Scotland will have another independence referendum: the only question is when. I have little doubt that if I was Scottish I would vote Yes again. That, though, is not the reason for commenting now. What I want to discuss is the claim that Scotland has a weak economy. This claim is based on four figures. The first is Scottish GDP. The second is Scottish tax revenues. The third is Scottish government spending. The last is the Scottish balance of payments (imports v exports). My contention is simple: all four may be seriously mis-stated, in which case to base debate on them would be a serious mistake.
Why might the data be misstated? First, there simply isn't enough data to reliably estimate Scottish GDP. We have no figures for where sales take place in the UK, for example. VAT returns are an utterly unreliable source for this: a UK company does not submit data separately on sales in Scotland from elsewhere. The same is largely true on spending. So forget Scottish GDP data: we just don't know what it is.
Then there are tax revenues. That VAT point still stands. And the truth is Scottish Revenue are struggling to be sure who is resident in Scotland whilst on corporation tax there is no way of knowing where revenues are earned at present. And so on.
So we come to spending. The allocation of government spending to Scotland will be arbitrary: how much defence should it pay, for example? Or interest? The arbitrary areas will be too great for this number to really be reliable.
In which case what of Scottish imports and exports? Let's be blunt: no one has a clue what crosses the borders from Scotland to England and Northern Ireland. These numbers are literally made up in that case.
So two further issues, both serious. One is Westminster could pretty much manipulate this data at will. And two, nothing will be the same if Scotland leaves: a government of an independent Scotland will have a very different structure to that imposed now.
My point? Simply this: if there is to be meaningful debate on this issue then the SNP have a lot of work to do to produce best possible data. The last thing they should do is trust that from London.
Postscript: I am well aware that the Scottish government publishes GERS - Government Expenditures and Revenues Scotland. And I know this is compiled in Scotland. But it is compiled on the basis of estimates. It has to be. No one declares data for Scottish sales. Or Scottish profits. Revenue Scotland is not sure who Scottish taxpayers should be - and has struggled on such a basic issue. And there is no data on trade flows across the Scottish or Norther Ireland borders because none is required. There is no Customs post in Carlisle. In which case the data is just estimates based on surveys that could be wholly misleading and as a result is approximations for the UK as a whole adjusted for oil, which may overstate the impact of oil as a result. The real result may be better or worse than GERS says. I am not suggesting otherwise. What I am saying is better data is needed because all we have are some estimates that might be wholly misleading but which are going to be treated as fact.
And if you doubt me this comes from the GERS homepage:
The primary objective is to estimate a set of public sector accounts for Scotland through detailed analysis of official UK and Scottish Government finance statistics. GERS estimates the contribution of revenue raised in Scotland toward the goods and services provided for the benefit of the people of Scotland.
It's an estimated set of accounts based on estimated revenues based on UK statistics as my emphases show. The debate needs better than that.
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Thank you Richard for acting as a breath of fresh air. The bottom line is that the general public are taught to accept Official data as if it were carved on stone and emanated in the Mount Sinai region.
Instead as you infer all data is socially constructed to a greater or lesser degree and as an ex-Customs officer I am fully aware of how lacking in intallectual rigour the collection and dissemination of Official stats actually are.
No doubt for having the temerity to mention subjects such as this you will once again be the subject of the ire of the right-wing lunatic fringe, many of home reside in the Scottish Labour Party or haunt the Ben He’s of the PLP. I’m sure your well capable of acting in your own defence, especially given the obvious incompetence of those who attack you.
Many thanks
Appreciated
I agree: all data is a social construct and a very dangerous one in this case
I agree with the points you make Richard, and thank you for making them. I expected the usual responses from certain people on Twitter and they are all piling in.
Most of their arguments are based on detailed work by an individual who has no relevant qualifications, other than being a business owner. To be fair, he has clearly spent an inordinate amount of time studying GERS for every year since 2011-12, which he takes to be gospel. His conclusions, and the points raised by his followers, are based entirely on that work on GERS – which is the very problem you have raised.
My Twitter is pretty busy this morning – and none of the opponents seem to have a clue what they’re saying
Any criticism of GERS and they all have a hissy fit.
A sensible analysis Richard and what a lot of us in Scotland have been saying for a while now. Would desperately love to see a clear picture of VAT returns, tax receipts, true exports and define the potential for growth in an independent Scotland, but that doesn’t seem to be fathomable at all.
At last! An actual, neutral, honest appraisal of the Scottish financial position. In other words – no one knows. As you intimate, it could be good, it could be bad. As a useful tool to deflect all the ‘bad’ stories (I use that word, since ‘facts’ seems totally inappropriate) this is invaluable.
In any case, most Independence supporters have moved on from the purely financial case, to what kind of Scotland we wish to live in. We have definitely agreed that it won’t be like a future England!
Interestingly, if the figures turn out to be genuinely bad – that is a great argument that the Union is not working for Scotland and therefore a factor FOR Independence.
Meanwhile, if the figures turn out to be good, then that also is an argument FOR independence.
Win/Win!
Thank you for you excellent article – copied with all credits.
I tend to agree on the win/ win
And you gave correctly read me
This may (or may not) be an accurate position. What it quite clearly is not, is neutral. Richard says quite openly that he would be a Yes voter (both in the past and future). Given the uncertain nature of the figures (that he points out) it can hardly be seen as anything other than partisan.
