The Scottish government is just about to enter into a black hole of Westminster's making. That this is the case is hardly surprising. It has been forecast for a long time by with those with an interest in the detail of Scottish taxation policy. Now, though, even the BBC is realising that not all is right with the devolved Scottish taxation system, and its correspondent Douglas Fraser has written about the issue. He did so under the title ‘The devil's in the detail' but he would have been better off using mine because as he noted:
So when you hear or read there's a £1bn black hole facing the Scottish government, take special care. ...
The culprit looks more like dodgy data. And that's the price to be paid when you set up a largely new system of devolved taxation.
Fraser goes into a long-winded explanation. He could, in practice, have saved much of his effort by saying what is really happening. And that is that increasingly the Scottish government is being told that it must spend the supposed tax revenues raised in Scotland and not the sums apportioned to it by the rest of the UK. The problem with this is that it so happens that the new data, still of dubious quality, suggests an amount less than that previously attributed. And, given that the Scottish government is duty-bound to balance its budget, and is not, in contrast to Westminster, able to run deficits that can be managed either by the issue of new currency, or the borrowing of funds, then what is going to result is a new round of devolved austerity for Scptland. The consequence will be that the people of Scotland will suffer real cuts in spending, and simply because dubious estimates of what is, or is not, Scottish taxation revenue are being used to guarantee that the rest of the UK will benefit whilst Scotland suffers.
For those, like me, who have long pointed out the dubious nature of Scottish taxation statistics none of this is a surprise. As I have long argued, the Government Expenditure and Revenue Scotland (GERS) report has always contained substantial numbers of estimates when, with the expenditure of some effort and some cash, much better data could have been collected. But, without as yet a proper statistical agency, and without Revenue Scotland ( which is the branch of HM Revenue & Customs that runs tax in Scotland) even being able, as yet, to identify who is actually Scottish resident, let alone have any idea how much VAT is really collecting the country, that process of estimation which has always, in my opinion, produced data of dubious quality, continues, but now at real cost of the Scottish people.
If you want the boring analysis, read Douglas Fraser. Let me, instead, get to the nub of it. There are several real issues that are going to have major consequences here. First, in the current febrile political atmosphere it is not going to take long for people to realise that what is going on is an exercise in being shafted by Westminster. As a gift from the Tories to the Scottish independence movement, few could be better. I very strongly suspect that the backlash and anger will be significant.
Second, I do sincerely hope that at long last the demands for better data will become stronger, be heard, and be acted upon. If Scotland is to manage its own affairs than it has to have the data to do so and it has been denied it to date.
Third, the partial devolution that shackles Scotland has to end. I have given evidence at Holyrood on the absurdity of, for example, devolving income tax to Scotland but not devolving corporation tax, so that those persons who divert their income from self-employment into companies can immediately and directly harm the revenue of the Scottish government without a Scottish minister having any power to control the process. There are many such examples. You cannot run an economy with control of a tiny part of the tax system.
Fourth, nor can you run the tax system of the economy without control of its currency, its interest rates and its central bank. To pretend otherwise is just wrong. Scotland is being reduced to the economic status of the giant local authority, but will be blamed for failure to deliver core services that are way beyond those that any local authority is required to supply in the UK, and which are absolutely core to the very well-being of the people of the country. And yet the Scottish government has been denied the tools that it needs to deliver those services appropriately, including the necessary ability to manage the rough and smooth not just of economic reality, but also of dodgy data, that is going to have real impact on the ground on ordinary people.
Fifth, I suspect interest in modern monetary theory will grow.
And sixth, calls for a proper tax system for Scotland might grow as well. I have put some thought into that issue.
But what cannot happen is that what is proposed will work well: that is an impossibility. And what that proves is that all that debate, over such a long period, over the dubiousness of Scottish economic data is suddenly proving to be very relevant indeed. I strongly suspect some people should have paid a little more attention to the issue a lot earlier than they did. But it's not too late: the demand for real reform has to begin now.
