Nicola Sturgeon committed the SNP to a Green New Deal yesterday. I am, of course, pleased. But I also have a problem.
At the same time as the SNP has made this commitment it is arguing that it must deliver on the promise of its so-called Growth Commission, which has been discussed here before. And there is a problem. In no known Venn diagram can a commitment to the Growth Commission and the Green New Deal produce policy overlap.
The Green New Deal commits a government to use fiscal policy to create the funding required, in its own currency, to in turn create the activity required to deliver the economic, social and policy transformation necessary to deliver sustainability. I summarise, but that's it.
And the Growth Commission would commit an independent Scotland to use sterling and curtail all government spending to appease financial markets by suppressing any economic activity that might require any form of deficit to be run. Again, I summarise, but that really is it.
Although I should add, in case there is doubt, that the Growth Commission also precludes any effective fiscal policy by the government of an independent Scotland. Such a government, if bound to sterling and the Growth Commission constraints, simply could not have a fiscal policy, apart from austerity (if that can be described as such).
So Scotland has a choice. It's a future, or the poverty prescribed by the Growth Commission, which also fails to prepare Scotland for any form of sustainable society.
It's not really a choice, is it?
And Nicola Sturgeon can't back both. She too has to decide. A lot may hang on her decision.
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… John McDonnell has created the same rod for his own back with Labour’s “Fiscal Credibility” rules… they appear to believe Thatcher’s dictum that…
“It is your tax which pays for government spending. The government have no money of their own. There is only tax payers money”… yet they surely aren’t stupid enough to not understand that every time the government spends it creates money and every time it taxes it destroys it…
Don’t you believe they’re not that stupid…..
Roger’s point explains my sympathy for the SNP, of which I am a member. When both the government and the official opposition of the UK get it so wrong, and any attempt by the opposition to oppose Tory austerian policies is ridiculed in most of the UK media, how do we persuade the SNP to get it right? The Scottish media is of course famous for parroting the UK media, especially the right-leaning media.
I know there are at least a few practising SNP politicians who understand that MMT is the correct description of how a modern fiscally sovereign economy works (and I think Richard knows some of them too). However, they are reluctant to stick their heads above the parapet.
There are politicians in the US who are much less scared of promoting, or at least being sympathetic to, an MMT view, which may seem odd. However, it seems to me there is a much stronger current of open economic discussion running through the US media, and academia, than there is in the UK. The mainstream media in the US run articles and discussions for and against MMT on a regular basis. Who in the mainstream UK media would give credence to an economist that argues against the views of a Nobel prize winner? How often do we see open discussion of MMT in the media here, despite the sterling efforts of Richard and a few others?
In my view, the tone of many of the attacks on the SNP and the Growth Commission doesn’t really help. In the US, it seems to me that the MMT camp comes across as (mainly) calm and collected, while the opposition (often) scream Zimbabwe etc. Here the MMT opposition to the SNP (often) scream Neoliberals, which enables the media and the policy-free zone that is “Scottish” Labour to jump on that bandwagon.
Given that Scottish Governments have had no experience of running an economy, it’s hardly surprising they need help. Perhaps Richard and the need for a workable GND can help them see sense, but cajoling rather than castigating them is more likely to work.
Roger Stokes says:
“… yet they surely aren’t stupid enough to not understand that every time the government spends it creates money and every time it taxes it destroys it…”
I’m afraid they are exactly that stupid, Roger. That is what is so very depressing.
And if they aren’t that stupid why are they pretending to be ? That’s Tory policy. I for one have seen ‘Tory Lite’ and I don’t think we need to go there again do we ?
You are right, of course – but the currency issue, which is both an emblem (I’m thinking of the recent Commonweal article on pre-preparation) and the actual key, is going to be the focuss of debate at the conference – and whatever happens there, it will carry on as a living struggle within the party. There are, so far as I can see, zero grass roots in favour of Wilson’s ‘sterling’ nonsense and the issue is big enough that I know that it is THE reason some have made the effort to get to this year’s event. The contradiction is indeed real – and there’s local support, and growing, only for one side of this argument.
I have just been interviewed on this and said much as you have….
