A generation is a long time in politics

GERS again?  Really? I know, it’s getting a bit ridiculous now, isn’t it?

Yet here we are again with the latest denial mechanism for those who simply don’t want to believe the inconvenient conclusions from their own government’s statistics.

I know it’s a generation ago now but some of you may remember that, before the last independence referendum in 2014, the GERS figures were used repeatedly by anti-union campaigners as evidence of Scotland’s superior fiscal position to the rest of the UK.

GERS quotes

Cited on 15 occasions by the SNP’s white paper on independence,  and by their Fiscal Commission Working Group, Business for Scotland, Yes Scotland and every SNP politician including Alex Salmond and Nicola Sturgeon (who incorrectly claimed they showed a surplus) there was absolutely no doubting their trustworthiness.

[See this from Blair McDougall for a full collection of GERS praise from the SNP]

As the campaign progressed, the spin imparted on the figures began to fray around the edges – particularly after the release of the 2012/13 version 6 months before the vote.

In response to this, the compliant online wing of the independence ‘movement’ began to fabricate myths to bolster the figures.  It started with the invention of taxes that simply didn’t exist – the infamous whisky export duty – and when that was proven for the lie it was [LINK] they progressed onto bizarre claims that first VAT and then corporation tax were assigned according to company headquarters and so missed from GERS – proven wrong [LINK].  After that, they claimed GERS didn’t include our appropriate share of oil revenues – also debunked [LINK].

Next, they claimed that GERS included billions of spending on English projects – Crossrail, London Sewers et al – that an independent Scotland wouldn’t pay for.  Another lie. [LINK]

More recently there have been claims that an independent Scotland wouldn’t inherit any sovereign debt repayments or pay for state pensions which, whilst both stupendously wrong [LINK and LINK], at least accepted the current figures at face value.

Myth after myth, meme after meme, those people who had been so full of praise for GERS when it suited them, now remained silent – refusing to publicly debunk when deliberate disinformation and public ignorance aided their constitutional obsession.  Indeed, on occasion it was apparent that some of the looser cannons amongst the SNP-fold actually believed the lies.

Of late a new line has taken hold, fostered by Richard Murphy – Professor of Practice in International Political Economy at City University, London.  The claim is that the data the Scottish Government’s statisticians use to produce GERS is not fit for purpose – a claim which seems to rest heavily on the assumption that because the data comes from ‘London’ then it must be biased against Scotland… it’s self-evident…

Professor Murphy also claims that because some of the revenue streams are estimates of Scotland’s share of total UK tax, they are therefore unsuitable.  For the purposes of this blog, I will leave discussion on the suitability of the estimates to people better qualified than I am – such as Graeme Roy, Director of the Fraser of Allander Institute [LINK] or Professor Ronald MacDonald, Research Professor in Macroeconomics and International Finance at the Adam Smith Business School, and Professor Angus Armstrong, Director of Macroeconomics at the National Institute of Economic and Social Research [LINK].

Professor Murphy’s comments were shared online by several SNP politicians, more than happy to further muddy the waters of economic reality but it was noticeable that, when asked directly, the official line from the Scottish Government and Finance Secretary was to distance themselves from claims the current figures are inaccurate.

Derek Mackay, never a man to inspire confidence that he’s fully in charge of his brief, had the following to say:

“…I’ll take those statistics at face value… I accept the estimates as they are, but I think we could do so much better.

In terms of the statistics available between the UK government statistics, the ONS (Office for National Statistics) and what the Scottish government produces, yes, they are accurate.  But they are an accurate assessment of estimates of where we are right now – not the starting position of an independent Scotland.”

http://www.bbc.co.uk/news/uk-scotland-39509863

This now appears to be the go-to line for those who find it just too inconvenient to answer questions on how an independent Scotland would deal with the near-£15bn deficit.

And today, following a Radio Scotland debate between the afore-mentioned Richard Murphy and Kevin Hague, there was much crowing from nationalists when they thought someone on ‘the other side’ was saying the same thing:

The problem for Ms Cherry et al is this is not something that is, as she pejoratively claims, “conceded”.  It’s simply the repetition of the very point Kevin (and the rest of us) have been making for years now.

In fact, it’s the very same argument made by the SNP’s white paper for independence and everyone, including Ms Cherry, who backed it as the foundation of their case for separation.  To quote:

This chapter sets out Scotland’s public finances and demonstrates that Scotland has the financial foundations to be a successful independent country.

It also provides an overview of the financial position that the Scottish Government expects an independent Scotland to inherit and this Government’s early priorities for public spending and revenue.

The starting point for this analysis is the National Statistics publication, Government Expenditure and Revenue Scotland (GERS). GERS is the authoritative publication on Scotland’s public finances…

To enable an informed assessment of the financial position of an independent Scotland, the Scottish Government has prepared projections of Scotland’s public finances under the current constitutional framework

http://www.gov.scot/Resource/0043/00439021.pdf

Just three years ago the SNP were telling us that GERS is “the authoritative publication on Scotland’s public finances”, shows a trend of Scotland’s fiscal position and that it provided the starting point for an informed assessment of an independent Scotland.

We agree.  Why have they changed their mind?

It has never been claimed that GERS shows exactly what the public finances of an independent Scotland would look like.  We’ve only ever said this report, produced by the Scottish Government, shows where we are now – so you tell us what changes to improve that position.

If we were to become independent, the first government would face a multitude of choices on how to run the new country.  One, albeit ludicrously implausible, scenario would see them run things in exactly the same manner as exists within the UK – this would result in, all other things being equal, the deficit shown within GERS.