Everyone is partisan
Most especially those who claim not to be who invariably support the status quo
Dear Chris, if you read Alan Crerar above you’ll see that if the cannot be relied on GERS turn out bad, it is time to get out this dysfunctional union and if they turn out to be good, it is still time to get out of this dysfunctional union.
Richard Murphy concurrs.
The latest to “tackle” your points on Twitter is that GERS-loving business owner I mentioned above. He seems to like adding “ffs” on the end of his tweets.
He and his cohort of supporters has already been asked to enter a proper debate, i.e. off Twitter, on Scotland’s finances – and,so far, has refused.
Kevin is not, it seems, too good with data
In some ways, he’s actually very good with data – in the sense of doing the arithmetic and plotting graphs. Unfortunately, he appears to be denying that the sources of data can be questioned.
Given that you said “I tend to agree on the win/ win” in your comment above, he will see that as confirming his view that you are doing this “maliciously” to favour a Yes vote. He will use that to deflect from the serious points you have made.
I can also guarantee that the Scottish Government will now be asked about GERS and the points you have made. As you might imagine, they will probably have to defend GERS to some extent. Nevertheless, I hope they are smart enough to agree that your points about estimates are correct.
It goes without saying that any further time you could spend on developing the arguments would therefore be welcome, and should be welcomed by all sides of the debate.
I will develop this – even add some theory
But not today
Students to teach….
As Gordon says, I do hope that you can expand at length on your approach to the Scottish question as started above. I find that graphs can often say more clearly only what words cannot, at least not from my own personal view.
Thank you Richard.
The UK govt has form already in manipulating economic data concerning Scotland’s oil (on grounds of national security supposedly). Why would they stop now?
The Scots are going to have to decide on more than just economic grounds. Historically the English always overplay their hand. They’re trying hard not to just now, allegedly, but their intransigence is not going to play well.
I’m speculating but corp tax on the oil supply chain could be treated as ex regio an not credited to Scotland
I suspect that you would be more likely to find The Holy Grail before you find any reliable economic data about Scotland. In any case time spent on the knees at Rosslyn Chapel may be a better way of spending the time than searching the net.
You may be right
The Unionists will run a very dirty campaign, with the active support of the press and the tacit support of the BBC. If the independence case still has its weaknesses, the Unionists are in a far weaker position politically, economically and organisationally than in 2014. They will therefore reduce the debate to the level of the Brexit debate, with many of the same issues, and it will be very difficult to discuss GERS or anything else that’s sensible. We have never needed quality and integrity in our public service broadcaster more but, once again, we will not get it.
You are stating that GDP/GERS data are estimates, and therefore are not reliable in any sense.
Firstly, do you have any evidence for this, other than mere speculation?
Secondly, I notice that you have repeatedly published a 120bn figure for the “tax gap”. You have also repeatedly stated that it is accurate. If GDP/GER are innaccurate, despite being collated by large teams with signficant resources, how innaccurate is your tax gap measurement given it is estimated by a single person with no added data other than that supplied by government sources – which you are claiming now are highly suspicious?
First don’t fabricate claims. Of course £120 billion is not accurate. As my work makes very clear it is an estimate to guide action. Making false claims does not help you.
Second, read the blog. The GERS web site says the whole of it is an estimate
What more evidence do you need?
The GERS website also states what confidence levels their estimates are within (95% to 0.6bn from memory).
To what level of statistical accuracy are your estimates for the tax gap? In your paper on it I can’t find any statistical treatment of your data. It is simply presented as fact with the words “estimate” tagged on at the end.
In other words, are you suggesting that the GERS estimates are somehow less accurate than your own estimates?
I don’t believe the GERS statement, to be candid
I cannot provide such an estimate for my own work because the underlying data has inherent risk in it – precisely my criticism of GERS
If your work relies on underlying data, you should STILL be able to statistically determine the confidence levels of any estimates.
Regardless, you have repeatedly said your work on the tax gap is wholly more reliable than HMRC – yet are unable to provide a GCSE level confidence interval for it.
You clearly gave no idea about confidence levels or GCSEs
I am a risk modeller. I use confidence levels *every day* in my VAR/ETL calculations.
I also know full well that the basic statistics for confidence level calculations are introduced at GCSE (certainly when I did them) and expeanded on at A-Level.
My feeling is that you simply don’t know how to do this fairly basic calculation – given you haven’t bothered to put one in your tax gap “estimate”. Therefore you have simply resorted to name-calling – that I don’t know anything whereas obvious “Professor” Murphy is infallible.
Given your clear lack of any understanding, I am confident that your tax gap is a work of pure fiction (and all it seems to be is a few estimates multiplied together with some surrounding waffle) and can easily be discounted as wholly incorrect.
I think the inverted commas say all we need to know
I have made no claim to infallibility
Nor to anything but the fact my estimate is a figure in a widish range
But you offer abuse
Don’t bother again
Richard, it is good that you raise this but the issue goes much wider than just data on Scotland. The whole treatment of data and measurement in economics is a total joke. I don’t know of a single university that offers anything close to a module in economic measurement and data. Sure all universities have econometrics modules but the coverage of data and measurement in economics does not go any further than downloading a set of figures from the ONS/OECD/IMF or whoever and taking these to be gospel and beyond discussion. You’ve got your data now go and click the regression button. But without really understanding the data then how can you perform meaningful analysis and draw sensible conclusions?