I think conference is going to throw out the GC six tests and add our own currency ASAP after a Yes vote. At least my branches delegates seem minded to vote that way. We’ll know in ten days.
I hope you are right
Nigel Goddard says:
“I think conference is going to throw out the GC six tests and add our own currency ASAP after a Yes vote…..”
I hope you’re right about which way the vote will go. ASAP will do for now.
From there the logic will kick-in. and do the rest.
Leave aside the irony of a report which endorses 10 years of increased austerity being published by the SNP as an “Inclusive Growth Report”.
Of course the choice of which currency an “independent” Scotland might use is a problem but, to an extent, the debate over the currency is displacement for the known fact that “independence”, whatever currency is adopted, would be an economic disaster for Scotland. The UK’s regional economic policy underpin’s Scotland’s ability to deliver relatively high levels of public service and state benefits. The gap in income if we lose Barnett, according to the Scottish Government’s own GERS figures, is around £13.5bn/year. Leaving aside the costs of setting up new institutions to support the new country and to support any new currency, the loss of that transfer alone plunges the public sector in Scotland into a crisis much worse even than the current Tory austerity.
Add all the other costs of being outside the EU, setting up borders, trade deals, treaties and embassies, the flight of key industries to safer jurisdictions and renegotiating links with Scotland’s biggest market and you have a recipe for chaos that puts the Brexit shambles in the shade.
Brexit has cost £billions that the UK can’t afford. “Independence” would cost £billions that Scotland could afford even less.
Which is why Nicola Sturgeon has been on the point of announcing a new indyref for the last three years but never quite gets round to it. THere is no coherent plan for “independence”. It would be a disaster for the SNP and Sturgeon would be the SNP leader to lose their only real reason for existence.
So be under no illusion that, even if the SNP could agree on the currency question, it would solve anything in their own terms or bring “independence” any closer. The controversy over the currency is a symptom not a cause of the impossibility of delivering an acceptable deal on Scottish “independence” on economic or any other terms.
Alex
With respect, this is drivel
You and all in Scottish Labour really should not spend your time solely talking Scotland down
And you should know better than to base an argument on GERS
If you really want to display your irrelevance north of the border this is how to do it
You really need to do better and I wish you would
Richard
https://m.youtube.com/watch?v=Ni5dTPBgLKE
And do you think people listen to you on GERS after this performance? Talk about being exposed as a fraud !!
I should hope so
I told the truth as it really is
I was entirely happy with that
You were basically accused in the assembly of just making up numbers in a way which no other country in the would would do and you are happy with that??..
I was accused of it
But it was not and is not true
As the evidence I have assembled shows
I was happy to defend that
Remember almost all GERS data is a UK extrapolation. Almost none is Scottish
Nick says:
“And do you think people listen to you on GERS after this performance?….”
In the kingdom of the blind even a man with half an eye can see stupidity. A one-eyed man could be king, but we need a monarchy in Scotland like we need a hole in the head. (besides we already seem to have got one 🙁 )
Only unionists take heed of GERS figures because they think they demolish the case for independence. It’s quite childish really. Brain candy for bean-counters. Enjoy.
Mrs Thatcher abolished the UK’s Regional Policy in the early 1980s and there hasn’t been one since. That is one reason that the sucking of all activity into the South East has accelerated.
The choice of currency is not a problem – independent countries have independent currencies. Period.
The money spent on setting up the new agencies of State (all the various ministries, etc) will likely result in a decade long boom in Scotland. Tens of thousands of new jobs, building projects, etc, etc. 50% of whatever is spent comes more or less straight back into the Treasury in tax and the rest follows via the multiplier in due course. You should study what Prof Murphy writes in more detail.
There are a few in the upper echelons of the SNP who have not yet seen the light, but they will in due course. Not least because I think they will find the membership demands it, and it takes a bit of effort but the Party is ultimately democratic so the membership will prevail.
Robin MacAlpine has addressed all these issues
Alex Gallagher.
“Of course the choice of which currency an “independent” Scotland might use is a problem but, to an extent, the debate over the currency is displacement for the known fact that “independence”, whatever currency is adopted, would be an economic disaster for Scotland.”
