There are a number of annoying issues one has to live with if engaging in discussion on Scottish economic policy. One of the biggest is the Fraser of Allander Institute. This is located within the economics department of the University of Strathclyde. In my opinion they have a habit of misstating facts to suit their own agenda. I will illustrate this using their latest blog on GERS, which is entitled ‘GERS Day 2: after the hullaballoo'. In it they say:
Every year when GERS is published, there is a new angle that seems to gain traction and ignite a debate about the accuracy of the figures.
This year's is a rather misguided interpretation of the notional net fiscal balance produced in GERS.
These have been variations on:
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How can 8% of the UK population be responsible for more than 50% of the deficit?
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And/or how can the Welsh and Scottish deficits add up to more than the UK?
Let's look at this for a moment. First, just go to the GERS document itself. Look at Table 1. You don't have to go far to do that. It compares the net fiscal deficits for Scotland and the UK:
That is what GERS wants to you do. There is no other explanation for the juxtaposition of the data in that way. In other words, if the Fraser of Allender has a problem they should aim it at GERS. It's GERS that is wrong. But they don't say that, and you have to ask why.
And second, those of us asking the questions they note have done so because we have said the suggestion that the data makes, as presented by GERS itself and not by anyone else, is absurd. So we're not misstating the data to claim what we say. We know that GERS misstates the data and we have said so. But the Fraser of Allender seems not to have noticed that. What it is saying is that those of us who have criticised GERS because what it says is wrong have got our facts and statistics wrong. Which is utterly politically absurd. Or incompetent. Or both.
And then note that instead of saying why GERS is so hopelessly wrong, as I have done more than once, they accept it at face value. And what they instead say is that GERS should be read in the context of ONS data (which I also drew attention to, a day before them). This, they suggest, makes clear that the issue is more complex than GERS implies, saying:
The latest ONS figures are for 2017-18, so they are not quite the same as the 2018-19 GERS figures, but it illustrates the key error when pulling together a ratio of the Scottish figure vis-Ã -vis the UK as a whole. The ONS figures show that:
- 3 areas contribute positively to the UK net fiscal position (that is, they contribute more in taxes than they spend on public services)
- 9 areas contribute negatively to the UK net fiscal position (that is, they contribute less in taxes than they spend on public services).
The UK net fiscal balance is therefore a sum of these surpluses and deficits. .... Comparing the £bn figure for Scotland to the equivalent UK figure is simply not a valid comparison. Statements such as “the GERS figures imply that Scotland is responsible for 60% of the UK's deficit” are just statistically meaningless.
I agree. That claim is meaningless. But instead of criticising GERS for making it The Fraser of Allender again criticises its critics. You need to ask why. As you need to ask why it then comes up with this claim:
For a more accurate statement about the relative importance of Scotland to the overall UK fiscal position, we could say, on the basis of this ONS 2017-18 data that Scotland makes up 13% of the total deficit contributed by the 9 regions of the UK who raise less in taxes than they spend on public services.
This is based on this chart in their post:
Let me be quite blunt: you cannot say what the Fraser of Allander says we should. I'll spell out why since they seem incapable of reading anything correctly.
Firstly that's because that's not what we're discussing. We're discussing the political economy of the GERS data, and not ONS data. So they utterly miss the point.
Second, that's because the ONS data is just as wrong as the GERS data. It also ignores the fact that value is not recorded where it is created in the UK, as I have explained. But the Fraser of Allender seem to have no awareness of this.
Third, their comment pretends Scotland is just another region of the UK, and it is most definitely not.
Fourth, and perhaps most importantly, this suggestion avoids any requirement to mention why there is a surplus in the south-east of England and nowhere else - or in other words, what we are being told to do is not only accept that the data is right (when it is not) and that the political and economic bias that gives rise to this data is also right, and it is not.
Instead the Fraser of Allander say:
As an aside, there is a serious — if albeit boring — point to be made here. Each year, the level of misinformation and bad analysis around the GERS publication is pretty shocking.
I suspect I am in the sightline of some of this criticism from the comments made. So I will shoot right back and say three things.
First, the issues discussed are either political or about political economy. The Fraser of Allander, very boringly, appears to know almost nothing about the latter and they do not declare their bias, as most economists do not, on the former.
Second, if they had any economic credibility at all they'd point out that the GERS report was wrong for presenting data as it did, but they did not and so have not a shred of credibility to fall back on.
And third, they should be asking why Scotland might have a deficit that is about 55% of that of the UK as a whole if the GRS data is to be believed - in the way that they present it - instead of denying that fact. But they don't do that. Which is not just boring. It's a dereliction of their supposed duty to discuss Scottish economic data objectively.
And if you want to know why the SNP leadership don't attack GERS it is because they listen to too much that the Fraser of Allander say, and I suggest that's at considerable cost to the people of Scotland.