If you were interested then you could ask your students some fairly simple questions around key data like GDP and public sector debt/deficit. I’m sure they could all talk about the issues around GDP and public sector debt/deficit. But ask them to outline what units are counted in the public sector. Or what the difference is between general government debt and public sector debt. Ask them what the 5 sectors are of the UK economy in the GDP sectoral breakdown. See if any of them have heard of FISIM. Ask them by how much the deficit would reduce if the government sold 500 million pounds of shares that it owns in order to raise funds. For an economist this should all be basic knowledge that they need to know to truly understand their subject. But it is not taught. I expect your students would give you a lot of blank expressions as answers to these questions.
Worryingly the UK civil service offers no formal training in this area either. You could pose these seem questions to your average government economist and you would probably get the same blank expression. The government takes students from university who lacks this knowledge and makes no effort to fill in the gap.
No other subject which considers itself to have empirical foundations would offer precisely zero hours of education on how to measure the variables it analyses.
A) I cover that stuff
B) I teach my students about the need to appraise data quality
C) you are right, that is pretty rare, but I walk this talk
A) you would then also know that GDP is not measured by sales…..
I do indeed
But they sure as heck matter
Richard, great to hear that you are teaching this stuff. It really is vital to an economists education.
Are your lecture notes/PowerPoint slides or similarly made publicly available anywhere?
They’re not published
I may do something based on them though here sometime soon
Here we go yet another attempt to show what might be by an impartial yes voter. The last thng you will see is an educated debate on the future of Scotland’s economy in fact you are unlikely to see anything constructive coming out of this once in a lifetime never to be repeated opportunity. What is the most important to you independence or the break up of the united kingdom whilst climbing into bed with a European parliament that will swallow you up and spit you out just as the will do the UK the difference being that the UK economy is far stronger and healthier than Scotland’s although there is the small matter of rebuilding Hadrians wall to fund. Perhaps the plan is to cosy up to the Russians and invite them in to your waters to fish and deplete socks further than even the eu have managed to do.
At The end of the day this is far more about egos than it is economics, These islands will be weaker for the split not stronger and our defence will suffer too, Faslane will be forced to close, as will Rosyth but perhaps that will be seen as a positive along with no further shipbuilding on the clyde. This is not a rugby or football inernational this is about our future and that of our children scotland can and should hold its head up high as part of a unin which has served us all well and long ma that continue.
I made an economic argument
You seem to have ignored it
With respect, you made a statistical argument, not an economic one. An economic argument would have required some faith in the statistics, which you apparently do not have.
Where variables [like imports] have a degree of uncertainty, we always must estimate them – the word ‘estimate’ tells us nothing about how good or bad [=accurate] an estimate is. But almost every measurement is an estimate: just try measuring the length of a piece of string with a ruler – you’ll end up with an estimate.
But this is not even estimation as such
There is literally almost no Scottish data at all
That’s just making it up
Yoons are idiots as Billy has confirmed.
The Tories gave away Scottish fish and will do so again in their Brexit plan, and the UK economy is fast going down the Fiat financial pan as they rely on people borrowing to keep it afloat. Only £1.7 Trillion pounds of a defecit how braw.
If “the UK economy is far stronger and healthier than Scotland’s” why is UK government so keen to hang on to Scotland?
Economics does not decide such issues
The old logic of empire does
[…] Richard Murphy, 14 Mar:Â Why economic data provided by London will not help the Scottish independence debate […]
Excellent article Richard.I have been looking for other thoughts on GERS and you have provided exactly that.I seem to remember reading somewhere that the raw data sets from which GERS are compiled are supplied by UK Treasury.Correct?
Last time I looked the UK Treasury was not too kindly disposed towards Scottish Independence (oh dear..whatever am I inferring?).I also noted that Scottish Gov civil servants actually compile the reports from the raw data.Would this explain The Scottish Governments reluctance to criticise GERS? Keep up the good work!
My poin is there is no raw data
There is no data on Scottish tax revenue
Or consumption
Or investment
Or savings
Or imports and exports
So the Scottish CS work in some pretty rough estimates that I do not think justifies the credibility given to it
That’s my point
Purely as a for instance. Can you advise what HMRC export figures there are for Whisky exports either using UK figures or Scottish figures. There is a particular reason I ask for this example. I understand whisky exports via Felixstowe container port are listed as UK/English exports. There may be an odd one or two distilleries in England, but I think most folk from anywhere in the UK would accept that English Whisky does not enjoy much of an export market.
This subset of export statistics might be very illuminating, and be in confirmation of your cojcerns about using HMRC figures in GERS et al.
Hi Richard,
I am really grateful for your contribution to this important public debate which actually goes far beyond Scottish independence. I am a lifelong supporter of Scottish Independence but believe the “settled will” if there is such a thing is closer to Home Rule, alas the British state is not prepared to countenance that. I appreciate your work on tax evasion and the general points of constructing a state where public revenues are siphoned off to private holders of capital via privatisation, contracting out etc. It is all the more heinous when Ministers of State are shareholders in these companies. At the other end I see in my own town drug dealers cleaning their dirty cash through tanning booths, taxis, scrap metal etc.