What manner of nonsense is this ? Dearie me.
And then you trot-out the usual hogwash about GERS.
This stuff carries some spurious weight on Facebook, but it doesn’t wash here.
Everyone who is at Conference should please vote in favour of Amendment B, which is essentially George Kerevan’s proposals, and my Amendment D. You can also vote for Amendment A, but that is not about currency but rather any potential payment to rUK. Amendment C conflicts with B and C so while it is better than the original motion I think you would have to vote against this one. If we get B and D passed then we get to having our own currency as soon as practicable after Independence Day and with no tests or other garbage. Preparations to start right after a vote for Independence. There will be a transition period so it depends how long that is as to when we are ready to go with releasing the new currency and withdrawing the old Sterling.
For those interested I wrote this yesterday:
The Times has a somewhat OTT article today (now yesterday) about the ‘revolt against Nicola’ on currency. In response to the usual ill-informed drivel in the comments I just posted this:
The S£ is highly unlikely to decline against sterling. Why? Because of the fundamentals.
– Scotland as a country has a Balance of Payments that is about zero, i.e. imports = exports. The UK has a massive deficit of not far off £150 billion this year. That means Scotland will not require any external funding while the UK is, as the BoE Governor said, “dependent on the generosity of foreigners”.
– When you are all talking about ‘Scotland has a deficit’ what you actually mean is that the Scottish Government would, if Scotland were independent, have a deficit. Of course the SG currently does not have a deficit as it is not allowed to run at a deficit. The Government and the Country are not the same thing.
– When the S£ is introduced it is used to purchase Sterling from those that are happy to exchange it. This is totally voluntary. The Sterling handed in becomes the property of the Scottish Reserve Bank. This means at the point of creation the S£ will be the only currency on the planet which has one to one backing by Foreign Reserves. My estimate is that Scotland will start off with about £50 billion of Foreign Reserves. Compare that against the BoE Foreign Reserves (net) of US$55 billion. So in case you don’t appreciate that, Scotland would be likely to have larger reserves than the UK currently has. The figure for UK reserves is the net position for Feb 2019 from the BoE web site. If you liquidated sterling you would get about 2 US cents per pound as there are about 2 trillion pounds in existence (M3).
– People will naturally be cautious and that £50 billion handed in during the initial phase is only about a third of the money we own. There will be a long tail of folk who gradually hand in much of the rest over the following couple of years. That means there is a guaranteed demand for the S£ in the FX market for at least double the amount in the initial issue over the next two years or so.
– At the outset international speculators will hold zero S£. So it is very hard for them to dump the currency. Selling forward risks a bear trap from the Scottish Reserve Bank.
– The Scottish Government can and indeed should run a significant deficit in the early years. If it does not issue bonds then there will be nothing for e.g. Scottish pension schemes, savers, etc to purchase in place of current holdings of UK bonds. A Scottish pension scheme would not wish to be exposed to exchange rate risks so they need to sell their current UK gilts and replace them with Scottish gilts instead. There are currently none of the latter, so they need to be issued. The Government Debt = Private Savings simply because this is a double entry book keeping system. Every debt of the State is a saving of a private individual, company, etc by definition. Repaying the National Debt also means wiping out the National Savings as bringing a debit and a credit together means they cancel out and leave zero. All you get instead is that the saver has cash instead, but cash is a liability of the state. So all that has really happened is that the one asset and liability (bonds) have been swapped for another asset and liability (notes) leaving the end position of the debts of the state unchanged. The only way to reduce the debts of the state is to tax the currency away which results in its destruction.
– Those who wish to convert will be issued with new S£ bank accounts, credit cards etc. They can keep their existing Sterling ones or close them as they wish.
– Contracts, such as mortgages, will stay as they are in sterling unless both parties agree to change them. There are likely to be incentives and sticks to encourage agreement on changing them so that people are not exposed to FX risks. This might include e.g. making sterling debts no longer automatically enforceable in Scottish Law and treating them the same as e.g, a US dollar debt would currently be treated.
– Business, etc that trade with rUK will most likely do what happens in Canada and simply run two bank accounts, card machines, etc. rUK customers can pay in Sterling and Scottish ones in S£.
