I have been asked for my comments on GERS 2017 - the Government Expenditure and Revenue Scotland statement, of which the latest version was published this morning.
To be candid, in many ways I have little to say to add to what I have already said on this issue. All my reservations about GERS remain. On the revenue side the vast majority of estimates are just that i.e. they are extrapolations from UK data that assume Scotland is a mini part of the UK as a whole, and I do not think that a useful basis for assessment. Some changes, e.g. on oil revenues, have taken place, with modest up-ratings in Scottish revenues as a result. Some devolved taxes reflect Scottish source data now: I accept that the latter in an improvement.
But, and I stress the point: what GERS still shows is the improbable likelihood that the Scotland is disproportionately responsible for the UK deficit when it is very clear that many decisions for which Scotland is asked to contribute would not be paid by Scotland as a whole if it had the choice. Trident and much of the defence budget is an obvious example, but there are others on the spending side, where Scottish demography would, for example, suggest that a very different pension system might be appropriate for Scotland when compared to the rest of the UK.
As for income, Scotland has very limited control over the income attributed to it and the tax system in operation, which heavily biases towards wealth and which is very large business friendly, may well be one it would not choose. In addition, I would hope a Scottish government would pursue the tax gap much more vigorously than HMRC does anywhere, and not least in Scotland, where it intends to withdraw from all local services above a line between Edinburgh and Glasgow, leaving some in the country many hundreds of miles from a tax office, and its scrutiny.
This leaves all aspects of GERS distorted by a decision making process centred in London which has devolved little real control of much of what happens to Scotland by keeping a tight rein on purse strings and strictly limiting the use of devolved tax powers either by statute or by the way in which powers have been granted. This lack of real interest is reflected in the fact that so little of the critical data in GERS is really collected in Scotland but has to be abstracted from that for the UK as a whole.
GERS is, then, a statistical anomaly prepared without consideration for what really happens in Scotland and as such provides almost no real indication as to what its potential might be, whilst leaving the Scottish government with no reliable data on which to make economic decisions. It is this that annoys me. Scotland has been granted the form of devolution but has no way to assess what that really means. GERS does then, without in any way questioning the integrity of those who prepare it, at best represent a continuing mechanism for control of the Scottish economic and so political agenda for London and that's precisely why in its current form it serves no useful purpose for those really interested in Scotland being managed for its own benefit within the UK.
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Having read your recent article on GERS I wonder if you could tell me if this order is classed as Scottish export or is it just lumped into UK exports.
Buses bound for Mexico in £44m double-decker deal
Scottish bus manufacturer Alexander Dennis Ltd will build 90 low-emission double-deckers to run on one of Mexico’s most famous avenues.
That should be a Scottish export
Those exports are funded by UK Exports Guarantees, meaning the UK taxpayer, not just the Scottish taxpayer is that order.
Post independence that would stop, Scottish taxpayers would have to finance it.
No, they’d have to agree to take the risk on it if the customer did not pay
I agree that GERS does not provide the Scottish Government with the data it needs. I would also assert that we should be able to examine the statistical validity of the provided estimates. In that regard, much has been made of the fact that GERS provides confidence intervals. The Fraser of Allander Institute was “careful” to point that out just before GERS appeared for 2017.
Confidence intervals are given for 7 items of revenue, totalling some £36bn. This includes the 3 largest revenue items. Corporation tax is the next largest item and GERS says a confidence interval CANNOT be provided. Richard has pointed out why this is the case.
The items where confidence intervals are not provided add up to £22bn, which is 38% of the total. I accept that, in some cases, they are ‘administrative items’ – assumed to be highly accurate. For others, as with corporation tax, the accuracy is unknown.
The overall confidence interval for the £36bn is given as +/- 2%.
The key point is that GERS does not provide a link to a source, or even a cursory few words, to justify the claimed confidence intervals.
Normally you are dealing with a sample set of data, and can calculate the mean and standard deviation. Assuming the sample is from a population with certain characteristics, one can then calculate a confidence interval. It’s hard to see how that can work with any of the methods used to provide the estimates. For that reason, it would seem appropriate to explain how the confidence intervals are derived.
Given that extrapolations from UK data are heavily involved, it is possible (if not likely) that the estimates are also biased – in the statistical sense of bias. Again, some attempt to reassure us that the biases are likely to be small would be in order.
but if it leaves these shores from say Felixstowe, it will be recorded as…
The YES movement has multiple ways it can approach GERS, and all are valid.
It can indeed point out, as did the Fraser of Allander Institute, that ” [GERS are] a set of accounts based upon the current constitutional settlement and policy priorities [which] will tell us little about the long-term finances of an independent Scotland.”
It can attempt to provide more realistic and accurate data.
Or it can take GERS as it is, and point out that the onshore deficit has dropped since 2009-10 from £19.9 bn 17.8% of GDP, to 2016-17 £13.5 bn 9% of GDP – in 7 years a drop of £6.4 bn, and 8.8% of GDP.
And that if that trend continues, an Indy Ref in 2019 would see it at £11.7 bn — 6.5% of GDP, and Independence in 2021 would see it at £9.9 bn — 4% of GDP.