In FY 2014/15 and FY 2015/16 I note that the Norwegian oil sector generated circa £21Bn and £12Bn in public revenue, when the UK sector about 45% of Norway’s, generated c£2Bn and £60m respectively. There is something deeply troubling about these figures for anyone interested in public life.
I tend to find more coherence in the political economy of John Gray – that a strong capitalist economy can only really thrive in a strong social economy that has a culture of obeying the rule of law. Also Krugman’s thesis that inflation, long run productivity linked to capital investment and high employment rates are what determines a nation’s wealth. I agree with you completely that the darts club, the company and nation that does not observe basic accounting eventually go bust.
I think anyone reading GERS will be surprise that it includes paying for Defence and the National Debt. (Google Kevin Bridges on the economics of Scottish Independence). I think the former Scottish Secretary Ian Lang is on record as saying that GERS would have the advantage of making it impossible to have a sound economic case for independence. For me this is reaching a conclusion before starting a debate.
SB
Many thanks. Appreciated. Second and third paras especially poignant
Richard
Surely you see the problem that exists. The SNP provided us an economic case from which it was made apparent it was in our interests to vote for independence. The foundation for this was the GERS report. Are we to believe no one from either side, are they all wrong?
Your questioning of the GERS data is built on supposition – rather than an inference that Westminster COULD distort the statistics, is there any evidence they are actively doing that?
Just want some grounded clarification.
Almost all the GERS data is estimated
The core estimated data comes from Westminster and I suspect most of the estimated assumptions do too – because they have to fit back into the Westminster agreed totals
I’ve been trying to do a bit of work on Scottish International Trade. This is purely amateur and internet based work I’m carrying out on behalf of the Common Weal. I have been able to gather a significant amount of data on both the UK and Scotland but I can only describe my situation as ‘trying to make a silk purse out of a sow’s ear’. You have succinctly explained just why I’ve been feeling this way.
I think that instead of struggling with the estimates based on estimates it may be more productive for me to try and put together something on the nature of Scottish imports and exports. This might at least be useful in formulating industrial/trade strategies in the future.
If you can point me in the direction of any, more reliable,sources of information I’d be most grateful.
I’m sure that most interested parties, no matter what side of the debate they are on, would appreciate any further work you do on this subject.
I wish could point you at the data
I do nit think it exists
Sorry
Trade! that must be even more estimated than GERS
True, Richard, it’s difficult to track sales by location inside a custom’s union or single market. But then we don’t measure GDP by sales anyway. We measure it by production, consumption or incomes, each of which should be (but won’t because of cheating) the same. We can identify place of production, place of consumption and place of the person earning the income. This is why ONS uses the income and production approaches to measuring GVA, GVA being the equivalent of GDP in smaller statistical units than that of a custom’s union or a single market.
I submit that the government’s estimates of Scotland’s (and other regions’) gdp/gva is more robust than your estimates of the tax gap.
But there is no data on any GDP measure barring some elements of tax spend
So none on come
Or consumption
Or investment
Etc
But I could show my workings
Thanks for covering all this. In my CA of SNP we have discussed this and an MPS gave responses along lines you make.
To be honest no country can predict how it will fair in world until it hast.
But Scotland has the mix of resources work agriculture and services like similar North European states to succeed.
I think YES supporters need to tackle this on 2 or 3 levels. First is as above in the article, second though is to take the GERS figures as they are, and show for instance how the onshore deficit (without oil) hsa dropped from 17.8% in 2009-10 to 10.1% in 2015-16. Third of course would be to actually get a detailed model of the Scottish economy. Who knows, we might actually see one in time.
Why GERS deficit is bogus under independence:
the net borrowing deficit is 10.4 billion the TME deficit includes 4.4 billion of capital consumption(depreciation) none of this money requires to be borrowed and it does not contribute to net borrowing.
subsidies currently made to rUK pensions (£400 million); profits from central bank 250 Million; share dividends 350 million;*
return or part-return of debt interest payments currently made to the UK treasury (£1.27bn, using historical debt); plus the gains from defence restructuring (£1.8bn)3;reduced foreign aid
payments 300 million;non-identifiable expenditure payments to UK departments 0.5 billion;the return of Scotland’s share of quantitative easing assets at the Bank of England (£1bn), reduced
EU contribution from being in EFTA (£0.5bn). raise VAT to 23% 1 billion and
production tax on whisky and gin 0.5 billion
repatriated taxes from cross border commuters 100 million
total 7.47 billion
that leaves 3 billion to find Scotland can run a 2% deficit because Scotland has longterm growth in taxes and GDP of 2% on a gdp of 156 billion its a done deal also a reducing deficit.
Gers is useless as a tool to calculate the economy of an independent Scotland as it doesnt calculate the deficit nor the spending requirments accurately. Nor is ex regio corp tax included in the revenue calculation.
Other ways to make cash:
12% transit duty on electricity exported to the UK
gets you 1 billion
6 billion saving from uk liability to Scotlands existing pensioners or a reduction in Debt to Scotland if they try to weasel out of it.
UK is the continuator state and is liable for all UK debt oil decommisioning and existing pensions
worked example a foreigner comes to the UK works 35 years and fufills the requirement of 35 years of NI contributions. He then qualifies for a uk pension under the scheme rules. “Nationality does not matter” quote from pensions secretary Stephen Webb in 2014. Scottish pensioners after independence will not receive any pension increases from the UK Scotland would have to make up the difference.
