Sunday, December 10, 2006

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There's a number of problems with this report, not least to do with the fact it's always out of date by the time it is published (this one will be for 2004/05).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:

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.


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