– Financial investments such as shares, UK gilts, etc will stay exactly as they are, so priced in Sterling. That is simply because they are all quoted on the LSE and that is not changing. Thus things like shares ISAs will stay as they are. The Scottish Government may or may not offer the current tax advantages of an ISA, but that is a different issue.
In conclusion this is really not hard. The most time consuming and difficult part of the process is actually getting the new notes and coins designed and manufactured.
There is no E: a currency on Independence Day
And that is a mistake
Sorry Richard, pointing out the SNP’s weaknesses is not talking Scotland down. It’s pointing out the considerable IMO weaknesses in the SNP’s case for “independence”.
In that respect the Brexit shambles has been a great help in providing concrete examples of the previously abstract problems inherent in destroying existing unions. People now understand the problems better.
As for GERS, they are published by the SG and endorsed by the SNP and they are the only comprehensive numbers available to make any calculations or judgements on. They may not be perfect in your eyes, but they’re all we’ve got.
So we have to base any judgement on “indy” day 1 on GERS. Unless, that is, you can suggest other reliable calculations.
You’d base your calculation in what is known to be wrong? No wonder you make so many mistakes
Hi Richard, I predict it will be very shortly (i.e. weeks) after Independence Day. But when we are probably at least 5 years away from that and what you really want is a simple and clear policy to have on the doorstep, the TV debates, etc then it has to be simple and not offer hostages to fortune that are open to attack. So that is why I have proposed the preparations to start after the vote and currency to be introduced ‘as soon as practicable’ after Independence Day as the policy for now (Conference Amendment D). We don’t know when the vote might be, we don’t know how long the transition period will be between the Vote and Independence Day, etc. If we say as our pre-vote policy ‘Day 1’ then that can easily be attacked as in ‘you won’t be ready’, ‘it will be chaos’, etc. As soon as the vote is out of the way then yes you then work to as soon as possible. But there are still a range of possibilities. There might be what many assume will be a 3 year transition period of negotiation, etc. But rUK could just as easily say ‘Right, get out now!’. Most countries that have become independent from the UK, or indeed anyone else, have done so very quickly (6 months or a year max) after the decision, vote or whatever was made. It would, unless done as an emergency, take 6 months or so to get an Act passed to set up the Scottish Reserve Bank and authorise the bank to introduce the currency. I gather it takes around a year to manufacture and design the required quantity of notes and coins. The digital side is easier, but we still need to implement a variation of the Euro Standard inter-bank payments system as the new Scottish Payments System, the banks have to find out who wants S£ accounts, credit cards, etc and then set those up, etc. So if you only had 6 months between the vote and Day 1 you would not be ready with the new currency under even the most optimistic scenario. So this is A) what will work in terms of persuading folk to vote Yes and B) a bit of softly softly catchee monkey in terms of getting to what we want, I,e. the new currency right away.
We know it will not be six months
And the reality is anything but day 1 is likely to be a disaster of a scale worse than Brexit
I base my arguments by what is known, i.e. GERS. What do you base yours on?
The fact that we know GERS is wrong and that states the size of Scotland with its resources and an independent currency are all viable and successful
What I will not base it on is false data
Alex, after 300 odd years of all the economic levers in the hands of Westminster and Scotland’s case represented in London by Scottish Unionist politicians for most of that time you say that Scotland still cannot stand on its own 2 economic feet and you think that’s a good argument for staying tied to Westminster rule!! Unbelievable, when there are so many small independent states in Europe with a fraction of the advantages of Scotland – renewable energy potential being just one – doing very nicely.
In my lifetime I have seen politics go from a reasonable post-war consensus to first Thatcher and then her heir Blair eviscerate all that had been achieved socially and economically during those years and handed over for the benefit of a tiny minority. If there are any real socialists left in Scottish Labour I cannot understand why, like Keir Hardy who advocated Home Rule, you cannot see that a socialist Labour party could thrive in an independent Scotland.
So what data do you base it on?