Of course common sense dictates that this would never happen – the government would pursue different policies and these, along with both beneficial and detrimental external factors, would influence government revenue and spending.

All we’ve ever asked is for those seeking separation to tell us what these alternative policies are and what impact they would have from the starting point of GERS.  If you think independence would be such a huge success for Scotland, it really shouldn’t be difficult to quantify the economic benefits.  Should it?

Sadly it seems that perhaps it is.  The current tactic from the SNP is not just to ignore the economic questions posed by GERS but to deliberately undermine the work conducted by the statisticians of their own government, work which they had previously lauded as “authoritative”.  Instead, their current argument appears to be “we can’t tell anything about the economics of independence so let’s just take a punt, eh?”

pishfart gers

Not only that, they will happily directly contradict their own arguments…

wishart gers

…and hope that no-one notices.  Do they really think the Scottish public are that stupid?  Do they really think we can’t see through it?

Frankly, I doubt the Scottish public will take kindly to being treated with such utter contempt.

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11 thoughts on “A generation is a long time in politics

  1. Not sure that this blog brings us terribly far.
    For me the overriding, unanswered questions are these (beyond the Gers-value debate):
    – On iScot day 1, would the new country be starting with a need to borrow £15bn in the firat years (and thereafter)?
    Surely the answer is: we can’t possibly know.
    And a more extended answer is: should we take one year’s worth of Gers data to answer the question or 10 years’ worth or since they started collecting them? Or is there a need for a more balanced view, taking on board other stats, data and views ( for example, on whether the data are estimates…)?
    I am no economist but some clarity has to prevail given that all Scottish resdients – whether economists, MSPs, political party affiliated bloggers or the ‘average’ voter – will have probably have to take a decision some time soon and concentrating on the 15bn figure surely risks leading us/ them to an exaggerated conclusion.
    Or am I wrong?

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    1. Hi Peter, I agree that taking single year wouldn’t be terribly helpful so it’s good that all the analysis I’ve seen looks at the trends within historical GERS.

      I also agree, as I’ve said in the blog, that there will likely be factors which alter the starting point position provided by GERS and it’s my opinion that it is incumbent on those proposing constitutional change to articulate and quantify what those changes are and how they affect the fiscal balance

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    2. Peter, the answer is that the first year of independence would most likely look an awful lot like the previous pre-independence year. Thereafter, and over time, policy decisions taken and external events would alter outcomes for better or worse. So, yes, likely to start with a major deficit which would need to be substantially closed and quickly. This is not necessarily a bad thing, a lot of countries are living beyond their means (indeed the UK probably still is) and the fiscal consolidation needed to get EU entry is no different from that faced by Ireland in 2009 (in fact the scale is almost identical). Ireland managed that by pension cuts, public sector pay cuts and broad based raises in income tax. As long as people understand that’s the likely similar path when they vote for independence then we will be taking this challenge head on.
      In terms of the adequacy of the statistics, it seems to me the scope for GERS being very wrong is limited. Around 60% of all the spending is devolved so it is known for sure. Of the remaining 40% there’s a limit to how much an independent Scotland can vary, given that the largest component by far is state pensions. I mean you might have noticed, but the Conservative government is not known for its largesse, so they’re not chucking money about that an independent Scotland could cut. The one exception is defence. If we had absolutely no armed forces at all then we might be able to save 4% or so on spending.
      So, overall spending per head is likely to be very accurate, and given that the result is a massive deficit then the revenue estimates become a little less important. The specific O&G taxes are easy to count because they’re separate, as is income tax because of Scottish tax codes. I agree VAT could be a bit wrong, but that’s the only one and why would it be higher as opposed to lower? But here’s the thing, even if the revenue was really 102% of estimate and spending 98% (which would represent massive failings in the statistics and which nobody in the Scottish govt is pointing to) then the deficit on day one is still huge.

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  2. Since “GERs tells us nothing about the finances of independent Scotland”, I am from now on operating under the assumption that independent Scotland will face a first deficit of £75 billion.

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  3. The analysis of GERS in this and previous blogs attempts to discredit pro-Independence numerous assertions. In doing so it illustrates just how unwieldy GERS is – some areas of expenditure are incurred directly by the Scottish Government, some by the UK Government on Scotland’s behalf, some have Barnett Consequentials, others don’t or have different proportions allocated according to their ‘perceived’ value to Scotland. In short it illustrates an extremely complex set of processes and confirms Richard Murphy’s view that Scotland needs it’s own and proper set of data, rather than the smoke and mirrors illustrated here.

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    1. Which “analysis” would that be, Philip? Which reserved spending do you believe shouldn’t be included in GERS? Which items do you think receive different proportions of Barnett consequentials and why is that incorrect?

      Some specifics would be appreciated rather than a baseless attempt to undermine

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      1. Your analysis of the pro-Indy view of GERS and explanation thereof. I didn’t suggest there was anything incorrect about GERS. What I am saying is it’s labyrinthine complexity makes it unfit as an effective tool for budgetting, business planning and governance – as per Richard Murphy’s assertion.

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      2. It’s not an “analysis” of the anti-union view, I’m directly quoting people who are proposing separation and providing their view.

        Struggle to see why the supposed complexity makes it a problem when, as I’ve pointed out, it was fine in 2014 and no-one except Richard Murphy considers it to be a problem.

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  4. Excellent article. Please, please keep up this invaluable work. Nationalists hate economic arguments. It’s like garlic to them. Thank you. Mark Speight

    Liked by 1 person

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