Where it’s at

That title reminds me of a linguistic joke, so let’s get that over with:

New student at Harvard, seeing a clearly established student whom he can ask for information: “Say, is this where the library’s at?

Established student (snootily): “This is Harvard. We don’t end sentences with a preposition.”

New student: “Oh, I’ll rephrase my question. Is this where the library’s at, asshole?”

To the point, now. It’s been a long time since the Scottish independence movement has been anything other than murky, unpredictable, unbelievably baffling or just plain hopeless. However, things are beginning to turn the corner, with some upcoming dramatic events:-

  1. This coming Wednesday, it is said, Nicola Sturgeon will set out her response to BJ’s refusal of the request for a Section 30 order. This either will or will not contain a commitment to an indy referendum this year. It’s difficult to see how it will plausibly do that. But if it doesn’t, the SNP’s credibility will slide down by another notch.
  2. The background to this, and the basis of all SNP policy on independence since 2015, is their belief that independence can only be securely won with the consent of the British government; anything else will create too much division in Scotland, and too much risk of non-recognition abroad.
  3. An alternative explanation of the SNP’s conduct since 2015 is that they don’t in fact want independence – they want to stay in power and keep their jobs and perks for ever. Political life after independence will become much more difficult for the SNP, with their primary aim accomplished and the rise (let us hope) of a proper Scottish opposition.
  4. The Alex Salmond trial opens soon, and there’s open discussion among commentators that this will destroy the SNP. It will destroy the SNP because the accusations against Salmond are (commentators say) a stitch-up, and Sturgeon (they say) played a large part in setting that stitch-up up. She did this (they claim) to demolish a rival who wanted to take the party in a direction she didn’t favour. (The thought of the honest, open, red-headed wee wifie whose mouth butter wouldn’t melt in being revealed as a corrupt and self-seeking political turd is an unsettling one, until you remember Blair’s metamorphosis in just a few years from left-wing poster-boy to financial scammer and international war criminal.)
  5. A line of argument that might mitigate the SNP’s dishonesty is that their proposed direction – indy with consent – is truly the only viable one, but that this will take ten to twenty years. Their only dishonesty is that they haven’t admitted to that timescale.
  6. If the SNP is eviscerated by the Salmond trial, a new party will head the independence movement (let’s just assume it’ll call itself the Scottish Independence Party, for heaven’s sake!). It’ll be much more aggressive in calling out the lies of the mass media on Scotland’s economic and cultural strengths, and in challenging Westminster’s machinations to erode devolution. If the movement is eventually forced to go for UDI, it will be a UDI which Scottish voters are in favour of because they’ll have listened to all the arguments, and one for which international recognition has been prepared through diplomatic initiatives.
  7. This might not be far off. After January 31st, an EU that wanted Scotland to join it (because of its economic potential and cultural compatibility) would be able to twist the arm of the UK, because the UK will no longer be an EU member and the UK will want a trade deal.

The Scotsman doesn’t believe this last point: it reports that the EU has stated categorically that it will not readmit a Scotland that has separated from the UK without consent. What The Scotsman doesn’t say, however, is that the EU will twist the British government’s arm to give consent, and that will be the price of the trade deal. So there’ll be consent, and therefore indy. And the Northern Ireland settlement shows that BoJo does actually back down when he has no cards.

Smile and be a Villain

This claim turned up in comments on The National yesterday, from John Stuart Wilson. Since it’s based on data, it needs to be taken seriously:

Our largest on-shore private sector employer is the finance industry. It accounts for, directly and indirectly, 1 in 12 jobs. It doesn’t want to be located in a foreign country from 90% of its customers. (Ask yourself: how many local authorities and SMEs currently send their monthly pension scheme payments to Belgium to have them managed there?) And it will not accept the loss of a LOLR [lender of last resort] backstop. So independence will cause major job losses in Scotland, as these firms relocate to the rUK.

However, there are a few points in the above claim which are not clear:

– the Scottish finance industry employs 160,000 people, out of a labour force of 2.6m. This is 1 in 16. Where does the writer get his figure of 1 in 12 from?