There’s little comfort for unionists in today’s GERS, though I daresay they’ll be making a frantic best effort at it.
Wait a minute, so on your numbers, £9.9bn will be 4% of GDP, so GDP will be c.£245-250bn. Wheras £13.5bn is 9% of £150bn GDP in the most recent year. So you expect GDP to grow from £150bn to £250bn in four years? That’s a frantic best effort GDP growth rate of 14% p.a., excellent news!
Pretty good isn’t it 🙂
The magic of number series.
I forgot to say – wait till you see the figures for 2023-24, and the next year.
GERS offers no comfort for Independence supporters, just more home truths.
Post independence, there will be shortfalls in revenues, revenues that GERS already reflect. I remember one nationalist bragging about VAT revenues, until I explained those VAT revenues include VAT levied on vatable exports to the RUK, overnight those revenues would disappear, and the people of Scotland would be expected to stump up the shortfalls.
And VAT would be charged on imports
Get real
The last time I checked, VAT registered will be able to claim the VAT back, so my point of the VAT levied on Vatable exports to the RUK will disappear post independence.
Vat is a tax on end consumption
GERS cannot be judged against independence because it is apples and oranges. Scotland accounts for 15% of the total UK rail network, and post independence, the bill for looking after the rail network will shoot up.
It also assumes, that the foreign aid budget of any independent Scotland would be 0.7% of GDP, which is a stretch of anyone’s imagination.
Why would the cost of rail shoot up? Scotland could bid to run the rUK rail network and get a subsidy that way – as the Netherlands does
With respect, I think you’re being absurd on this one
With respect I am not being absurd, far from it. Network Rail runs the tracks in Scotland, and as mentioned, Scotland accounts for 15% of the total rail network which amounts to nearly 2,800 km in length.
Post independence, the body who ran the rail network would inherit 15% of the Network Rail, debt by the way, never accounted for by the Scottish Government in its white paper on independence.
” If Scotland’s share of the Network Rail debt was worked out by its share of the network rather than population then the cost would be even higher as Scotland has 15 % of the UK’s train route miles.”
https://www.sundaypost.com/news/political-news/billions-in-rail-debt-for-independent-scotland/
Scotland wouldn’t be in any position to be bid to run the UK network, you know being flat broke from day one.
Scotland would have no debt on independence
How could it?
It contributed to the UK budget and reduced the deficit for well over 30 years
What debt could it inherit?
Respectfully, you’re talking nonsense (there are better Scottish words I could use)
%age of route miles is a deeply inappropriate measure to use in apportioning share of UK rail costs. Track miles (which takes into account whether the line is single, double, or more) is self-evidently more appropriate: if a single track weren’t cheaper to run than double, there would have been no point in singling in the first place. Needless to say, a considerable part of Scotland’s route mileage is single track, and further more, has very different infrastructure costs to the more intensively used network in England: for instance, the use of radio signalling is a huge cost saving over the fixed signalling infrastructure that is almost omnipresent in the rest of the UK
I like that, a lot….
Indeed, having reflected on this, you could scarcely have wished for a better example of the way GERS works (or doesn’t!) than to ascribe 15% of Network Rail’s total costs to Scotland purely on an abstraction from route mile figures!
Plus Network Rails’ HQ is in London with the associated higher wage jobs, plus:
“We own and operate two Rail Innovation & Development Centres (RIDCs) in Britain, one in Melton Mowbray in Leicestershire and the other in Tuxford in Nottinghamshire.”
At best it should be per capita, and probably lower considering economic activity.
I despair of academics ( you’ll know the sort who campaigned to Leave the EU ) who think the meaning of extrapolation is when you take a small country like Switzerland and then claim that a big country like the United Kingdom could be like that. So it’s good to see extrapolation used in the correct manner in this piece. Some of these public intellectuals really do need their matron. Not you of course, I can tell you passed your English O-level.
One thing that doesn’t get mentioned nearly enough is the huge transfers of wealth from the people of Scotland to its biggest landowners, many of whom are not Scottish or British. I think it would be safe to say that a lot of their income will not be taxed. The feudal spirit is still alive and well here. These thousands of acres attract huge payments and are often reported as providing significant benefits for local economies but do nothing of the sort…it’s similar to the tax avoiding corporations who pat themselves on the back for the income tax paid only by their employees.
The estate nearest us is owned by an Australian, run from a virtual office in Aberdeen and provides no local work. Eight thousand acres properly utilised could revitalise our tiny communities but the local kids all move away to Glasgow, Edinburgh, London and further afield. Holiday homes, second homes proliferate as does the bracken on the unproductive hills and in the glens. There are resources aplenty but no structures available for them to be realised. Fuel poverty is probably touching 30% of households in a country overburdened with wind, water, wave, oil and nuclear. Those who are happy with the status quo fear independence because it will lead to a reckoning with this poverty of imagination and ambition.
It can’t come soon enough for me.
Well said PJM. I am all for maximum democracy and as much independence as the Scottish people desire. However political democracy without economic democracy equals no independence, it is a fantasy. That self-rule will soon fall victim to the machinations of the major economic players. The progressive wing of the SNP having served their purpose will be gradually side-lined. Thinking that Scotland’s problems originate in Westminster is just as naïve as thinking the UK’s problems are produced by Brussels or immigrants.