Reasonable projections, comparisons and interpretation of likely scenarios based on Scotland’s likely prosperity as an energy producer
Judgement in other words
Better than the crude approximations of GERS ‘data’, by far, most of which anyway is whole of UK extrapolation and so wholly irrelevant
Can you give a link or source to your reasonable projections, comparisons and interpretation of likely scenarios based on Scotland’s likely prosperity as an energy producer, so I can use them too, and get it right?
Not now, no
Because I have better things to do
I can wait.
I wouldn’t
You are 3,754th on my list to do
Alex Gallagher says:
“Can you give a link or source to your reasonable projections, comparisons and interpretation of likely scenarios based on Scotland’s likely prosperity as an energy producer, so I can use them too, and get it right?”
I suggest you join the ‘Sensible Debate’ Fb page where you’ll find plenty of encouragement to discuss the finer detail of the GERS figures with people who have nothing better do than dissect pointless figures to several decimal places.
Or you could do some research on the internet. It’s all out there if you look for it.
“So what data do you base it on?”
Richard has made clear that GERS is flawed, and he clearly considers it unusable (not without reason – the GERS ‘Methodology Paper’ is quite obviously weak). It is noteworthy that even informed apologists for GERS acknowledge that GERS is constructed strictly for the ‘status quo ante’, and not for an independent Scotland. I would add, however that while this may be true, it begs the question, and even in the context of the ‘status quo’, I consider the apologia to be laced with sophistry.
At the same time GERS is produced by Government, and largely by the British Government, which either owns, controls or provides most of the underlying British data, and the methodology for analysis (including the allocation of both revenues and expenditure to Scotland). Your question would therefore much better be directed to the British Government, which is best placed to provide something more compelling than is possible with the current GERS.
I am at some loss to understand how you expect Richard to repair the inadequacy of GERS, when the British Government has access to and control over almost all the underlying data, across the board, and the most detailed and thorough understanding of the form in which the vast array of data is held; it is, after all, their data, and realistically the British Government is best placed and resourced to undertake most of the task. Indeed your question speaks to the failure of British Governments over many, many years to provide sufficiently comprehensive, thorough, informative and detailed statistics for Scotland, or been sufficiently open, rigorous and transparent in their provision.
Your question is useful in one particular: as a perennial and sobering reminder of the degree to which Scotland is merely a casual afterthought in the operation of the British state. Allow me to rephrase that observation; it is, perhaps unfortunate for everyone in Scotland that many more people, including those professing and interest or competence in politics or economics had not thought to ask your question …. long, long before now.
Thank you
Much appreciated
My grumpiness showed: I am tired, and know it
It may be interesting for Alex to note that, despite the currently low North Sea element of GDP, Scotland’s GDP per capita (£31,419) for 2017/18 was higher than that for the UK (£31,137). In case he queries this, he may wish to consult his “GERS bible”, for tis there I find that data.
Note further that, when we extract Scotland from the UK (soon!), the GDP per capita for the rest of the UK is reduced to £31,111.
The Scottish result includes our geographic share of North Sea GDP. As far as I can tell, and I’m happy to be corrected, the UK GDP quoted in GERS includes North Sea GDP. When I remove that, the rest of the UK without North Sea Oil & Gas has a GDP per capita of £30,825.
So, in summary:
Scotland – £31,419
rest of UK – £30,825
Before Alex brings this up, the picture for Gross Value Added (GVA) may be a bit different and GVA may be a better measure to use – however, he does keep harping on about GERS which quotes GDP. For the avoidance of doubt, I’ve not sneaked in any adjustments for the jiggery-pokery which may be going on when North Sea data is calculated and apportioned.
John S Warrren say;
“Richard has made clear that GERS is flawed, and he clearly considers it unusable ….”
Which is why I asked Richard to tell me what figures he bases his calculations on. Clearly, if GERS is useless, and no-one knows the true economic picture, then no case can be made for or against “independence”. But if Richard has better information on which he bases his calculations I, and I’m sure the entire political and economic communities, would like to see them and use them. Maybe we would reach different conclusions too.
