotland's economy looks while within the UK. But they give us a clear view of the starting point from which any changes the Scottish Government makes (using increasingly devolved powers, Full Fiscal Autonomy or indeed if we become Independent) can be understood. These figures show us what it costs to run Scotland based on the taxes we pay today and the public spending we benefit from today. It means we can understand what the immediate impact of changing tax or spend policies will be on Scottish people and our Natioanl accounts. Of course the long term impact of those changes (will they boost or damage economic growth) are far more difficult to assess - that's where politico-economic judgement is required.
Thirdly: they are a snapshot (or more accurately 15 snap-shots) in time. The time-series nature of these stats is extremely useful as it allows us to understand how volatile or predictable the various revenue and expenditure streams are. We can judge if the latest figures are "just a snapshot" or a reflection of long-term trends.
I've already shown the breakdown of the last 10 year's figures (in absolute terms) in my previous post Analysis of 2013-14 GERS.
In this post I focus on how Scotland's Economy compares to The rest of the UK's (rUK's)2 over time. All figures are taken directly from the GERS data tables; I've just calculated rUK (= UK minus Scotland), aggregated some rows of data for presentational clarity and worked out the figures on a per capita (per person) basis so we can easily compare the figures between the two regions.
Let's start with relative per capita Tax Revenue generation excluding Oil & gas;
This graph shows very clearly that (before oil & gas revenues are considered) Scotland consistently generates slightly less tax income per capita than the rest of the UK - the 15 year average is £260 less.
Now let's look at the relative differences between the main sources of tax revenue that make up this figure;
Working from the top of the graph down: the only areas where Scotland's per capita figures differ materially from rUK are "Gross Operating Surplus" (mainly profits generated by State owned Scottish Water) and the "Sin Taxes" generated because Scots smoke, drink and (to a very small extent) gamble more than people in the rest of the UK. The impact of the council tax freeze is observable but a relatively small factor - I guess this shows how some policies with relatively marginal economic impact can generate a lot of attention.
The striking point of course is that Scottish Income & Wealth Taxes3 consistently generate £400 - £500 less per person than in the rest of the UK. Given the tax regimes are currently the same this must simply be a reflection of the fact that on average Scots consistently earn less. This - as with so much of the economic debate - is more a "regions versus London" issue rather than one of Scotland versus rUK. The graph below (Equality Trust from ONS data) illustrates the point
In this post I focus on how Scotland's Economy compares to The rest of the UK's (rUK's)2 over time. All figures are taken directly from the GERS data tables; I've just calculated rUK (= UK minus Scotland), aggregated some rows of data for presentational clarity and worked out the figures on a per capita (per person) basis so we can easily compare the figures between the two regions.
Let's start with relative per capita Tax Revenue generation excluding Oil & gas;
This graph shows very clearly that (before oil & gas revenues are considered) Scotland consistently generates slightly less tax income per capita than the rest of the UK - the 15 year average is £260 less.
Now let's look at the relative differences between the main sources of tax revenue that make up this figure;
Working from the top of the graph down: the only areas where Scotland's per capita figures differ materially from rUK are "Gross Operating Surplus" (mainly profits generated by State owned Scottish Water) and the "Sin Taxes" generated because Scots smoke, drink and (to a very small extent) gamble more than people in the rest of the UK. The impact of the council tax freeze is observable but a relatively small factor - I guess this shows how some policies with relatively marginal economic impact can generate a lot of attention.
The striking point of course is that Scottish Income & Wealth Taxes3 consistently generate £400 - £500 less per person than in the rest of the UK. Given the tax regimes are currently the same this must simply be a reflection of the fact that on average Scots consistently earn less. This - as with so much of the economic debate - is more a "regions versus London" issue rather than one of Scotland versus rUK. The graph below (Equality Trust from ONS data) illustrates the point
So before Oil & Gas (or the "bonus" of oil & gas as the Yes campaign liked to refer to it) how does our relative revenue generation compare with our relative levels of public expenditure? This is easy to see by adding our relative public expenditure on to the same graph (the red line); this line is a graphical representation of the wdiely quoted "we spend £1,200 more per capita in Scotland than the rest of the UK). Of course the gap between this and our tax income (the black line) is the difference between our pre-Oil & Gas deficit.and that of rest of the UK
It's worth noting that the expenditure per capita difference between Scotland and rUK has in fact increased in recent years - we'll come back to that later. But it's time we introduced oil & gas income.