Bad academic economics, that does not reveal its political biases, and which asks the wrong questions of data whose credibility it does not question has led the world into all sorts of crises. And it will do the same for Scotland as well unless somebody stands up and points this out.
That's what I am doing, right now.
Buy me a coffee!
FAI’s position makes a lot more sense when you know who funds them.
Start with Deloitte…
“That is what GERS wants to you do. There is no other explanation for the juxtaposition of the data in that way.”
It has always done that, even incuding when it showed Scotland with a better (nominal) deficit than the UK.
So that is what it has always intended to communicate
And that is why the Fraser is wrong to po8int out picking up that poi8nt is wrong
They are being wilfully blind
The problem is Richard, that back in 2013 after GERS came out that – with that exact juxtaposition – GERS 2011/12 showed Scotland at 5.0% of GDP with oil, but the UK at 7.9%, and claims were (justifiably perhaps) made that with Independence Scotland would be better off by £4.4 billion, and £832 per capita.
And yes, I went along with that as it was, basically, correct, even without changing policies and bringing the accrued revenue on spending home to Scotalnd rather than laave it in mostly London and around.
Pseudo-GERS going back decades would show many similar cases where the UK’s fiscal deficit was worse than ours; in fact it would show many cases where Scotland would have run a SURPLUS.
Fraser of Allander Institute are not the enemy; there’s stuff elsewhere on their website would make your hair stand on end 🙂
I am disputing an issue here
They have defined the terms of engagement on this occasion
I have challenged those
They have got this badly wrong
“In my opinion they have a habit of misstating facts to suit their own agenda”
And of course you never do that?
“In other words, if the Fraser of Allender has a problem they should aim it at GERS. It’s GERS that is wrong. But they don’t say that, and you have to ask why.”
If you bothered to read the various posts on their website, they acknowledge that GERS uses estimates, and then explain what those estimates mean, how the data is compiled and what the potential size of errors are. What you don’t like is that they have done all this properly (which you seem unable to do) and then find that it doesn’t change the underlying story – that Scotland’s fiscal position is poor, it has a large budget deficit and this is mostly due to greater government spending.
“We know that GERS misstates the data”
No we don’t. You CLAIM GERS misstaes the data. You have no evidence for this.
“And then note that instead of saying why GERS is so hopelessly wrong, as I have done more than once”
If it is so wrong, where are your comparable estimates? Why then when you were up in front of Holyrood’s Finance and Constitution Committee nobody agreed with your claims, and you couldn’t substantiate any of them. I quote you talking about your own claims:
“But we are using some estimates here, very rough and ready stuff which is done on the basis of blogging not on the basis of doing a lot of deep searching, and I’m not pretending I have”
https://www.youtube.com/watch?v=Ni5dTPBgLKE
“Second, that’s because the ONS data is just as wrong as the GERS data. ”
I suppose you have proof that both ONS and GERS data is totally wrong now? you are trying to claim anything less than perfect 100% accuracy makes the data useless, but both ONS and GERS data is to a 95% confidence level, which makes it pretty good.
Good enough for you as well in fact, given you use ONS data to produce your tax gap estimates – which you (laughably) claim is incredibly accurate.
“they do not declare their bias”
Said the totally unbiased Mr. Murphy.
“Second, if they had any economic credibility at all”
They have a lot more than you, chum.
“And third, they shoulkd be asking why Scotland might have a deficit that is about 55% of that of the UK as a whole”
They do – but you seem unable to read what they have written. That and you seem to have trouble with simple maths. Percentages don’t matter really in this case (which FAI point out). If the rest of the UK had zero deficit and Scotland a deficit of £1, Scotland would have 100% of the UK deficit. Comparing like that is meaningless – which is why FAI spend so much time talking about the outright size and trends of the deficit.
“And if you want to know why the SNP leadership don’t attack GERS it is because they listen to too much that the Fraser of Allander say”
And instead they should be listening to you I suppose. And paying you handsomely for it, and no doubt rewarding you with a peerage or two.
“Bad academic economics, that does not reveal its political biases, and which asks the wrong questions of data whose credibility it does not question has led the world into all sorts of crises.”
Take a look in the mirror before casting aspertions on other people.
Oh dear….and wow!
What a diatribe…..
It’s hardly worth replying but let’s be clear – as you aren’t, actually.
First, I am biased. Of course I am. I never said otherwise. It’s implicit in all I wrote. And we all are. I dislike those who claim not to be.
And second if you bothered to read the argument (and you clearly have not) you will see it is complete within itself: I am saying the FAI failed to notice that what they criticised me of doing is not what I did, but which GERS did, and which it got wrong, as I had pointed out. In which case I could have simply said they’d made themselves look very silly. But not as silly as you. And certainly they’re not as offensive.