I disagree John Adams with your assertion that an independent Scotland would soon be subject to a take over by economic players. Just take a look at the Scandinavian countries and our close neighbour’s; they manage very well economically and socially. We will have a constitution which will ensure we are no longer used and abused. And while we are shackled to WM I would suggest that WM’s problems are caused by indulging in war mongering and a fixation with investing in weapons of mass destruction.
Think they mean englands prices will shoot up there not scotlands because don’t forget the vanity projects factored in the rest of the uk once Scotland leaves will have to pay scotlands share between them trident hs2 Hinkley power station plus no revenues Scotland makes will come to London meaning the uk coffers will have less money coming in there as well all that’s got to be taken on the books as well
[…] This is my evidence in the quality of GERS – Government Expenditure and Revenue Scotland – presented to the Finance Committee of the Scottish Parliament earlier this year. The GERS for 2016/17 was published yesterday. […]
I’ve been reading around on the FoAI (Fraser of Allander Institute) website, 3 articles from or via Graeme Roy, who used to be on GERS itself.
First of all, I agree totally 100% with him about the actual integrity of the people working on GERS, and that they will have been working to the highest standards of statistics and statistical analysis. I also presume that they have been working WITH economists on the production of these stats.
There are also advanced techniques that can be used to CORRECT dubious stats one way or another, and I daresay they used these. For instance you can get rogue data that doesn’t fit, and on inspection it turns out to be wrong, or produced in a different way to the rest. Analysis can and should highlight this and trigger corrections to the actual data.
https://fraserofallander.org/2017/03/28/estimating-scotlands-fiscal-position/
https://fraserofallander.org/2017/08/17/next-weeks-gers-numbers-part-1/
https://fraserofallander.org/2017/08/18/next-weeks-gers-numbers-part-2/
But I’ve done stats and models in “real” business environments where an actual product comes out of the door and gets sold one way or the other, for a profit, or a loss, and there’s something in all three articles that just leaves me – uneasy. One from that is that GERS itself IS the end product, and stands or falls on its own merits. No money actually changes hands.
I’ll have to re-read the articles at my leisure. I think part of it is that it defends GERS which has been attacked, rather than does a real devil’s advocate, though it does do some of that.
Perhaps I “feel” that the defence is too – defensive, and that’s not a comment against Roy who’s probably been responsible for many of the improvements and methodology changes over the years. Basically you have to be ruthless with your own work, rather than be proud of it. You do your best, then open it up to attack from all sides, justified or not.
Big business has experimented for decades with its own accounting to try to get a “true” picture, an example for instance is cost centres versus profit centres. That’s a different part of the accounting to what it likes to portray to the outside world 🙂
I too am rummaging….there may be a blog in the morning
GERS is a set of estimates that may have some relevance for comparing one period with another. The whole London-centric approach to UK economics and financial data undermines GERS as a measure for the viability of an independent Scotland. We cannot expect; nor should we expect, after three centuries of relevant experience; that the UK Govt will accurately portray Scottish potential. No West European country of 5 million people with a highly educated workforce, outstanding natural resources, modern infrastructure, highly developed agriculture, highly developed industrial resources and an outstanding industrial and scientific history, can possibly be non-viable as an independent state. To suggest that it would be non-viable is to portray oneself as extremely stupid.
Absolutely right
The news on the number of students outstaying their visas is *interesting*.
Previously we had an estimate, now we have the actual data – and the difference is startling. Demonstrates Richard’s main issue with GERS quite well.
@ Glenn Middleton: when you quote the Sunday Post to support your case, you’ve lost the argument.
Westminster has no incentive to provide accurate figures for input to Gers. Simples.
You need a better excuse than that Gavin.
How refreshing to read good honest comment as apposed to the flurry of nonsensical reporting from the main stream media comparing these GERS figures with the Scottish Government white paper of almost 4 years ago and deliberately attempting to miss the point completely , that the figures in the white paper were an attempt to lay out the position in an independent Scotland whereas these GERS figures as Richard has explained can only (at best) be an accountancy of the status quo, and a pretty ropy one at that.
[…] but not all of my criticism of GERS has focussed on the fact that almost all the significant revenue figures are estimates based on […]
Dear Richard Murphy,
It is good to hear someone speak the truth,Scotland is well capable of being independent,it has no ambition to rule the world,but live in peace.Scotland has invented so much,and tried to improve lives.There have been more than enough resources wasted on London vanity projects,of Scot,s lives lost in conflicts that have nothing to do with Scotland.There has been no respect in (Brexit)for Scotland at all, and no equality.This nonsense that started with Conservative party infighting,seeking to line their pockets still further with no thought of anyone else,they joined Europe to make money for the S.E.England and are leaving for the same reason,we will worse off quality wise,(food and health).Scotland with all it,s resources including people,does not need to be wasted on vanity projects.Why is there No equivalent to G.E.R..S for England,Wales and N.Ireland ????
There is for Wales and NI
The suggestion is the three generate most of the deficit