UK is the continuator state and is liable for all UK debt oil decommisioning and existing pensions
*Irish investment currently makes 0.5 billion Irish financial
accounts 2015
Some interesting points in there – especially on pensions
This would mean the UK government could be deliberately misleading Scotland re their finances. Mind you the have form in this area. (McCrone Report).
Alternately this could be an oversight . Make your own mind up. I have.
Thank you for your intervention(s) in the debate. As others have pointed out this is very much the point many of us on the pro-independence side who have engaged in debating the figures have made. I well remember my first economics lecture at university (Social Science Degree) when told never to trust data and figures, particularly official data and figures, always question their basis and their purpose.
This is a point that seems to have been ignored, wilfully or accidentally (as a result of their having no background in economics) by those who have chosen to place their faith in the figures and argue that the consequences of Scottish Independence would necessarily be wholly or mainly negative.
Unfortunately you seem to have immediately discovered quite how intransigent and closed minded these individuals are on Twitter. If it’s any consolation many of us have been through the same experience at one time or another and given up direct engagement with them. Unfortunately though these are the ‘go to’ ‘experts’ the UK media often use to ‘prove’ certain points about the economics of Scottish Independence.
In my opinion they view the data as an end in itself having started from a pre determined and partisan position. The fact the data appears to back up their position is enough for them so further interrogation is not only unnecessary in their view, it is a direct threat to their partisan assumptions, as I think you might have discovered over the last 48 hours.
I’ve pointed out more than once that there’s a reason why economics is a social science rather than a ‘science’ science but the point seems to be missed by those whose aim, ironically, is to use data as a justification for their own subjective political position. Unfortunately any attempted debate on the matter quickly becomes a binary point scoring exercise which fails to illuminate the real underlying questions and issues.
Anyway, thank you again for your comments on these issues and I look forward to reading more from you in the coming months.
Thanks
Just to add to the we don’t know what we don’t know theme.Well now we know even less
From The Herald Dec 18 2006
Gers was conceived as a political, not as a statistical, exercise. We know this because the original correspondence from the then Secretary of State, Ian Lang, was leaked some years ago – he wanted it to “undermine the other parties”, saying “this initiative could score against all of them”.
Telling
What’s ‘telling’ is you not knowing that in 2007, GERS was overhauled completely by the SNP, who invited the Cuthberts into the mix (qualified and respected economists, who funnily enough also support independence) to better reflect our finances. The work they did was not only needed, but revolutionary.
She wrote a good piece on Brexit and GERS back in 2016:
https://www.commonspace.scot/articles/9162/margaret-cuthbert-what-gers-and-brexit-reports-tell-us-about-scotlands-economy
Anyone who knows anything about GERS and its history would know this. They would also know that due to the work carried out post 2007, prior reviews of GERS accuracy can be safely thrown out the window. For the record, previous years’ data were amended to reflect the new model and methodology. That obviously eliminates you, since you are ignorant of this fact.
I would genuinely like to know how you (as an economist) would feel if you published researched data for then another economist to basically flush it down the toilet with no evidence or source to support it?
If and when you attempt objectivity I will try replying
My own instinct has been to look at Scotland’s resources – both natural and in terms of human potential – and compare what other countries achieve with similar or even less in the way of these advantages. Scotland really does seem to have rather a lot going for it in a wide range of areas.
Now the argument is sometimes made that if Scotland’s economy really is so bad despite all these assets, what does that say about its current situation within the union and is this not a rather forceful argument for a change of management? However, leaving that aside, I look more to the medium and longer term. How might a reasonably well-governed country of about Scotland’s size and with Scotland’s asset base be expected to perform?
And I have to say I come up with the answer, pretty well on the whole. We won’t get back the oil revenues that were arrogated to Westminster and spent on God alone knows what. We can’t magically restore the heavy industry that was closed down in the 1980s. But we do have other strings to our bow which can be used when the hand of Westminster no longer directs and curtails our every movement – and holds the purse-strings.
I can’t help feeling that we need to give it a go.
I agree
My sentiments exactly. I find it very disturbing that we Scots have it rammed down our throats that we only get by because we get a handout from England of £1,500 per head of population per year. I find it very hard to believe that figure or indeed any financial data that comes from Westminster about Scotland. How can you believe any of it when something made in Scotland and is exported to Europe through a channel port is counted as an English export?
Precisely
Thanks for the interesting article. Any estimate will normally have a + or – uncertainty associated with it. Would it not be more realistic for the summary numbers, such as deficit, to have a range of possible values?
Yes
Interesting – so actually we are being encouraged to leap into an economic void – we have no way of knowing whether the Scottish economy can survive without the UK economy – it’s like starting a business with an unknown amount of capital, no plan, no cash flow predictions, – what sane person would encourage you to do that??? But we’ll be free of the English so it’s all good!
That is pretty much it ( since apparently we have no data we can rely on ). But like Brexit it won’t be as bad as the doomsayers predict so whatever the result we accept it and get on with it. What one has to remember is that the SNP don’t care what the economic impact will be – good or bad they simply don’t care. Their position is based on ideology – independence whatever the cost ( or benefit ) is their only reason to exist. If they do get what they want I hope they do a better job of things that they have since they took over ( a fact conveniently overlooked is their somewhat mediocre management of most of what they are in charge of in Scotland ). Once they have independence they won’t be able to blame Westminster any more ( although they probably will ).
