I have already commented on the Government Expenditure and Revenue Scotland statement, issued today.
What the statement suggests is that Scotland ran a deficit on government income and expenditure of £12.6 billion (including North Sea revenue) and £14.0 billion without that revenue to 31 March 2019. The UK for this period had a deficit of £23.5 billion.
I want to put this in context. This is the data on UK net regional (and you'll have to excuse m,e calling Scotland, Wales and Northern Ireland regions when they aren't) to 31 December 2018, which is what the Office for National Statistics, in their usual massively unhelpful way, issue:
The data is not consistent with GERS: the overall deficit is £41.8 billion. And Scotland is still, despite that, still around £14 billion depending on the basis of apportionment.
The first thing to note is that Scotland's deficit is significantly smaller as a proportion here than in GERS. Please don't ask me why: I cannot tell you.
More important is the fact that Scotland is not alone in having a deficit. Before anyone says the Scots are a drain, then so too is the North West. And in fact anywhere that does not enjoy the 'benefit' of recording the UK financial services sector and the profits of most of its companies.
Anyone who argues that this makes sense has, very politely, lost the plot. This is akin to the data I published for Barclays Bank in 2014 that showed, according to its data, the 14 people it employed in Luxembourg in 2013 made a profit of £1.38 billion between them, or £98.5 million each. The 54,000 staff in the UK did, however, lose £25,000 each.
I have to tell you the Barclays data was wrong.
And I also have to say that Barclays could not have made more money by closing all its operations but that in Luxembourg because all Barclays Luxembourg reported was money syphoned off from elsewhere in Barclays.
And that is exactly what this charade from the ONS and in GERS is reporting. It is showing that London syphons of money from the rest of the country.
How does it do that? Try this list:
- Most interest is paid to London
- Most profits are recorded in L0ndon
- Most leasing is recorded in London
- That may be true of rents as well
- Credit card fees and bank charges will largely be recorded in London
- So too will insurance
And all that means there is a lot of profit in London that is not anywhere else.
Then add this:
- Most bosses are in London
- As are most high paid employees in most companies
- And so are most oligarchs
- Most wealth is in the south-east, and so are those who charge high fees to service it.
So incomes are high in London, but actually, the rest of the country supports that by actually doing the work that is needed, at much lower income, to keep the country going.
Then note that:
- Rents are higher in London, and so is tax paid on it
- As are all the service fees for that
And all that happens because of the o0ther factors already noted.
And what you get is a scenario where wealth is sucked out of the country to be recorded in London, just as Barclays sucked income from all over the world to record in Luxembourg in 2013. But that did not mean Barclays earned that income in Luxembourg. In fact, I am sure it did not.
What this shows is that data does not necessarily record where the value is. Economists and accountants can distort the facts really easily is what I am saying.
And that's why all these claims are just wrong.
Scotland creates value. Lots of it. I am sure.
But in that case I'd ask an even more important question. Does London? And if it does not, then you have the answer as to why it wants to keep all these apparently economically hopeless locations under its control. It's extracting what in economic terms we call rents from all of them - Scotland included. That's leach like behaviour.
And then Scotland is blamed for its part in this. And it's almost certainly a wholly false accusation. That's GERS for you.
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It may be useful for readers to compare this analysis with a careful and considered reading and review of the ‘Detailed Revenue Methodology’ which is provided by GERS.
As John is too modest to mention it himself, I hope he doesn’t mind me pointing readers (again) to his definitive deconstruction of the GERS Methodology, published on Bella Caledonia in 2016: https://bellacaledonia.org.uk/2016/08/24/gers-or-a-wayward-exercise-in-the-capricious/
Thank you Graham
And thank you John
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You produce compelling statistics. I as humble member of this increasingly fractured society say ‘there are lies damned lies and there are statistics’. Why do we have to put up with this rubbish. Those who are the decision makers by relying on falsehoods have abdicated their responsibility by producing figures that can quickly be shown to not represent reality. Policy decisions are made on these figures but the problem is they may not represent any truth so what or who can you trust and the outcomes they seek to justify?
Why do we have to put up with nonsense. Best outcomes are surely provided by a proper evaluation of circumstance rather than a mythology of what they think they ought to be.
Paul, I think it’s fair to say the UK has never been good at its basic score-keeping. The evidence is everywhere, but today’s news story of significant errors in UK’s Immigration statistics in recent years is typical: inaccurate record-keeping over lengthy periods necessitating sizeable corrections in one year, so year-on-year comparisons become unreliable.
It also happens in the tax system. Nobody knows how much tax is raised in Scotland, England, Wales or N Ireland: it is largely recorded at the place where it is received into HMRC’s coffers. I ran a business based in Scotland for 25 years, but never dealt with, or remitted my tax payments to, a tax office in Scotland: they all went to Bradford or other English cities. Similarly, UK-wide businesses like M&S, Tesco etc tend to have one VAT number for all trade in the UK, so all VAT is remitted from group head offices, generally in London or the South-east of England, with no attempt to understand where it originated. VAT is supposedly being “devolved” to Scotland, but nobody knows how much VAT is raised here, so we’re expected to make do with estimates and suffer inevitable later corrections when errors creep out of the woodwork.
