'mon the GERS!

Oh, looky there! The latest edition of 'Government Expenditure and Revenues in Scotland' has been published and with heed having been taken of many of the criticisms levelled at previous editions, the methodology seems to have been refined somewhat.

Nothing too dramatic, you understand. Just minor details like including a geographical share of oil and gas revenues to Scottish accounts; trying to identify Scottish spending as accurately as possible and improving the estimates of Scottish tax revenues. And guess what? While the UK ran a budget deficit in 2006/07, on these estimates Scotland ran a surplus of £800m. Since the price of a barrel of oil has doubled since then, I can't wait to see what next June's figures hold...

By a country mile, this is the most comprehensive and rigorous analysis yet undertaken of Scotland's finances. Maybe now, we'll start to hear a more articulate and intelligent unionist case for Britain based on the argument "Scotland more than pays her way, and here's why she should continue to do so"

Nah. It'll never catch on... :-)

Lies, Damn Lies and Labour Party Leaflets

I was the recipient this morning of no fewer than three leaflets from the Labour Party. Sadly, two of the three are glossy (or should that be Panglossy?), so they have few alternative uses around the home. However, the one which really stuck out was the party’s official Election Communication for the Lothians.

It’s printed on a piece of very flimsy 1/3 A4 card, and says not a word about what Labour has achieved in office or what they plan to do if returned. Instead, they give an example of an ‘average family’ (Question - why does their ‘average family’ always seem to consist of a firefighter and a nurse cohabiting? Does their publicity guru have a thing for uniforms or something?), whom they contend would be £913 per year worse off if the SNP were to win power.

That seems an unusually precise figure, although sadly no-one in the Labour team has seen fit to explain how they have arrived at this amount. It’s also significantly at variance with the £5,000 per family figure they have on their billboards and party political broadcasts currently. To make things even clearer, there is considerable confusion amongst Labour spokespeople as to whether this £5,000 figure relates to alleged SNP spending commitments; or to the supposed ‘borrowing requirement’ identified by the now discredited GERS report, divided by the number of households in Scotland.

So far in this campaign, they’ve tried to terrify us with ‘deficits’ of £6bn (Labour’s North-East Scotland leaflet), £7bn (their analysis of supposed SNP spending commitments), £11.9bn (GERS), and £13bn (Labour press conference). Quite clearly, they are just making it up as they go along. Perhaps more to the point, though, if I were to speak to their economic team (assuming it even exists), would I even get an attempt at an explanation for all these competing figures, or would they all be too busy sitting around on what they think are their elbows to give me a proper answer?

Progress!

The Scottish Executive has admitted that there are significant difficulties with their GERS report on revenue flows to and from Scotland, not least the small matter of this half-billion pound error in the Treasury calculations they use to compile Scottish spending figures.

Lib Dums (Part MCXVIII)

I simply had to laugh at the antics today in Holyrood of everyone’s favourite opposition/government (delete according to circumstances) party, the Liberal Democrats. For quite simply, in today's debate on government spending, they proved for all time the wisdom in the old adage that a little knowledge can be a dangerous thing.

Deciding on this occasion that they were government rather than opposition, they decided to accuse the SNP of having uncosted spending commitments. This they did in the time-honoured fashion of saying that ‘if you’re going to spend this amount on doing that, where’s the money to do it going to come from?’.

Tee-hee-hee - how clever. Sadly for the Lib Dem speakers, though, the SNP’s Alex Neil was on the case, and managed to intervene to ask what spending the Lib Dems planned to cut in order to fund their proposed cuts in income tax. Three times Alex intervened on three different speakers, and each time answer came there none. The sound of rapidly escaping air was deafening…

Jeremy Purvis also took to his feet, and used his time to claim that SNP figures in a document called ‘Scotland in Surplus’, were wrong because they didn’t take into account the party’s proposed cut in corporation tax. Sadly for Jeremy, the SNP figures to which he refers represent an analysis of the revenues and expenditure which take place in Scotland in the current year, and not a dynamic budget showing what the SNP would do in government.

This is something the document explains very clearly – that lack of attention to detail won’t do your ministerial chances any good, Jeremy!