You make the mistake of suggesting economics is all that matters
Not really – just pointing out that the SNP’s position is not solely based on economics so that means the economic arguement , whilst relevant , is not the primary driver for the SNP or its supporters.
The SNP’s argument is at least partly economic
But GERS is not the thing to base it on
I think I said the first and was not suggesting the second!
Anyway , the referendum will turn nasty , divide our country again so hopefully it will be the last one whatever the outcome (I’m on the fence at the moment – just like Brexit you can’t believe politicians or , as you suggest , any economic data they produce). If we can have a second go at independence maybe the whole UK should get a second go at Brexit!!
🙂
I have only just seen your update on GERS. You are of course quite right to emphasise that to suggest that policy or changes should be based on reports produced using estimates is indeed dangerous!
Keep up the debunking of these things.
Further to your Postscript surely time to change the headline to “Why Economic Data Provided by the Scottish Government…” ?
But it is not provided by the Scottish government
The data comes from the ONS and UK as a whole
As you say elsewhere, it’s not about the money.
Scotland is a viable state because it has a polity, a culture and a legal system that is strong enough to stand on its own – more than you could say for a state which puts amateurs like May and Johnson in charge, and which swallows the neo-fascist garbage put out by Messrs Murdoch, Dacre and Desmond.
Agreed
I am English and I would not want to see Scotland split from England at all. The reason has nothing to do with me wanting to subjugate the Scottish people (again).
It is to do with the fact that (1) the Union is set up as a Union by Westminster so they of course do not treat Scotland as a separate country – Scotland’s economy is treated as part of the UK s overall economy – it is subsumed within it – which is why I think Richard is making the point about the vagueness or lack of any concrete figures particular to Scotland. I’m not saying this is good – but it is a fact.
My second point (2) is that can the Scottish people really trust Westminster Tories to cut a good deal for them upon independence, given this Government’s awful treatment of is citizens since 2010?
I wouldn’t trust Tory Westminster as far as a I could throw them to be honest. Scotland will be ripped off plain and simple. And then what? Do you think that Tory Westminster want to see a vibrant Scotland living right next door? They will make things as hard for you as possible because the aim would be to get Scotland to then have to start selling its assets as it failed. Scotland would be treated as an economic competitor.
And who do you think will be hoovering up the assets? The English. The Americans (of course)? Europe? China?
The best thing the SNP can do is to stay in the Union and make a case for anti-austerity in the UK for all UK citizens. As they are, they playing a high risk game that I fear they cannot win.
Stay in and fight the Tory Sassenachs for the good of all decent UK people – Scottish, Welsh, English – whatever.
I fear the SNP think it’s the jobs the English to fight England’s battles
Well, if that is right some questions need to be answered.
1) Is the SNP based on racial principles or economic ones? On the news last night, there were Scots wanting independence but also BREXIT. Are the SNP playing with fire in the hearth?
Would not a better ploy be staying the UK for now and negotiating better economic data and THEN going for independence rather sabre rattling about another independence vote? Or arguing for more self determination within the Union?
2) What is the composition of the SNP in terms of ideology? Who are the Tories in the party? Who are neo-libs? The Left?
Maybe the Scottish people know this already. Considering what is at stake, I hope that they do.
But I say again STAY – and be a thorn in the side of Westminster.
And in no way am I questioning the ability of Scottish politicians and intellectuals. My concern is that I am English and I know that ‘my people’ can be absolute bastards to deal with. Our history tells us that.
And over the Atlantic is an even nastier version of the imperial state? What about an independent Scotland’s relationship with the USA?
There are others more expert than me to answer that lot!
To ask us Scots to stay and risk losing our only voice in Holyrood is preposterous. We would be sold off bit by bit as bargaining chips to get a reasonable trade deal for Westminster. Thank goodness our First Minister saw this coming and acted the only way she could.
Richard thank you for providing an unbiased view on GERS and the Scottish economy.
Yes it will be a leap of faith but in my opinion it is of lesser risk to leave the UK than it is to stay. We are a small population but have many many assets. I also believe that once independent and a deal is struck with the EU to at least have access to the single market, this is when Scotland will boom. We will be a gateway for free trade for the rest of the world and the EU. I believe businesses will relocate for easier trade links.
To base the future of our country on economics, cooked up by the country attempting to keep us tied to them; is stupidity. We as a nation need to be brave and take this leap of faith because if we don’t, we will never ever get this chance again.
And what if it all went wrong and the SNP ended up selling off your assets anyway?
It could happen – especially without decent data to base independence on.
Of course Scotland should benefit from its resources directly but as I said Scotland would be better staying in for now and taking more time to appraise the strength of its economy before going for another independence vote in my view.
So you think it’s best we stay? When Mrs May was all set to use farming and fisheries to broker a deal and would not doubt sell us off bit by bit.
Nicola did not ask for a section 30 for no reason, she and the Scottish government have been backed into a corner. The torygraph government have nothing but contempt for Scotland, always have and always will. The indication has already been made to strip Holyrood of powers, well the little we have.
The economic case no longer stands!! The future is just as uncertain in the union but one things for sure, democratically we are 100% better off out. This means more to supporters of independence than the economy. We know it won’t be a bed of roses to begin with but in the end I will vote for my children and future generations to make their future better. The way I look at it, the SNP have been in power for 9 years; things aren’t perfect but they are improving for the better. We have been ruled by Westminster for 310 years, 301 years more than the SNP have had and look at the state of the economy!!!!