“(not without reason — the GERS ‘Methodology Paper’ is quite obviously weak)”
You may be right, but the GERS Methodology was totally revised by the SNP in 2007. The review was led by Jim and Margaret Cuthbert, who were the SNP’s favoured economists at the time and they expressed themselves satisfied with the methodology. The methodology is fully The SNP Gov has continued to use GERS and to endorse it’s numbers. Alex Salmond, Nicola Sturgeon, John Swinney and Derek MacKay are all perfectly happy to use GERS in their calculations and to bolster arguments when they saw fit. Furthermore the methodology has the gold stamp of the Office of National Statistics, who declare it to be their highest grade. So if the methodology is “obviously weak”, it’s the SNP’s own methodology and it hasn’t put the SNP off using GERS and the official statistics body is happy ….. Can you name a reputable independent economist apart from Richard who thinks these supposed flaws are fatal?
“It is noteworthy that even informed apologists for GERS acknowledge that GERS is constructed strictly for the ‘status quo ante’, and not for an independent Scotland. I would add, however that while this may be true, it begs the question, and even in the context of the ‘status quo’, I consider the apologia to be laced with sophistry.”
GERS tells the story as it is and as it would be on day 1 of “independence”. It shows what an “independent” Scotland would face, what problems it would have and the scale of those problems. These include: no currency, no central bank, no foreign reserves, and a huge deficit in the current account, no trade agreements with the UK or the EU and the costs of setting up a new country and new institutions. These are considerable problems. They cannot be ignored by saying you don’t trust GERS – unless you have something to put in its place. You may say the problems can be overcome. But even if you are correct, it would take time. In the meantime austerity multiplied for our families, children and grandchildren. So the status quo is important, because that’s where we have to start from. And GERS is important because they provide the best guide to the economy on day 1.
“At the same time GERS is produced by Government, and largely by the British Government, which either owns, controls or provides most of the underlying British data, and the methodology for analysis (including the allocation of both revenues and expenditure to Scotland). Your question would therefore much better be directed to the British Government, which is best placed to provide something more compelling than is possible with the current GERS.”
See above. GERS is calculated from national statistics to the SNP’s preferred methodology.
“I am at some loss to understand how you expect Richard to repair the inadequacy of GERS….”
I don’t expect anything of the kind. I merely reiterate: if GERS is useless, and GERS is all we’ve got, there can be no economic case made for “independence” QED.
“… when the British Government has access to and control over almost all the underlying data, across the board, and the most detailed and thorough understanding of the form in which the vast array of data is held; it is, after all, their data, and realistically the British Government is best placed and resourced to undertake most of the task. Indeed your question speaks to the failure of British Governments over many, many years to provide sufficiently comprehensive, thorough, informative and detailed statistics for Scotland, or been sufficiently open, rigorous and transparent in their provision…..”
See above.
“Your question is useful in one particular: as a perennial and sobering reminder of the degree to which Scotland is merely a casual afterthought in the operation of the British state. Allow me to rephrase that observation; it is, perhaps unfortunate for everyone in Scotland that many more people, including those professing and interest or competence in politics or economics had not thought to ask your question …. long, long before now”.
I take it from that that you would like to see an “independent” Scotland. If you don’t accept GERS basis for projecting the economic situation in an “independent” Scotland, what figures.numbers/whatever do you use to give you the confidence that an “independent” Scotland would have a stronger economy than it currently does?
Alex
It is a bank holiday and I am very tired.
And I have dealt with all these issues before.
But what really gets me is your claim that unless we have perfect data there is never a case for anything
That is the whole neoliberal Labour view exposed in one claim
You clearly have not a clue what politics, aspiration, Scottish nationalism, or economic forecasting (which always deals with what is not and cannot be known) are all about
And you presume to comment?
Please don’t waste my time again until you have just the slightest idea on anything
Richard
For the avoidance of doubt, I am not an apologist for the SNP. If you wish to query the SNP use of GERS, I suggest you ask the SNP.
“You may be right”: or to put it in your own words, QED. I rest my case.
I would suggest your use of these words, combined with an attempt to justify GERS identifies the real nature of the problem: a basic, unresolved, untenable contradiction at the heart of your argument. You are perhaps in too much of an impetuous rush to find the ‘answer’ (the sound-bite, the Twitter assertion that hurries us on, heedless), before we have satisfactorily investigated the facts. I trust you will respect facts.