There is also considerable distortion of import/export statistics resulting from imprecise records for sources/destinations. In Scotland’s case we have no definitive stats for imports or exports either to/ from rUK or indeed overseas. You couldn’t run a sweetie shop without some knowledge of where your costs and incomes arise, but UK seems satisfied to bumble along without accurate indicators. It’s this “fuzzy” attitude to basic statistics that invalidate the GERS statements, with less than 10% of the numbers having a probative audit trail that leads back to relevant and indisputable records. But it’s also indicative of a mendacious political attitude that the Scottish Government is held accountable for an economic performance that is significantly outwith its allotted powers to control and which is “quantified” by using unreliable “data”.
You might well ask why we (all of us in the UK, not just Scotland) put up with it? I suspect there’s what in Scotland we call the “aye been” effect: it’s always been done this way because that’s way it’s always been done. I also suspect it’s often politically expedient to be able to fudge results because it’s hard to prove the accuracy of so many stats. This may also be the reason that UK has an unwritten Constitution: it’s always been that way, so it’s part of our “traditions” (and damned handy for politicians to do as they please since the parameters of their power are nowhere formally codified). It is almost certainly a toxic combination of these and other reasons, coupled with a resistance to change (i.e. what’s the point as the politicians will continue to do as they please?). At least an independent Scotland would have accurate statistics for its trade, economy and the accountability of its government as well as a written Constitution.
Thanks Ken
Well said
Ken, it’s notable that the Telegraph has already bogged up this fictitious piece of news as being “a blow to Nicola Sturgeon’s plans for independence”!!
Gerrymandering of reality, in other words!
Nicely put, Ken. It’s “Aye been” because knowledge is power, as someone said. Too much information, provided by impartial analysts would show us just how appallingly unfair the UK is and exactly how “mendacious [is the] political attitude” of our governing classes. It’s aye been the case that, in the main, concessions to public knowledge and power in the UK has never been willingly given, as the anniversary of Peterloo reminds us. The governing classes have drip fed concessions when the consequences of not doing so might have been ugly. The history of suffrage illustrates this; it’s why we have FPTP. It’s why Magna Carta is eulogised as a great charter of English liberties, when it was really about a power struggle between king and elite barons, which excluded the common people.
Yes, it’s aye been, and I fear it’ll stay that way unless and until people of goodwill take over and bring in far reaching reforms, such as a participative, deliberative democracy.
Andrew, it’s not just the Torygraph that’s at it: here’s today’s page one headline in The Herald:
https://www.heraldscotland.com/news/17850569.scottish-deficit-record-six-times-bigger-uks-last-year/
But they’re keen to say that….
In debunking this you have stated the bleedin’ obvious.
But in the Kingdom of the Blind, it needs to be done.
Excellent, thoughtful stuff.
I watched part of a History of Scotland last night and it led me to think about GERS. We English – we’ve never stopped being controlling bastards (especially as our power abroad has diminished). Longshanks never really went away except that we use finance to subjugate these days.
What a pathetic, badly ran little England we are. Still feudal after all these years.
[…] If you want to know what that means it says that people in Scotland care about GERS. […]
Not to mention that a lot of Scots exports are still booked to England and London as they have to head South to find export ports because Scottish port provision, especially in containers is nothing less than woeful.
Our one and ONLY container port is well upstream in the Firth of Forth at Grangemouth so is not deep water. A couple of years ago they trumpeted that they had, finally installed power points so refrigerated containers could run while sat on the dock.
I grew up in New Zealand it has many deep water container ports dotted around the coastline so that exports don’t have to travel far to find an export port. My home town there Dunedin is a city the size of Dundee and it has a container port in Port Chalmers. So does smaller Timaru up the coast halfway to Christchurch (Port Littleton).
All have had power points for containers built in from the start since a majority of our exports are frozen or refrigerated. NZ pioneered frozen meat shipments. The MV Dunedin sailed from Port Chalmers for London with a cargo of frozen sheep in 1881. They sold out very quickly and thus an export industry was born.
There should be container ports in Edinburgh/Rosyth, Dundee, Aberdeen, Inverness and probably Wick or nearby as well as on the Clyde Firth and maybe Ulapool as well (there doesn’t seem room at Oban). I’ve made this point many times before.
Mind you after Independence when rUK is a 3rd country and we’re in the EU the Rosyth ferry service will be most viable again and I predict the Aberdeen to Norway route will be on again too. We may also need more Irish Ferries from somewhere more accessible than currently. Probably on the Ayrshire coast with a rail line and good road connections.
From a climate change perspective that would sound to be a good idea anyway- stop all this unnecessary journey distances.
Why is the UK so woeful at infrastructure?
Richard, thankyou for this article of truth about this supposed deficit. The amount of cash heading to London from Scotland is indeed huge. Fortunately my RBS mortgage has recently been paid off so that is less money headed to be booked in London or Luxembourg.
Now I’m not contractually obliged to maintain an RBS current account I’m considering moving it somewhere. Where though? Now the Coop Bank is in venture capital hands there seems little point in heading there for moral reasons.
If I had any money to save I would save it in our excellent local credit union here in Dundee. But they don’t offer current accounts to my knowledge. I had dealings with NAB the owner of Clydesdale Bank in NZ and I’m not keen to renew the acquaintance.
Pretty much every mutual I’ve ever joined has been demutualised under me and against my wishes. I seem to be death to them. Look what happened to the Coop after I joined them.
I use the Nationwide now because I wanted a mutual, and I moved on from the Co-op
I am aware there aren’t that many in Scotland. Do you need a branch? I like having one, but really don’t need it
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