Scotland (when given it's geographic share - getting to keep "oor oil") of course generates considerably more oil & gas tax revenue per capita than rUK. Typically about 90% of the UK's oil & gas revenues fall to Scotland (it's not 100% because there are gas fields in the "English" North Sea waters - let's put aside arguments about definitions of where Scottish Waters ends and English waters start and just run with these figures using the definition accepted by the Scottish Government).
The volatility of oil & gas revenue over the last 15 years is clear to see. We should remember also that these figures predate the oil crash - we already know the 14-15 figure will be well below £500 and 15-16 is expected to be lower still.
So we let's now add this oil revenue (the black line below is the summation of the graph above and the first graph) and see how Scotland's finances compare with the rest of the UK when we include oil & gas. The fact that black line is always in positive territory is a graphical illustration of the SNP's oft repeated mantra that "Sotland has contributed more tax per capita than the the rest of the UK for the last 15 years".
Of course when the black (tax income) line is above the red (public expenditure) line Scotland's deficit per capita is not as bad as rUK's - when it's below it it's worse. For greater clarity we can simply plot Scotland versus rUK's relative per capita deficit (the difference between these two lines). Bars above the line mean Scotland's deficit (with oil) is lower on a per capita basis than rUK's - bars below the line obviously mean our deficit is worse.
The boxed area of the graph shows the 5 year history that was generally quoted by the Yes campaign when they used historical average figures - a period that usefully included the clearly exceptional year of 2008-09. It's also worth noting that the 12-13 numbers were published 6 months before the referendum but the Yes campaign (including not just Wings Over Scotland's "Wee Blue Book" but also MSP's like Stewart Stevenson) continued to quote the 11-12 numbers as if they were the most recent ones availabel - they simply ignored the 12-13 numbers.
Of course the 13-14 numbers were published after the referendum but anybody who pays attention to these things knew they would be similar to 12-13 because the oil situation was clear for all to see. Of course to mention this was to be accused of accusing Scotland of being "Too We, Too Poor, Too Stupid" - a remarkable effective strategy when it came to hiding the economic realities from a large proportion of the electorate.
We still have one last set of figures to look at and understand: the detail behind the public expenditure that is so much higher (and growing slightly faster) in Scotland than rUK. The following graph breaks that expenditure down into its constituent elements; as with all these graphs we are looking at the per capita difference between Scotland and rUK. Above the line means we spend more in relative terms in Scotland.
There are a lot of lines on there but a couple of observation are still easy to make
- We have a higher per capita spend in Scotland on pretty much everything
- Social protection (benefits, pensions, tax credits and admin costs) and in recent years Transport are the biggest areas of higher relative spend
Some of these figures will be explained by demographic differences, some by the intrinsic higher cost-to-serve of a geographically dispersed population, some by Scottish Government policy.
International Services, Public Sector Debt Interest and Defence do not appear on this graph as they are costs allocated on a per capita basis (so by definition the per capita difference with rUK is zero). It's worth reiterating the point that if Scotland wants to remain in NATO the absolute level of defence spend is likely to remain at similar levels to those allocated in GERS (to achieve the accepted NATO target of defence spend equating to 2% of GDP). Although talk of scrapping Trident is always accompanied by big numbers (the £100bn lifetime cost) the reality of course is that scrapping Trident doesn't save the economy that money - it allows it to be redirected into alternative defence spending.
The "Accounting Adjustment/Other" line is worth mentioning (given its the only one were we currently spend less per capita in Scotland than rUK) but if your stamina is flagging skip this paragraph as this is not easy to explain (or indeed understand). It's primarily the difference between capital expenditure and depreciation (and of course we are looking at the relative difference in this difference). I think in simple layman's terms it means Scotland is (very slightly and only in the latest year) at a point where it's rate of investment in capital programmes (compared to its historical average) is lower than rUKs. I think.
Slightly more interestingly there are two lines that I think are worth extracting from this graph as they tell us something about the SNP's relative priorities. I've observed before how education spending in Scotland has remained static in nominal terms over the last five years. The graph below shows that - while e.g. public order and safety expenditure has relatively increased - the relative premium spent on education in Scotland versus rUK has been eroded under SNP control.
The Scottish Government itself points out in the GERS commentary that "lower population density in Scotland relative to the UK [..] increases the cost of providing the same level of public service activity, particularly in areas such as education, health and transport". The inescapable conclusion is that the SNP are relatively less committed to education spending than the previous administrations. For those of us who believe that social justice starts with the best possible quality of education for all this is a damning observation.
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So what?
By pooling and sharing with the UK Scotland effectively carries a per capita share of the UK's debt; we are allocated a per capita share of National debt interest in GERS and the default assumption used for sharing the debt in the indyref was that it would be on a per capita basis.