– the UK-wide finance industry employs about 2m people, out of a labour force of 32m. So the Scottish economy is no more dependent on financial services than the UK-wide economy is.

– some financial institutions focus on customers in foreign countries, which is why the London financial sector is so keen to retain its access to the EU. How does this square with the writer’s claim that banks don’t want their customers to be in a different country?

– What’s meant by ‘located in a foreign country’? Many financial institutions have staff in one country and owners in another: HSBC, Santander, RCI, Clydesdale Bank (until 2016), to give a few household names. If the author means that banks which are currently headquartered in Scotland will move their headquarters after independence, that isn’t a big deal. And if he means that they’ll move their staff away and close up shop, that’s implausible – why would any businessman with a brain walk away from a 5.2m customer base that has a reputation for financial probity?

– the lender of last resort would not be the Scottish government; if the economy went pear-shaped, the lender of last resort would be the IMF, and the banks would stay. Thirty countries in the world have become independent since 1984, and they all have banks. Greece, ranking 24th among European economies in terms of per-capita GDP, still has banks. Why does the writer believe that banks would leave if the lender of last resort were the IMF?

A more plausible explanation of John Stuart Wilson’s post is that an independent Scotland would properly regulate its financial sector, squeezing out malpractice, and making it more difficult for the sector to make money. So, as far as financial operators with that mindset are concerned, Scottish independence is a lousy option. Arguing against independence on that basis is of course a thoroughly villainous activity, but until we get answers to the questions above, we can’t be sure that John Stuart Wilson’s claims are honest and believable. Can we please get sufficient clarification from him to show that his stance on this is an honourable one?

 

Yoon Truth

For those who haven’t heard of Kevin Hague and his rabidly anti-independence blog (What is he scared of? Why does he hate independence so much? Is he misinformed, or just greedy? And if greedy, what for?), this is a chilling post:

https://chokkablog.blogspot.co.uk/
28 August 2017 at 01:14
Comments to “Professor Murphy and the Deckchairs”

Anonymous Drew said…

Here’s a tricky one for anti-independence campaigners. While you want the Conservatives and/or Labour to win control of Holyrood in 2021, you wouldn’t want them doing too well.

There’s a danger for opponents of independence that if Scotland’s economy ever improves to the extent that tax revenues increase and spending on poverty, health and social problems decrease, then the situation with GERS might show Scotland could prosper with greater control over the economy.

This would risk doing the SNP’s job for it. The parties against independence need to be able to show that Scotland is economically weak enough to need the Union.

Lab/Cons would need the economy to do well enough in Scotland to remain in power at Holyrood but have a poor enough fiscal position through GERS to show that the economic case for independence remains in trouble.

That’s a bit of a Catch 22.

…and complete contempt for the well-being of 5.4m Scots.

Why GERS is a pile of pants

An open letter to Kevin Hague

Dear Kevin,

BloggerKevin Hague said…

yes – unclouded by anger and not troubled with supporting data that is an excellent summary, thank you

31 August 2017 at 07:24

I’m glad you agree that I gave (here) an excellent summary of your post about GERS on your blog. I summarised your post because I wanted to get behind your vituperation and your avalanche of data, and look at the merit of your arguments. I have to say I’m not impressed. Let’s take your five main points:-

1. Professor Murphy asks why the Scottish deficit is so much larger than that of the rest of the UK (the ‘deficit gap’). You reply that it’s because the difference between what Scotland spends on services and what it collects in revenue is larger that that of the rest of the UK. This answer is vapid: it doesn’t explain, it just restates the phenomenon. If you asked an employee of yours why they were late, and they said it was because they hadn’t arrived at the stated time, you wouldn’t think you’d been given an explanation, you’d think you’d been handed a bunch of insolence, and fire them on the spot. Your response to Professor Murphy is like that bunch of insolence.

2. Regarding non-identifiable expenditure, you say that Murphy’s claim is false, because non-identifiable expenditure is allocated fairly, by population. But Murphy doesn’t claim that it’s allocated unfairly: he claims that the revenue it generates is not allocated to Scotland.

3. You say that Murphy is wrong in saying that expenditure figures rely on estimates: expenditure, you say, is all supported by known data. But Murphy doesn’t claim that expenditure is estimated: he says that revenue is estimated (which you partly agree with).