Hi Jane. Could you inform me of the mechanism that the Scottish Government would use to the award the Peerage you refer to. I would be interested in your reply. Thanks.
🙂
Hi Richard
I’ve challenged the FAI and other such a ms Keven Hague to confirm whether GERS show the ‘positive’ or surplus revenues of London and the SE include revenues collected in Scotland such a corporation tax, excise duty, most of VAT, national insurance, surviving licence, passport fees and others such as citizenship fees, court fines (plus many more I’m sure). If revenues like this from Scotland and anywhere else in the UK are always shown via London then if course there is no credit side entry in the GERS figures. I get the ‘behalf of Scotland’ and how this totally skews the figures by overstating the costs but surely money collected in Scotland but accounted for at UK treasury level will also overstate London’s revenues and have the the opposite effect in Scotland. Am I being stupid?
There is an attempt in GERS to apportion e.g. corporation tax to Scotland
I have argued for a number of reasons that the apportionment can be wrong
I have also argued that the revenue and expenditure are estimated on different bases
And I am arguing that the estimates do not reflect where value arises – as do others
But I think your claims e.g. re VAT are wrong. Your suggestion that all this is in London is incorrect
not sure i understand the argument here. i thought gers messily says there is an undefined level of scottish obligation on uk gilts and net uk borrowing. why bother doing that if not to work out scotland contribution to an overall uk fiscal position?
i thought the basic argument was that some grumpy accountants saying you should not do that opposed to statsiticians who say that you should do that
8.1% of north sea revenue from around 90% of the oil and gas fields?
Maybe that’s what they meant by “better together”?
GERS is indeed crap, and so is westminster.
Richard,
If GERS is so wrong, as you claim, where is your Scottish budget deficit estimate?
Surely you must have one if you are claiming GERS is incorrect?
I know GERS is wrong because the methodology is inappropriate
But measure on the right basis no one knows what the correct answer is
This is an issue for a new Scottish National Statitsics to address
Your question makes no sense until the appropriate data is collected
Hi Richard. I suspect the blog article was written whilst you were incensed ;0), judging by the typos and odd text formatting (some larger than others).
A couple . .
“And second, those of us asking the questions they note have done so because we have said the suggestion that the data makes . .”
“shoulkd be asking”
The first comment is what I meant to say. It could be more elegant, I admit. But it is right.
The second now corrected.
And sure I was angry. Why not?
“Fourth, and perhaps most importantly, this suggestion avoids any requirement to mention why there is a surplus in the south-east of England and nowhere else – or in other words, what we are being told to do is not only accept that the data is right (when it is not) and that the political and economic bias that gives rise to this data is also right, and it is not.”
This is the very convenient omission from the unionist narrative. Why is London and the SE booming? Of course the vast majority of folk think money grows on rich people – the source of money being their tax revenue. The fact that these overpaid jobs and bankers bonuses are only possible due to state backing. Market forces never saved the city in 2008 – the U.K. government did and added a trillion to our balance sheet.
The double whammy of course is austerity and the continued drive to get households to take on more debt – encouraging banks to create more non-productive credit which sucks up more of our wealth and deposits it in the city. The game is well and truly rigged.
It’s about time we called the financial sector out for what it is – London’s hidden public sector. Of course it’s booming – it’s the UK govt’s scared cow, yet produces little of value. Why aren’t we shouting this from the rooftops?
The SNP need to be very careful here.
Giving birth to a new nation and then placing it immediately in a state of deep debt is a recipe for disaster. It just does not make sense swapping one form of debt bondage for another.
Where’s the independence in that!
Especially if the political economy and prevailing orthodox context are deeply flawed. Which in this case they undoubtedly are.
GERS seems to be a confection to retard Scottish independence – to enable England to keep its claws in place.
Getting a vote for independence is the easier bit in my view: changing the received wisdom about deficits to create true sovereignty for a Scottish Government seems to be the main battleground at the moment and I worry that this is not acknowledged enough.
Robin McAlpine has addressed all this in How to Start a New Country
https://www.commonspace.scot/tags/how-start-new-country
PSR says:
“Giving birth to a new nation and then placing it immediately in a state of deep debt is a recipe for disaster. It just does not make sense swapping one form of debt bondage for another.”
One major difference, even if it came to pass, it would be Scotlands debt, not the debt of a different country.
And that is the point
Jane-
fraser of alandar argue this- critics of gers can compare the scottish government estimate of a deficit with uk but you cant take a %… instead use different figures and only compare those regions which have also have deficits
that is quite clearly bullshit and is an argument to scrap gers because they are saying gers is not comparable with anything
“They have got this badly wrong“
You are quite correct in your assessment.
The tragedy is they have been doing this for too many years.
They are a blight on Strathclyde University and the name Fraser.
You are right to be angry as we are in Scotland.
Keep up the good work