This matters because if - on a per capita basis - Scotland makes a higher contribution to that deficit (and associated debt) then we are being subsidised by rUK. Conversely when Scotland runs a lower deficit per capita than the rest of the UK we are net contributing. In the recent past we have sometimes more than paid our way (look at the bar chart); but given current and forecast oil revenue levels we can expect the Barnett Formula to mean we are subsidised for the foreseeable future. That shouldn't be a source of shame or embarrassment - there will always be some regions that contribute less than others and we have more than paid our way in the recent past (just look back to the North Sea oil boom of the 1980s). It's what pooling and sharing is all about; it's why the Barnett Formula exists.
There are alternatives of course. Nicola Sturgeon has stated “I want full fiscal autonomy for the Scottish government. I want us to be responsible for raising our own revenues and deciding how those revenues are spent". A laudable objective; but to stand on our own feet fiscally within the UK means not continually running a higher deficit than the rest of the UK (given we would still be sharing a currency and our National debt). Now look at the graphs above and it's surely obvious that we can only achieve that with either another oil boom or by dramatically increasing our tax take and/or reducing our public expenditure. Of course every government wants economic growth to increase tax revenue without having to change tax rates but there is no magic wand that makes that happen. The truth is that the only way Full Fiscal Autonomy could be achieved for Scotland would be by pursuing policies of even greater austerity than the rest of the UK; we would be starting off £800 worse off for every man woman and child in Scotland. That's the head-start we'd be giving the rest of the UK on day one. This can't be dismissed as just a snap-shot historical view. Look at the graphs - we consistently, structurally spend more and raise less unless there is an oil boom. It's all about the oil.
To say the challenge would be tougher still were we to pursue independence is surely now self-evident. We'd have to sort out a currency and somehow seek to counteract the adverse impacts on our tax take and welfare spend that would result from increased unemployment as at least some businesses relocate South of the border.
If you believe that further devolution or full separation is worth it anyway then fair play. But have your eyes open and be honest enough to admit to the hardship that will result; hardship which will - as it always does - impact the least well-off most. Don't kid yourself (or others) that separation will somehow deliver "social justice" when the figures are strikingly clear - we'd all be worse off on day one.
It's at this point in the economic argument that - defeated by the numbers - some say "well if we're not net contributing to the UK why are they so keen to keep us?" There are two answers to this;
- Much as some Nationalists struggle to comprehend, there are people who believe in the long-term economic, social and moral merits of pooling and sharing - not everybody looks at the numbers and decides we should cut loose those who don't "pay their way" in a short-term economic sense
- They might be becoming rather less keen to keep us. If you shout and scream at a point in time when you are a net contributor ("it's oor oil"; "we give more to Westminster than we get back") then you might come to regret framing the debate in terms of narrow economic self-interest ("we'd have been £8bn better off"; "we'd all be £500pa. better off") when the numbers swing against you.
As for the party politics of this, be in no doubt: a vote for the SNP is a vote for full fiscal autonomy - and that's a vote for immediate hardship. It's also a vote for independence because that is the SNP's constitutionally defined over-arching objective. If you think the hardship and immediate economic disadvantage is worth it for that end then fair enough; but if you think voting SNP is a tactically astute way to ensure Westminster focuses on Scotland's selfish interests you might want to seriously consider thinking again.
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Footnotes
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1. Accuracy of GERS figures
The GERS figures are created by the Scottish Government and underpinned the economic case for Independence - so it is fair to assume that if there is any bias it would be to skew the picture in Scotland's favour. HMRC produce their own figures (Table 4 in this HMRC Document shows methodological differences between HMRC and the Scottish Government) and pages 38 and 39 of GERS show that the differences between HMRC and GERS estimates are are in fact very small. GERS estimate Scottish Tax revenues in 2013-14 to be 0.36%(£181m) higher than HMRC.
The likes of Business for Scotland and Wings Over Scotland have made startlingly misinformed statements about VAT and Alcohol Duty that have led some people to doubt the validity of these figures. If BfS and Wings were right it would be a terrifying indictment of the Scottish Government and the official Yes campaign's competence - but of course they are not right; the figures are sound. References to VAT being "paid at companies' headquarters" and Scotland not getting attributed "Alcohol Duty at point of export" demonstrate a fundamental misunderstanding of how these taxes work and how they are attributed in GERS. These are consumption taxes and GERS estimates Scotland's share of these based on consumption data. There is no such thing as "Export Duty" on whisky (in fact you get Export Duty Relief); for the same reason we get to keep tobacco Duty despite not producing cigarettes. A 2 minute search of the official GERS Method Statement is enough to dispel these myths.
