As some readers of the blog will know I have been taking an interest in the data underpinning Scottish economic reporting this year. As a continuation of this theme I have, over the last few days, been aware of the reports on the Wings Over Scotland blog that UK Regional Trade Data has been restated to allocate to Scotland the benefit of oil sales previously allocated to the head offices of the companies making the sales in the past, and treated as unallocated for the purposes of the statistics as a result.
Let me start by saying that I am aware of all the controversy that surrounds the Wings blog. Just, however, because almost any mention of this blog riles every Scottish unionist does not mean that what is written on it is wrong: this report seems reliable; Scottish oil data does seem to have been consistently under-reported by HMRC who are responsible for these statistics, which also seems to rather prove my hypothesis that Scotland has been supplied with poor quality data by the UK government as a whole.
I have been asked by some people to establish whether this means the GERS statement for Scotland is wrong, and right now I am not sure of the answer to that. That is because the GERS data for the North Sea is estimated by academics according to the GERS methodology note and it is not clear what influence the Regional Trade Data has on that estimate. The best that can be concluded then is that the data as a whole, as well as GERS, remains as unclear and unreliable as ever.
What I did happen to note form the Regional Trade Data is this (extracted from the excel download available here):
Note that only Scotland runs a consistent trade surplus according to the Regional Trade Data.
Now, don't get too excited: this excludes services, and is notoriously unreliable (as noted already, the data can include errors running to billions of pounds and still get published) but for those with an interest in Scottish economics the implication is at least interesting. The persistent claim that Scotland has a weak economy and is unable to sustain itself is not supported by this data. The chance that it may now and certainly did, support the UK economy as a whole, is, however supported.
This will need more work. I offer it as a curiosity for now, but one that certainly needs to be investigated further.
Thanks for reading this post.
You can share this post on social media of your choice by clicking these icons:
You can subscribe to this blog's daily email here.
And if you would like to support this blog you can, here:
Thanks, the usual suspects still drone on about the supposed large deficit even though none of them can tell me where I can buy scottish bonds!
Of course there is no such thing, yet the churn out graphs comparing us to sovereign nations..
Perhaps a proper stock/flow analysis is in order. Of course that would show that the high tax yield from the city was only made possible by govt bailouts. That will never do!
Is it possible that the accounting change was due to HMRC’s desire to better capture tax on that oil? What was the taxation/duty/licensing rate on non territorial oil exports booked to oil company head office?
Does that mean that Statoil’s fields in Scottish areas were being booked to Norway?
We do know for various reasons that the Treasury’s income from North Sea oil has plummeted of late. Not coincidentally with renewed calls for Scottish Independence . . .
I wonder if this is in fact a tightening of tax by an increasingly worried HMRC. I can think of no better reason why they might have done this. After all it boosts the prospects for iScotland. Why do that now if there is no advantage for you is likely to be the thinking.
Tax has nothing to do with this: I think we can safely assume it was known that the tax was due
But for reasons best known to HMRC they decided to say they could not attribute the revenue to a place – even though it was obviously Scottish
I think we should presume there was an agenda but it was not related to tax
Does this include export import to other parts of the U.K.
No
Thanks for taking the time to do this and I hope you find time to do a more in depth analysis. Disappointing though it is not to get a definitive answer it’s better to know that the data is not fit for purpose in order that it can be improved.
The thing is, were these statistics available before, or are they new? And if new, why? And a speculative question – is it because of ESA2010 being now fully implemented by the UK Gov? It was due to be implemented by EU member states by 2014, but the UK got a derogation until 2017 as did some other member states.
And lastly – will this make a significant difference to GERS 2016-17 due in 2 weeks? Will they be more accurate, perhaps even acceptably accurate by “both sides”?
The answer to all those is ‘I don’t know’.
Sorry
‘Wings’ has said on Twitter that ‘nothing to do with GERS’
Apparently the info has been around for some time re: RTS.
I have said that’s probable too
But we don’t know for sure because we don’t know what GERS is based on in this area
As usual an honest appraisal without polemic from a reliable source. Thanks, Richard.
The only slightly worrying thing is the trend in the figures! Surplus down by 90% in four years? Meanwhile England’s is going in the other direction!
Oil
I think the biggest part is that 2017 is for 1 quarter, whereas the other 3 years are for a full year.
You are right
Thank you for taking the time to publish this Richard. When Wings shared this I understand you were tagged in many posts (I know I did) we rely on people like you to inform us. I hope further investigation will be done.
It makes no difference to GERS, as the allocations for revenue are done according to the Kemp-Stephen methodology. It also makes to difference to Scotland’s published trade statistics under ESS as these are onshore only. The SNAP project does publish Oil & Gas statistics and these also do not use RTS. The SNAP project also provides a GDP figure for Scotland including and not including Oil & Gas, the numbers for the offshore sector are not sourced from RTS in these either.
I wrote an overview of Scotland’s Oil & Gas allocations on my site a while ago. here http://www.scotfact.com/article_oilandgas_1.html
In fact, the article that wingsoverscotland ‘discovered’ this methdology change was also one of mine. The article is here http://www.scotfact.com/article_unknown_region_1.html , the thrust of which is that RTS is not a suitable source for discussing Scotland’s exports, however other sources are available.
The only thing this RTS methodology change is to the RTS statistics themselves as they are not used for much else.
Maybe
GERS uses Kemp’s methodology to calculate oil volumes on a field by field basis and the related oil and gas revenues in GERS are approximated from that as is contribution to GDP. GERS therefor are unchanged by the UK regional trade figures methodology being updated to be more realistic.
So although the unknown origin status attributed to so much of the oil in the UK paperwork has been seriously misleading for a long time the GERS methodology always ignored it the unknown origin and correctly allocated it to Scotland. If correctly is indeed a word that can be used when there are so many estimates and debate over sea boundaries etc. For the economics of independence if it sounds to good to be true and its not a claim made by Business for Scotland then its to good to be true.
Note however RTS is based on VAT data and the UK is moving towards using this for GDP as it is likely to be better than other estimates
This may be true for oil as well
There is a debate going on right now on the best methodology for oil revenue calculation in GERS and I have just supplied opinion to the Scottish Government on this. They are looking to introduce a UK calculated measure that Kemp has consulted on, and one option is a hybrid, including VAT but I have my doubts. It is not however the allocation of revenues that is damaging Scotland’s fiscal position (as part of UK) in GERS but the UK Governments tax policy. BfS will publish a full report on this before the next GERS reports are published in a couple of weeks.
I am really glad you are taking an interest in Scotland’s economic data and its lack of robustness – we don’t even have enough data to manage a federal system (not that its really an option) or to model policy impacts. I think more detailed data needs to be gathered in Scotland by Scottish Government statisticians who are neutral in the constitutional debate but dedicated to the needs of the Scottish economy.
Agreed
Scotland is dependent on trade with the RUK, 60% of its exports end up in the RUK. Nationalists and WOS cannot understand the basics, issues like a currency have an impact on trade with the RUK.
There is not a shred of an argument in what you just said
Please be constructive or don’t waste people’s time