Wednesday, 4 May 2016

The GERS (Again)

Another SI column, this time on the subject of the GERS (Government Expenditure and Revenues in Scotland) Report. I have a general rule of thumb that just about anything you read in the papers or hear from a unionist political party on this subject is likely to be both highly partisan and incorrect, and it's a rule which has seldom failed me yet. For more on what others have said about the exercise, I refer you to a post on the old blog over here. Meantime, here's an attempt to bring a fresh angle to one of the most boring aspects of the constitutional debate...
The recent publication of the Government Expenditure and Revenues in Scotland (GERS) figures has seen a great rejoicing amongst some of the more excitable of our unionist chums. The reason? The fall in oil and gas revenues which has contributed to Scotland having a larger ‘deficit’ than the rest of the UK in the last financial year has, we are told, ‘demolished’ the economic case for independence. 
‘Aye right’, you might well say. Nevertheless, we are invited to believe by our betters who understand such things that this provides conclusive proof that the Scots dodged a bullet in September 2014. Further, we are asked to believe that the GERS analysis carried out by impartial Scottish Government civil servants demonstrates the deception perpetrated upon Scots by an independence White Paper which was also written by, er, impartial Scottish Government civil servants. 
It’s a charge intended to strike at the very hearts of both the SNP and the case for independence. Superficially, there is a point in there - the White Paper did overestimate future oil prices. However, so too did every other forecast for the period produced by the UK Government. Still, foolish consistency being the hobgoblin of tiny minds and all that, it’s the SNP which is - predictably - being singled out for censure.

All this took me back about ten years to when I was a Parliamentary Researcher and going through GERS with a microscope was part of my brief. While some things have changed, for all the altered methodology GERS still suffers from the same fatal flaws it did back then. All it does is give us a static and fairly blurry snapshot of a particular moment in time, which tells us nothing at all about independence, or of the dynamic impact on the economy which the act of becoming independent and having a full range of policy levers at our disposal could go on to have.

The lack of specifically Scottish figures for the document’s authors to draw upon is a serious problem. Because of the way the figures are collected, most have to be ‘guesstimates’ from UK-wide datasets. Some of those guesstimates will, by their nature, be better founded than others.

Take VAT, for example. Scotland’s share of VAT paid by businesses and the housing sector is allocated in line with the size of our economy and share of public spending. But when it comes to household VAT, we have to rely on data from the ‘Living Costs and Food Survey’ carried out by the Office for National Statistics.

This survey trawls around 12,000 addresses across the UK to ask the adults and the children of the household to keep diaries of what they spend their money (or pocket money) on. The survey does what it does and no doubt does it as well as it needs to, but it was never intended to assist with the allocation of nearly £11bn for the purposes of trying to settle a constitutional argument. 
There are also problems in allocating public spending, particularly over ‘unidentifiable’ expenditure. It’s not called that because it is genuinely unidentifiable, but rather because it is spending - such as on defence - which is deemed to be for the benefit of the UK as a whole rather than a specific location, even if most of it is spent disproportionately in London and the South of England. 
The deficit figure for Scotland is often wrongly assumed to be the amount of money being transferred from taxpayers in the UK to pay for public services in Scotland. The fact is that the rest of the UK is also spending more than it creates in tax revenues, making any ‘subsidy’ of this kind completely impossible anyway. However, the main reason any comparison with independence is bunk is because it makes the assumption that we would want any independent government to spend exactly the same amount of monies in exactly the same way as the UK government does currently on our behalf. 
Having currently reserved departmental responsibilities moving to Scotland would result in an economic boost at effectively no cost, since we’d get the benefit of the jobs we’re already paying for being relocated to Scotland. However, there’s also a number of UK spending lines which we’d almost certainly not wish to maintain, either freeing that money up for investment elsewhere or to reduce the level of borrowing we’d be undertaking ourselves as an independent country. 
In her Spring Conference speech, Nicola Sturgeon announced a summer campaign to persuade more of our fellow Scots of the benefits of independence - a move which brought the assembled delegates to their feet. However, of even greater significance was her indication that we need to be taking a good, hard look at the way we choose to present some of those arguments.

We’ll all have our own thoughts on what changes we might like to see in that respect, but it seems likely that a number of changes will be needed in the way we present the economic case. There’s a real sterility in trying to argue that we’d be better or worse off independent on the basis of playing one big number of uncertain magnitude off against another, which is all GERS achieves. Wouldn’t it be much better if next time round, rather than talking about the relative deficit or surplus for the year just passed, we were talking instead about the dynamic case for full fiscal powers and how we could use them to improve Scotland’s future growth path?

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