The main area of uncertainty in GERS figures is how Corporation Tax would split between Scotland and rUK. Businesses are not currently required to report profit split between Scotland and rUK. so nobody knows how profits (and therefore taxes) would actually fall.
This is useful if we look at the long term trends as it helps us understand what we have become used to in terms of tax and spend levels in Scotland (and by implication we can start to think how dramatic the tax rises or cost cuts would need to be to cover the deficit gap we have versus rUK).
2. Scotland versus rUK
In all these analysis I compare Scotland to rUK (where rUK = UK - Scotland). I find this preferable to comparing Scotland to the UK as a whole. I've seen the fact that the UK as whole includes Scotland causes remarkable confusion in debates (with people e.g. arguing that the UK shouldn't be getting the oil revenues). By comparing to rUK I hope to avoid this confusion.
3. Income & Wealth Taxes
The is an aggregation of the following GERS items; Income Tax, National Insurance Contributions, Capital Gains Tax, Stamp Duties, Inheritance Tax and "Other Taxes on Income & Wealth"
2. Scotland versus rUK
In all these analysis I compare Scotland to rUK (where rUK = UK - Scotland). I find this preferable to comparing Scotland to the UK as a whole. I've seen the fact that the UK as whole includes Scotland causes remarkable confusion in debates (with people e.g. arguing that the UK shouldn't be getting the oil revenues). By comparing to rUK I hope to avoid this confusion.
3. Income & Wealth Taxes
The is an aggregation of the following GERS items; Income Tax, National Insurance Contributions, Capital Gains Tax, Stamp Duties, Inheritance Tax and "Other Taxes on Income & Wealth"
Sunday, 31 August 2014
You Read it Here First
This is shamelessly self-congratulatory - but it's been an interesting week and I feel my Blogging activities have been somewhat vindicated.
1. Business for Scotland
On June 17th I blogged at length about the reality of this group, highlighting that they were a thinly disguised SNP construct with few significant employers and no businesses who trade with rUK > Who do Business for Scotland Represent.
On August 31st Andrew Gilligan used my blog (supplemented with his own research and an interview with me) to publish this excellent piece in the Sunday Telegraph
2. Dunleavy & Start-up Costs
On June 25th I wrote an angry blog. Our First Minister and the Yes campaign were claiming one-off costs of independence would be £200 - 250m and rubbishing treasury estimates of £1.5 - 2.7bn. Alex Salmond went as far as demanding a retraction of HM Treasury's "highly misleading briefing". Citing a report commissioned by the Sunday Post the First Minister wrote: "Professor Dunleavy’s report this weekend has vindicated the Scottish Government’s position and demolished that of the UK Government".
I analysed Dunleavy's report and concluded "no matter how hard you try you can't disguise the fact that the true cost will be significantly more than £1bn and in fact look to be closer to the Treasury estimates than Alex Salmond's" > Dunleavy & The Costs of Independence
On August 31st the Sunday Times published specially commissioned work by the Centre for Economics and Business Research (CEBR) which concluded: "The set up costs for an independent Scotland would run to nearly £2.5bn"
3. Independence threat to jobs in companies who rely on Trade with rUK
On May 18th I wrote at length (> Independence and Scotland's Trade with rUK) about the fact that businesses who trade with rUK would be damaged by independence and jobs would inevitably leave an independent Scotland as a result. I concluded: "This is not a marginal issue, the businesses I can speak for are not unusual. This is not about making threats or protecting the interests of a few rich shareholders [..] there are wider implications for employment and the economic success of an independent Scotland that I feel should be understood by anyone wishing to make an informed decision as to how to cast their vote on September 18th".
On August 13th the Scotsman reported: "Around one in ten Scottish jobs depend on trade with the UK and would be “in danger” after a referendum Yes vote,according to Treasury analysis."
4. Misleading Conclusions from GDP/Capita Data
On May 20th I wrote about the ridiculousness of concluding that Scotland is a wealthy country based purely on the single GDP/Capita measure (> Look at our GDP/Capita; Look at Ireland). I pointed out that Ireland has an even higher GDP capita but is in no meaningful way a "more wealthy" country and suggested GNP as one of the measures that should be considered (as it measures the wealth that falls to the citizens of a country as opposed to that owned by overseas companies)
On May 29th the Guardian published an article (New doubt cast over Alex Salmond's claims of Scottish wealth) which drew attention to the issue of foreign ownership of production, highlighting GNI / GNP measures and observing: "Alex Salmond’s claim that Scotland is one of the richest countries in the developed world has been challenged [..] it is a middle-ranking economy with high levels of foreign ownership. The domination of non-Scottish firms, particularly in key industries such as North Sea oil, financial services and banking, whisky and salmon, means a significant amount of Scotland’s wealth is exported to the rest of the UK and overseas"
5. Scotland and the EU
On May 16th I wrote about the realities of the negotiation hurdles that Scotland would face to remain within the EU (Independent Scotland & The EU).