You can of course continue to ‘spin’ all this, but not with me. Frankly, I suggest to you that this is not a good way to go about politics or economics, but it seems you wish to try. I find that remarkable, but forgive me if I do not wish to touch your current method with a barge-pole. Incidentally, “if GERS is useless, and GERS is all we’ve got, there can be no economic case made for “independence”, is a non-sequitur. GERS is all we’ve got, only because its all we’ve got. It is your sole argument; and candidly, it is flimsy. The question we should ask, is why is it all we’ve got? Why not change precisely that deficiency. This takes only time and political will; and we should and must require both. Behind the smoke and mirrors, this exercise, as a project in data capture and analysis, is actually much more straightforward to do (provided the assumptions and detailed methods are made public), than all the bluster makes out.
The way out of this is not to use GIGO, but to re-examine the facts and produce a genuinely illuminating and usable methodology. It is quite possible to do so. In spite of your over-excitement, and (I may be wrong, but I confess, as it appears to me), your intellectual short-sightedness and over-eagerness to score cheap political points; we all have the time, and must make the time, to consider the economics of Scottish independence, with care and intellectual rigour. What you are doing here is all too harum-scarum.
It is important in Scotland that we ensure that we both make and take the time to consider the facts with great care. For me, at least this is not a game; and certainly not a party-political game. There are bigger fish to fry.
Thanks John
Oh, Alex….
Stop peddling this shite. We dismissed this sort of nonsense years ago. Keep up. You sound like the broken record of unionist smart-arse wittering.
You’re on the wrong page here. Check your online address book.
Gosh! The silly season is on us already and, with Brexit away on its holidays, it seems GERS is the next best outlet for dodgy analysis and lack of understanding to be demonstrated, so let’s start with some facts about GERS.
GERS, as everyone must know by now, stands for Government Revenue & Expenditure Scotland and is an annual exercise purporting to show the income and expenditure relating to the governance of Scotland. The title implies that it is a statement of Income and Expenditure, but it is neither a P&L-type Income and Expenditure account nor a statement of Cash Flow, containing as it does recharges of expenditure made outside of Scotland but reputedly on Scotland’s behalf and without Scotland having any say about them. Indeed the single most salient feature of GERS is that less than 10% of all the source data used to compile it stems directly from data specifically relating to Scottish income/ expenditure, with the balance being estimated from UK-wide totals and disaggregated to a supposed Scottish share by a miscellany of arcane methods. If anyone fancies trying to understand how this is done, I recommend John S Warren’s analysis at https://bellacaledonia.org.uk/2016/08/24/gers-or-a-wayward-exercise-in-the-capricious/ Stick with it, with an understandably despairing tone, as he reveals some of the inconsistencies and smoke-and-mirrors techniques used.
Suffice it to point out that there is no probative audit trail for over 90% of the data and any auditor certifying public accounting statements prepared on the basis of 90+% estimates would either refuse to certify them entirely, or make highly critical and damaging qualifications in his/her report.
Other issues I have with GERS are:
– It claims to be based on accruals accounting, but there is no evidence that all financial source data has been prepared on this basis, so consistency cannot be guaranteed.
– In addition the GERS definition of accruals accounting differs subtly from accepted accounting principles in that, as Prof Richard Murphy pointed out in his GERS critique at http://www.taxresearch.org.uk/Blog/2017/08/25/gers-is-this-why-it-always-says-the-scottish-deficit-is-so-large/, “expenditure or revenue is recorded at the time when it has been incurred or earned rather than when the money is paid or received”, whereas normal accounting treatment is to match the costs incurred in achieving income in the same period as the income is received and booked.
– This creates the likelihood of potentially significant timing differences.
– No Balance Sheet is prepared, so there is no record of assets and liabilities.
– This raises the question of how investment expenditure is recorded. It does not feature as a separate item on the expenditure table, nor should it as it’s a Balance Sheet item, and it must be presumed that it is lumped into totals for Public Services, Defence, Transport etc.
– This would mean that it is expensed (i.e. it is expressed on a cash-accounting, rather than accruals, basis) as it occurs and not amortised over its lifetime and, in turn, this means that no attempt is made to phase costs to match savings/income.
