Nicola Sturgeon, the SNP leader, has responded to the criticisms that I and others have made of the Scotish Growth Commission's report that her government commissioned. In a twitter thread she said this yesterday:
That I know of no one is disputing that the Commission report says these things. As I noted in my own first review of it, I got some way into it with a generally positive attitude towards what it had to say until I came to the crushing points that are the basis for my criticism of it.
My point, and that of others, is that you can argue you are in favour of investment and you can argue that you are opposed to austerity but that you cannot do so and simultaneously say you will impose a balanced budget constraint; seek to reduce the scale of the deficit; impose a spending cycle limit on borrowing for investment and forego any control of monetary policy and pass it to the whim of another state by adopting its currency, quite probably against its wishes.
I am happy to share Nicola Sturgeon's sentiments. Her wishes for Scotland are appropriate, I think. But to achieve them equally appropriate policies have to be adopted and no country could achieve her aims without adopting its own currency, and choosing to pursue its own monetary and fiscal policy. The Growth Commission has instead chosen to give the government of a supposedly independent Scotland no greater economic power than the devolved administration already has in this area. Right now it manages a budget constrained by London and under the Growth Commission proposal that is exactly what it would still have.
Strong words won't do as a rebuttal for this criticism. Debate requires an open mind and a willingness to accept there are alternatives. The Growth Commission got this issue wrong. At some point Nicola Sturgeon will have to admit that or IndyRef2 is doomed from the outset.
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:
Unfortunately it appears that Nicola and others confuse justified confidence in an independent Scotland with the completely unjustified belief of the reports authors in the confidence fairy that creates growth only with austerity. The UK and the Eurozone proved that wrong already.
I too was dismayed at the Growth Commission’s intention to adopt Sterling. The debate, however, is now out in the open. BBC Question Time tonight should be quite fun; 3 of the 5 panelists are allegedly supporters of Independence, including one of the authors of the GC Report.
It would seem that syncretism with respect to an independent Scotland and its economics has arrived (i.e. holding a set of views that are mutually incompatible). It could be that this is what the SNP needs to do to get more than 50% of the vote in the event of a 2nd referendum. If they win, perhaps they will ditch the daft “balanced bidget” approach &* the link to “sterling” . In my experience, up-front honesty is usually the best course. However, given the mutually incompatible points (& outcomes) outlined by Sturgeon – it would appear she prefers…..something else. Perhaps I’m being unkind?
You just have to look at what’s going on in Italy to understand how restrictive the use of a foreign currency is on a nation.
If Italy was using the Lira, they would be broke. The problem is not the Euro, or the CEB, its Italy’s Governments not Managing their economy.
Like Greece.
If you have the time Richard, this initiative may interest you, an alternative, started small, but started now, and gaining increasing interest and support from Yes Grassroots: Main link: https://www.facebook.com/TheScottishHand/ Subsidiary Link: https://www.facebook.com/DoYesHaveTheBottle
Thanks
Nicholas Sturgeon needs to read Bill Mitchell’s devasting article on Italy which shows very clearly how ideological blinkers and Sectoral Balances Accounting ignorance have turned EU politicians into a bunch of liars at least as far as the Eurozone is concerned:-
http://bilbo.economicoutlook.net/blog/?p=39454&cpage=1#comment-58424
Here are the relevant extracts from the article and Article 123 of the Treaty of Lisbon to justify this claim:-
“At the time, a number of ECB’s official members gave speeches claiming that the SMP program was within the realm of normal weekly central bank liquidity management operations. Of course, that was nonsense. They were were trying to disabuse any notion that they were funding government deficits. This was to quell criticisms, from the likes of the Bundesbank and others, that the program contravened Article 123 of the TEU, which in essence it clearly did.”