However, to spare Mr. Purvis’ blushes, the ‘chump of the day' title must be split between Argyll MSP George Lyon and his equally irascible colleague for North East Fife, Iain Smith, both of whom claimed that the SNP had hacked out £750m of defence spending between the party’s July ‘Scotland in Surplus’ paper and its December update.

Whoops-a-daisy! That correction for the government’s overestimated defence spending in Scotland was in the July document as well. For future reference, boys, it’s in the bit about ‘Expenditure’ under the heading ‘Defence’. There’s also a dirty big Appendix on page 12, ‘Appendix 1’ as it happens, which explains the figure more fully.

Still, it’s not my fault if you can’t be bothered to do your homework properly. Now, if only I could find some way to get the theme tune for ‘The Muppets’ out of my head…

Forewarned is Forearmed...

Ho-hum. Tomorrow (Monday) will see the discharge of the latest fusillade designed to convince us all that the Scots are too wee, too poor and too stupid to be Independent. Yes folks, its time for the Government Expenditure and Revenues in Scotland (GERS) report once more.

There's a number of problems with this report, not least to do with the fact it's always out of date by the time it is published (this one will be for 2004/05). However, the biggest problem is its tendency to both exaggerate spending and underestimate revenues raised in Scotland.

Nowhere is this more blatant than over North Sea oil and gas. Even though 95% of these revenues would accrue to Scotland, GERS leaves them out entirely. In calculating a Scottish budget 'deficit' (the figure we are invited to believe is the amount of subsidy coming north), it also overlooks the fact that the UK as a whole is running an even larger (and real) deficit. This alone would render impossible any kind of domestic UK subsidy to Scotland.

One of the other arguments heard most often from unionists is that since Scotland gets more in 'identifiable' spending than the UK average of £7,000 per. head, we are therefore being subsidised by English taxpayers. This is twaddle, so please bear with me while I explain why:

1. The figure has nothing to do with whether Scotland is 'subsidised' or not, since it only deals with spending levels, not the amount of tax revenues raised in Scotland to cover it.

2. It excludes £74bn of 'unidentified' expenditure, most of which actually gets spent in London and the South East rather than Scotland.

3. The differences in English regional identifiable spending per. head are actually pretty big as well:

NORTHERN IRELAND - £9,084.
SCOTLAND - £8,265.
LONDON - £8,037.
WALES - £7,666.
North East - £7,689.
North West - £7,368.
Yorks & Humber - £6,829.
East Midlands - £6,248.
West Midlands - £6,676.
Eastern - £5,864.
South East - £5,959.
South West - £6,634.

With 1/12 of the UK population spread over 1/3 of the landmass, it should not come as a surprise that Scottish ‘identifiable’ spending is above the UK average. However, since London gets £1,000 more per. head than the UK average and the East Midlands £750 less, does this mean that the East Midlands is subsidising London?

Of course it doesn't, and for exactly the same reason that the figures tell us nothing at all about Scotland. But you don’t need to take my word for it. Here, in quotes, is what some prominent Scots have had to say about GERS since Ian Lang brought it into existence during his unlamented Viceroyship:

GERS – In Quotes:

‘I am disappointed that both you and the Chancellor have reservations about publishing the booklet I have had prepared and printed setting out the details of the government’s expenditure and revenue in Scotland. I judge that it is just what is needed at present in our campaign to maintain the initiative and undermine the other parties. This initiative could score against all of them'. Secretary of State for Scotland, Ian Lang, in a letter to the Prime Minister dated March 3, 1992.

‘Caution should be applied in the interpretation of the fiscal deficit. This is the difference between two large numbers, both of which are estimates and subject to large margins of error’. Dr John Rigg, Scottish Office Senior Economist, Autumn 1996.

‘The SNP claims the Scottish Office figures are distorted. The party has a point.’ The Economist, 26th October 1996.

‘Nationalists have a point when they allege the whole GERS exercise was designed to engender fear’. Alf Young, The Herald, 21/1/03.

‘Nationalist or Unionist, whether you trust GERS or not analysis to date reveals a budgetary balance that is not wildly out of line with contemporary experience in other economies in Europe’. Alf Young, The Herald, 21/1/03.

‘It tells us nothing, I would argue about the situation under independence’. Dr Andrew Goudie, Chief Economist, Scottish Executive, The Times, 21/1/03.