– The absence of a Balance Sheet also means that Debit/Credit parity cannot be proved and so anything could be inserted into or excluded from GERS without it showing.
– As a result, the GERS figures are a hotch potch of Cash Flow, P&L and Balance Sheet data, much of it derived from estimates and allocations of non-Scottish data.
A basic function of accounting statements is to demonstrate the effectiveness of the responsible management, in this case the Scottish Government. However, aside from the inherent inaccuracy of the data, GERS contains substantial values relating to matters reserved to Westminster. Thus the Scottish Gov is held accountable for the outcome of the UK Gov’s policies and decisions, so the annual GERS exercise is, as it was originally designed to be, a political trap to embarrass the Scottish Gov no matter which party is in power at Holyrood.
A question for Alex Gallagher: did Labour not understand this when they were in power in Scotland?
And a question for the Scottish Gov: why not get Audit Scotland to audit GERS? They would have to show it up for what it is — a cosmetic exercise to deflect responsibility and hide the fact that the UK’s basic record keeping has failed utterly to keep up with the reality of devolved government and, while the current Scottish Gov has recognised this and implemented a Scottish Statistics Department, it will take some years before the diverse underlying data collection processes are altered to separate out the “other nations” of the UK.
Thanks Ken
Frankly, a first class presentation
You’d get man 80 if a student 🙂
Very impolite Andrew. Surprised it got past the moderation.
Alex
I can wholly understand the frustration you create. The dismal vision Labour has for Scotland is very obviously enough to anger many. It’s also profoundly disappointing.
Now stop wasting our time.
Richard
Alex Gallagher says:
“Very impolite Andrew. Surprised it got past the moderation.”
You’re quite right, Alex. My comment was very impolite, and I should apologise for that, but I am sick of listening to this stuff, and coming here was once a fairly sure way of avoiding it. The sheer negativity gets me down.
Sorry to be a ‘Johnny Come Lately’ here but I have been reading all the comments.
I don’t want Scotland to be independent but I understand why it is being considered and I want it to be successful for them (I’m fond of the Union and Scotland – that’s all).
All I am seeing here is what seems like a typical third way discussion that avoids dealing with the concept of POWER. It’s all economics and figures – but what about the politics of what is being proposed and how they work?
Sure – I’m seeing lots of facts and figures – contested as they are. But the way in which traditionally ran economies (as they are at the moment) with austerity and increasing private sector involvement being to the fore and dominating would be like strangling the new Scotland with the umbilical cord wrapped around its neck as it is born.
I’ve seen no discussion from advocates or defenders of the Growth Commission ‘preference’ of how the strings are pulled in the ‘traditional’ form that seems to be being advocated by the GC. It all smacks of advocating market sovereignty – even UK sovereignty – rather than Scottish Government sovereignty. This is small beer if that is the case.
Make no mistake that the commanding heights of sovereignty is the ability to produce your own currency and to direct it into the areas of policy (social, economic, industrial) as part of a cogent plan to develop a new Scotland.
Richard is right in my view – GND would not be realised. But it would also result in a very weak Scotland where its independent status would just be there but there would be very little substance to it.
Yes – sure – Scotland would be independent – but that in itself is not enough. It is an independence that seems to satisfy The Crown and the markets (who also like a pliant state). There has to be a root & branch re-appraisal of what this means (as John S Warren robustly sets out above) for the economic macro policy of a new Scotland.
Otherwise the Westminster created micro world in Scotland will just churn on and on and people will wonder what they voted for independence for. In name only? Really?! Honestly.
There is opportunity here to go for more: take it, Scotland, take it.
P.S.
Richard – please take some rest.
x
Blogging is rest
I am doing no work
And a lot of navvying was done yesterday and Cambridge Botanical gardens will see me today
Fair enough. You’re a grown up and can look after yourself – acknowledged.
Sounds like your garden railway is coming along nicely.
It is…..
“Sounds like your garden railway is coming along nicely.
It is…..”
Mind you if that dreadful Marxist Corbyn gets in he’ll nationalise it….. 🙂
And tax your garden…… 🙂