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Since HMRC recently misidentified Welsh tax residents in a farcical manner recently Their failure over the Scottish version is not surprising. Tempting as it is to ascribe this to malice the Welsh cockup suggests it is either simple incompetence* or insouciance: not caring enough to do the job properly. I perhaps sympathise a bit with English Tax workers detailed to do this without any knowledge or understanding of Devolution or geography. Never ascribe to malice that which can better be explained by incompetence.
*Low pay and departments hollowed out by those seconded to Brexit work is likely to be involved as well.
It is to be urgently hoped that Scotland can do it better. I strongly suspect they will need to send serious signals and be prepared to put people, including company MD’s in Barlinnie if necessary for tax evasion. It should also implement proper fines for company non compliance based as a stinging proportion of turnover. I suspect such will be necessary to concentrate minds to pull finger and comply.
International arrest warrants for foreign based corporate culprits should not be shied away from either. Restrict their movements until they comply.
My thoughts exactly.
The Scots need to go into this with their eyes wide open – and that also applies to the eyes in the back of their heads.
Well Dalkeith Branch were co-sponsors of another successful resolution at the SNP Conference which was to require the setting up of Statistics Scotland as a new national statistical authority. Obviously it will take a while to get that going but we are well aware of the issue. I believe it was Robin McAlpine’s Common Weal group who originated the Motion.
It was…
There is also a level of culpability that has to be directed at Scottish Government/SNP decision makers in allowing this to be possible.
40 years of lies/dodgy data/incompetence (whichever’s the case) concerning oil revenues should have acted as an ear-splitting alarm call concerning Westminster.
I do not dispute that
They have over-relied on GERS, and I have said so
https://macalbasite.wordpress.com/2019/06/03/the-cost-of-the-union/
The Cost of the Union ?
There are numbers in there I do not recognise right now
Agreed. Some source references wouldn’t go amiss
The sources are all Scot Gov or HMRC. It’s pretty easy to find out Scotland’s historical block grants each year and it’s receipt income.
But they don’t actually prove your point
zzzzzz… oh, hello, umm, has he finished yet? Lost me in the first paragraph when, without any apparent irony, he got the word ‘detail’ wrong in the headline of my blog. Detail, schmetail.
I strongly suspect this is not Douglas Fraser
Cumulative tax receipts sent to The UK treasury from Scotland over 18 years, minus the block grant over 18 years leaves the remaining amount the UKG spends on Scotland’s behalf…am I missing something?
Yes: those receipts are simply not Scotland’s
Collected in Scotland does not mean due by Scotland
If only it was so simple
Excellent article. Estimates must be not be allowed to scupper Scotland’s future. The SG must loudly and repeatedly denounce GERS and other Britnat bias on economic forecasts. Forecasts are lazy lies; that’s why Britnat organizations like the BBC loves them so much.
And when Richard was given the opportunity to discuss Scottish National Accounts in a proper forum this was the outcome.,
https://m.youtube.com/watch?v=Ni5dTPBgLKE
Did you notice the edits?
Coem on…..
A very simple solution for Scotland, Independence. The only way to avoid further interference to the economy by Westminster. The Block Grant from Westminster is approximately half the monies raised in Scotland in tax to the exchequer. Those monies don’t take into account oil and gas revenue in Scottish waters or even the export taxes on Whisky which is exported from an English port. All of those are not counted as Scottish income, but as English. Rubbery figures are a Westminster specialty
The Scottish government could raise £100 billion by introducing an Annual Ground Rent charged per square metre on all land, floor space and roofs. For urban Scotland and the built environment the charge would be £7.124 per square metre.
All other U.K., Scottish and local government taxes would be abolished. While we remain in the UK the Scottish government would reimburse Scottish taxpayers for the UK imposed taxes by using the block grant from Westminster .
There’s a problem with that
We really do not want to abolish all other taxes
A fair society demands that we do not