Article 123 of the Lisbon Treaty clearly states the following is prohibited:-
“purchase directly from them (Member States) by the European Central Bank or national central banks of debt instruments.”
http://www.lisbon-treaty.org/wcm/the-lisbon-treaty/treaty-on-the-functioning-of-the-european-union-and-comments/part-3-union-policies-and-internal-actions/title-viii-economic-and-monetary-policy/chapter-1-economic-policy/391-article-123.html
Debt instruments clearly are bonds Eurozone member governments have issued!
How does a new independent country establish the value of its sovereign currency for international trade?
External suppliers will probably be unwilling to accept the new currency in payment as they will have no idea how the new currency’s value will vary over time – this will be particularly important if the time between order and payment is extended. Until the new country has been operating for some time, won’t it need a high level of foreign reserves to ensure it can maintain its necessary imports?
This might come as something of a surprise to you, but Scotland is not a new country
It’s been around for quite a long time
Sure it’s not been independent for a while but shall we stop pretending it’s a place that will just rise up out of the sea?
And I refer you to the Common Weal report I have already linked to
I appologise if my wording was inappropriate, I probably should have used the term ‘new sovereign state’. My question is genuine, I would like to understand how confidence in a new curency is generated when the issuing sovereign state has no history of economic sovereignty. I’ve scanned your Common Weal report but as far as I can see there is no reference to international trade.
Scotland is part of an existing, mature, stable, democratic country with strong, stable business and massive potential. I go back to my point. It is not arising from the sea. It’s a fact that already exists. It will be compared with other similar countries. The Growth Commission got that right. If you want your answer it’s like ranking a new company- it’s done by comparing with others like it. Just as you rate new people you meet that way.
Although the current Scottish deficit is identified at about 8.3% of GDP using the GERS Figures the Growth Commission has a starting deficit of 5.8% for 2020/21 based on a number of cost cutting assumptions and adjustments.
Is this 2.4% difference in line with your doubts about the validity of the GERS accounting principles?
What are the deficits of Wales and Northern Ireland? Are their figurs GERw and GERni similarly flawed?
Can I be clear: we discussed this in a session at Holyrood in a committee hearing last year and the reality is no one knows whether there is a deficit or not: the data to find out simply does not exist. This is all guesswork, and GERS could be very wrong indeed
Growth Commission appears to accept the GERS Figures?
There is nothing else
C’mon, as they say.
It doesn’t mean they’re right
You identified previously parts of what made up the GERS figures as being illogical and not following accounting convention. Does that contribute 10% or 20% or 100 %? From what I read of the Growth Commission report they have made adjustments and estimates (eg Tident costs, defence spending etc.etc.) and that is where their revised figure ( 5.8%) came from. Is it that difficult to quantify and estimate your reservations and uncertainties? They might be more right with their revised figure. That at least provides a better basis for estimating how long it might take to get the Scottish economy back to sustainability. Is the root cause of the economic problem the Barnett Formula and differences between population growths in the rUK and Scotland?
I’m not looking for right just more right and closer to reality.
There are two issues here
One is the adjustment for changed circumstances – that is what the Growth Commission did.
The other is changed data because it is wrong. As far as I can see they did not do that. The required change is not certain. It’s been argued it is only a percent or two.
It may be a little more.
I am not saying it is 10% – I really doubt it is.
But small percentages matter and have big impact and few now doubt that GERS has persistently under-reported. The result has been persistent misinformation, and belief. And that matters. As do cumulative small errors when the actual differences between what is being discussed are small percentages.
I’ve recommended this link before, an article on GERS by John S Warren (who posts on here from time to time) and may be a useful read for those wanting to know more. He deconstructs the methodology and questions whether it can provide anything meaningful at all, pointing out that “We are therefore in no position to understand the economy of our own country” because for decades data has not been properly collected.
This is no esoteric matter: methodology is central to science and many a conclusion has been undermined by errors in methodology.
https://bellacaledonia.org.uk/2016/08/24/gers-or-a-wayward-exercise-in-the-capricious/
That is a stunningly good take down of GERS
A glimpse of the grey reality is much more informative than black and white.