I rest my case.
Thanks for this, it is needed. This situation of course is an indictment of Westminster, and earlier Scottish governments for not demanding better figures.
I understand separate figures were once gathered, but this ceased when North Sea oil was discovered as the Scottish figures were getting embarrassing.
HMG could mandate tomorrow that henceforth sales, goods movements, VAT receipts need to be booked to the polity where they take place. Wales is moving to separate Welsh law out of English law once again. So all the constituent parts of the UK will operate under different legal systems with various associated tax varying powers.
Even if we were not hurtling towards Brexit and Scotland were not seeking a New IndyRef there would be an increasing need for better figures.
One thing is for sure, unpicking Scotland from rUK will not be easy or simple. I would suggest to Scotgov that they pass the buck. Pass a law stating that from such and such a date NOT remitting to the Edinburgh treasury the due tax will be prosecuted. Then after the date prosecute a few and put them in Barlinnie or the new women’s prison pour encourage les autres.
Without strong measures like this people and companies will simply not bother and hard core Unionists post Independence will be recalcitrant.
You make a good point
Come what may Revenue Scotland needs to take control of taxes in Scotland
I am not a financial expert or an economist but I do have home finance to contend with. If I don’t have the money I don’t go on holiday, I stop using the car and cut down on general expenses. Why does Westminster want to keep sending money to Scotland if we are not at least making an equivalent contribution? I find it hard to believe loyalty comes in to the equation.
First, let’s be clear that government is nothing like a household because governmetn’s can print any amount of money that they want
Second, or can’t just lop off parts of countries even if they are a burden and retain a credible;e state
Third, politics is much more than economics, whatever is said
It’s certainly true that GERS is only and can only be a bunch of estimates. However, they’re the best estimates available and they’re what we have to work with. I’m not convinced that the campaign needs to spend any time at all undermining the worth of the data. (Of course, it’s perfectly reasonable for a disinterested economist to blog about them, but that’s a different issue.)
The bigger question, for me anyway, is what GERS might tell us about an independent Scotland. IF it’s all accurate, it shows this famed notional deficit of £15bn. We need to talk about addressing that “deficit” via independence. Unionists show themselves up as utterly horrible economists if they argue that the £15bn is somehow a fundamental element of the Scottish economy. It’s clearly not. Independence automatically changes the picture in Scotland’s favour.
GERS has Scotland assigned a population share of reserved services. Now, some of those are based in Scotland (things like Faslane, DfID in East Kilbride and a whole lot of Jobcentres, for example) but the vast majority are based elsewhere in the UK – mostly in London. An independent Scotland would still need a DfID, so that wouldn’t change much, and we’d still need Jobcentres. We’re also apparently keeping Faslane as a naval headquarters, although rUK will have to pay rent on there and Coulport for at least five years or so, lest either we claim the nukes as our own and begin decomissioning them or they start a war in order to get the weapons and subs back.
However, from day one of independence, we’d also need all the other departments: a Home Office, a Foreign Office, the bulk of promoted posts in the DWP, most of the administration and personnel of the MOD and others. That’s tens of thousands of jobs and billions of pounds of expenditure. Scotland already pays for those things but sees no benefit to GDP or employment. That’s billions of pounds added to Scottish GDP (lessening the debt as a percentage of GDP), substantial job creation (reducing social security spending and thus probably boosting health levels as well as helping rebalance our demographic issues by slowing our youth brain drain) and of course boosting government revenue by taxing those workers. Once you start applying fiscal multipliers to these sums, you’re looking at several billions of pounds in GDP and revenue. Remember, all of this happens at no (significant) additional cost to Scottish taxpayers. It’s just a consequence of becoming a normal country.
There are other questions too. Would Scotland assume responsibility for any UK debt? On one hand, one could argue a moral responsibility, or even a pragmatic argument (which I dispute) that the money markets would not look fondly on a country seen to be repudiating its debts. However, except for the last couple of years, GERS shows us as net contributors to the UK, or at least running a substantially smaller deficit than rUK. Data from 1900-1921 shows the same. That whole time though, Scotland has been paying a full population share of all UK debt. Unionist economists have run those numbers and showed that all else being equal, Scotland would be hugely in credit at this point. Given that, why SHOULD we take on any debt?
Pensions have been covered above. I also mentioned rental of Faslane and Coulport. These could be really substantial amounts of money. Then there’s the BBC. At present, almost two thirds of licence fees collected in Scotland are spent elsewhere. Imagine the difference that could be made to the Scottish creative industries with that kind of cash available. We wouldn’t even lose the BBC itself. It would most likely be bundled into our satellite and cable packages as it is in Ireland at a relatively trivial cost. We’d only need to produce one Doctor Who or Sherlock or similar and we’d be reaping an enormous reward. The potential for sport is even higher. At present, the BBC spends almost £100m/year on English football while the whole BBC Scotland Sport budget is just £4m. We are probably the only European country whose national broadcaster spends more on a foreign league than on our own. We just saw Celtic coin in £30m for getting into the group stages of the Champions League. With an extra million or two each year in TV revenue, could we see Celtic, the Rangers and Aberdeen or Hearts or another able to hang on to their best players long enough to achieve that regularly? I’m sure hotels and pubs in those towns could benefit from the knock-on impact of visiting fans too. Might ticket and shirt sales get a boost from the Scottish league no longer being invisible on FTA TV, overshadowed by the massively wealthy English league?