On August 29th Professor Adam Tomkins published this definitive article on the subject (Scotland and the EU). He makes his case with far more logical rigour and authority than I do - but I would venture his conclusions are wholly consistent with my own.
1. Business for Scotland
On June 17th I blogged at length about the reality of this group, highlighting that they were a thinly disguised SNP construct with few significant employers and no businesses who trade with rUK > Who do Business for Scotland Represent.
On August 31st Andrew Gilligan used my blog (supplemented with his own research and an interview with me) to publish this excellent piece in the Sunday Telegraph
2. Dunleavy & Start-up Costs
On June 25th I wrote an angry blog. Our First Minister and the Yes campaign were claiming one-off costs of independence would be £200 - 250m and rubbishing treasury estimates of £1.5 - 2.7bn. Alex Salmond went as far as demanding a retraction of HM Treasury's "highly misleading briefing". Citing a report commissioned by the Sunday Post the First Minister wrote: "Professor Dunleavy’s report this weekend has vindicated the Scottish Government’s position and demolished that of the UK Government".
I analysed Dunleavy's report and concluded "no matter how hard you try you can't disguise the fact that the true cost will be significantly more than £1bn and in fact look to be closer to the Treasury estimates than Alex Salmond's" > Dunleavy & The Costs of Independence
On August 31st the Sunday Times published specially commissioned work by the Centre for Economics and Business Research (CEBR) which concluded: "The set up costs for an independent Scotland would run to nearly £2.5bn"
3. Independence threat to jobs in companies who rely on Trade with rUK
On May 18th I wrote at length (> Independence and Scotland's Trade with rUK) about the fact that businesses who trade with rUK would be damaged by independence and jobs would inevitably leave an independent Scotland as a result. I concluded: "This is not a marginal issue, the businesses I can speak for are not unusual. This is not about making threats or protecting the interests of a few rich shareholders [..] there are wider implications for employment and the economic success of an independent Scotland that I feel should be understood by anyone wishing to make an informed decision as to how to cast their vote on September 18th".
On August 13th the Scotsman reported: "Around one in ten Scottish jobs depend on trade with the UK and would be “in danger” after a referendum Yes vote,according to Treasury analysis."
4. Misleading Conclusions from GDP/Capita Data
On May 20th I wrote about the ridiculousness of concluding that Scotland is a wealthy country based purely on the single GDP/Capita measure (> Look at our GDP/Capita; Look at Ireland). I pointed out that Ireland has an even higher GDP capita but is in no meaningful way a "more wealthy" country and suggested GNP as one of the measures that should be considered (as it measures the wealth that falls to the citizens of a country as opposed to that owned by overseas companies)
On May 29th the Guardian published an article (New doubt cast over Alex Salmond's claims of Scottish wealth) which drew attention to the issue of foreign ownership of production, highlighting GNI / GNP measures and observing: "Alex Salmond’s claim that Scotland is one of the richest countries in the developed world has been challenged [..] it is a middle-ranking economy with high levels of foreign ownership. The domination of non-Scottish firms, particularly in key industries such as North Sea oil, financial services and banking, whisky and salmon, means a significant amount of Scotland’s wealth is exported to the rest of the UK and overseas"
5. Scotland and the EU
On May 16th I wrote about the realities of the negotiation hurdles that Scotland would face to remain within the EU (Independent Scotland & The EU).
On August 29th Professor Adam Tomkins published this definitive article on the subject (Scotland and the EU). He makes his case with far more logical rigour and authority than I do - but I would venture his conclusions are wholly consistent with my own.
6. The "£8bn Better Off" Claim
On August 12th - responding to our First Minister Alex Salmond's claim in the first Live TV debate that an independent Scotland would have been "£8bn better off" over the last 5 years I cried foul and wrote this blog > The £8bn Misdirection. When it was defended by Business for Scotland and I saw they were using the same claim I followed up with this blog (August 16th) to try and simplify the point > £8bn Better Off.
On September 2nd I appeared on John Beattie's Radio Scotland Lunchtime show where I was able to clarify the issue for a wider audience. Business for Scotland sent along a representative to try and defend it - listen for yourselves and decide if he succeeded*
Listen from 35:30 in > John Beattie Show
*He didn't
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I reckon that's not a bad track record.
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