Journalism would get a boost. Scottish editions of English papers would no longer cut the mustard. Comprehensive newspaper offices would need to be established here. We’d attract more embassies and their foreign exchange flowing into the country. We’d no longer pay for a share of “national” bodies like the British Museum or the National Theatre on top of the many Scottish equivalents. Having our own independent national identity would boost tourism; God knows we have a hell of country to show off to the world, but it’s often overshadowed by London in terms of how Britain projects itself internationally. Our radio stations would likely start playing a bit more Scottish music because a music industry here would be focussed primarily on Glasgow and Edinburgh, not governed by the tastes of programmers in London and what’s hot there.
The possibilities are endless. Some of the calculations (like the government departments) should be relatively easy to make. Some will require negotiation (like debt and pensions.) The others are a good deal more speculative, but the opportunities are certainly clear to see. What is certain is that the next time a unionist yells “£15bn DEFICIT,” you’ll know what to tell them.
We already have a Home Office, you may have heard of it, the Scotland Office. Holyrood already has an external affairs minister and of course a proportion of foreign office staff and diplomats are Scottish and will wish to serve iScotland. Temporary space in British embassies and high commissions can be arranged, they are after all joint UK assets. So, we either take 10% of them lock stock and barrel or we negotiate shared arrangements for a while.
We will need an MoD but that is pretty much it. We are most of the way towards independence, even more so post devolution. We even have a nascent revenue service and an embryo Edinburgh Treasury. The SNP has been gradually building up our capacity since 2007.
Weeell, yes. But an external affairs minister is in no way comparable to the FCO. The number or nationality of the staff isn’t relevant. The important thing is that we pay for them now but most of them are based in London. The Scotland Office is not really comparable to the Home Office; it doesn’t handle immigration, for example. And yes, we have a handful of consular offices in Edinburgh, but many European countries will want to expand these to full embassies and more countries are likely to want to open completely new ones. You’re not wrong about what’s there, but in the end it makes little difference to the argument. The savings may be partly in reducing duplication of services but mostly it will be in repatriating that spending and those jobs to Scotland.
And in representing ourselves much better to potential trading partners.
At the moment if say Highlands and Islands Enterprise wish to use a British Embassy for a trade display they must pay for the privilege when the equivalent bodies in England do not.
So, if foreign affairs are going to cost us, as they do know better to make that expenditure better fit our aims and interests.
Don’t forget the EU has a burgeoning diplomatic service of its own which doubtless could be used to Scotland’s advantage whilst we build up our own diplomatic service.
I agree that Edinburgh will see a big increase in diplomatic missions though in the short term I expect most countries to simply beef up their consulates. It will doubtless be a slow burn though I would expect places like Eire and Norway might well want full embassies quite quickly. We have much to discuss.
And of course the rUK will require a High Commission. It is in Fleet St. but perhaps DC Thomson could put their building in London to the use of iScotland.
So if the best economic figures available are simply estimates and guesses, how does the Scottish government even start to convince the population that independence will be a positive thing. What would their points of reference be if there is in fact no reality to anything that is currently available?
I guess they could start by saying actually manage nt its own affairs might improve Scotland’s outlook
One example I looked into about a year ago was the cost of Benefits. If you go to the DWP website, it can tell you how many people claim what benefits and what part of the country they live in. If you ask for the cost of these benefits, it takes an average cost per claimant for the whole of the UK and multiplies it by the number of claimants in the locality. This is patently absurd. The cost per person of many benefits is substantially higher in London than in Scotland (e.g. Housing Benefit) so the DWP statistics are grossly overstating the costs of benefits in Scotland and grossly understating them for London. Since every benefit claimant has an address and postcode, there is no reason why accurate figures cannot be produced but the DWP chooses not to do this.
The DWP figures for benefits costs cannot be trusted. How many other public expenditure figures are distorted in a similar manner?
Precisely
You might want to revisit this.
Who do you think does the UK estimates? IDS?
What are you saying about the UK statisticians who do produce them? They’re a bunch of unionist liars? They put all that effort into learning their field, then just decide to start lying to help Theresa May? They get infected by some kind of pro-South English bias?
You’re in climate denialist stuff.
If that’s what you’re saying, come on, say it.
I suggest you look at the history of the McCrone report
And read what I wrote in my third blog on this theme: the bias is in the political decision not to create Scottish data
And yes, that is bias
Thank you for this very thoughtful piece, explaining clearly something I have thought for some time. Perhaps a naive question, but is it not possible, with some hard research, to get a much clearer estimate of the future economic prospects of an Independent Scotland? You could survey companies for example to see how much of their sales are actually made in Scotland to work out VAT etc.
In reply to Kenny why can’t Scotland borrow £100b or so based on a similar GDP/debt ratio to Denmark for example of around 50%? This would sort any extra expense for independence and reduce any deficit for the time it takes for a new Scottish economy to get settled in.
Interest rates are the lowest they have ever been and it would be foolish not to borrow as much as possible. As he says, Scotland must refuse to pay any share of UK debt.
It is unlikely Scotland does owe UK debt:oil guarantees that
And of course it could borrow, and it will
Whether data is available right now is a good question