4. You say that Murphy needs to consider why the Scottish spend is higher, and claim that there are two causes: (a) Scotland’s population is more spread out than in the rest of the UK, and (b) “slightly more” benefit claimants in Scotland suffer from long-term health problems. But the numbers here don’t support your case:

  • Two-thirds of Scotland’s population live in the Central Belt, which has normal density, and only one third is spread out. Scotland’s per-person spend is 12percent higher than in rUK, so for the low population density to account for the increase, every single service provided outside the Central Belt would have to cost 36% more than the norm, irrespective of its nature. I’m getting a futon bed delivered to Glasgow this week at a price of £130 + £10 delivery; your scenario says that if I lived in Dunoon, the whole bed would have to cost me £190. That’s nonsense.
  • You don’t say what “slightly more benefit claimants” amounts to, but let’s guess (unreasonably, in my view, but let’s start there) that the number of benefit claimants who suffer from from long-term ill health amounts to 10percent more of the population than in the rest of the UK. Here your scenario is even more implausible: every single service delivered to those people would have to cost 120% more than the norm (i.e. more than twice as much}. So if my auntie in Dunoon had dementia, she would have to pay £308 for the self-same futon bed as cost me £140.
  • Yes, I know I’ve accounted for the difference twice here, and the truth (if any) must lie somewhere between the two, but if you’re going to argue that these two features account for the higher Scottish spend, you’re going to have to provide some credible numbers. I put it to you that such numbers don’t exist.

5. Your last point is that the yearly revisions of GERS, which present amended figures for earlier years, consistently show that the earlier deficit was in fact higher than was first reported, and this, you say, demonstrates that there can no hidden agenda to overstate the deficit. This doesn’t make a lot of sense to me. Your creditor says to you, “Bad news. You owe me thirty grand,” but you suspect he’s lying, you don’t owe him that much. A month later he comes along and says, “I’m sorry, I got the figures wrong. You owe me thirty-one grand,” and you conclude from that that he can’t have been lying the first time. Really? How exactly does that work? You must let me know some time.

So let’s look again at your five-point rebuttal of Murphy. On the first point, that the deficit gap is baffling, you say that it’s not baffling, the reason for the deficit gap is that there’s a gap in the deficit. On the second point, that non-identifiable revenue does not accrue to Scotland, you say that non-identifiable expenditure is allocated fairly. On the third point, that revenue is estimated, you say that expenditure is not estimated. On the fourth point, that Scottish spend is necessarily higher, there is no credible way in which Scotland’s different circumstances could skew spending by the amount you say it does. And your last point, that the yearly GERS revisions show that there is no hidden aim of overstating the deficit, don’t show anything of the sort.

If I were feeling generous, I would call your alleged rebuttal of Murphy a pile of pants, and I’m sure you’re bright enough to see that. I therefore assume you wrote it in a tearing hurry. However, early intervention of this sort makes the Union side look panicky, as though it knows it’s losing the debate and has no more shots in its locker. Indies are already saying that Unionists no longer believe in their own economic case, they just jump up and down and scream when it’s challenged, and I’m sure you’re bright enough to see that too. It will be interesting to see how you deal with it as the debate unfolds.

Look forward to hearing from you.

Best regards,

Derek

Why GERS is right

GERS, as readers will know, is the “Government Expenditure and Revenue for Scotland”, and is published yearly. The report for 2016-2017 came out recently, and economist Richard Murphy questioned its accuracy, voicing his early suspicions that these books had been cooked. His claim elicited a vigorous rebuttal from Scottish entrepreneur Kevin Hague, blogging as chokka blog.

In my view, Hague’s rebuttal, which you can read here, should have used more moderate and factual language, which would surely have made it more persuasive. Instead, he wrote a sarcastic and emotional attack on Richard Murphy’s competence, and also included a welter of raw data. This made the thread of Hague’s argument difficult to follow, and in the end (in my view) weakened his case.

I’ve therefore re-presented his argument below, leaving out the emotive language and the overly detailed data, in order to make his argument clearer. This is what I think he should have written:

Professor Murphy and Deckchairs

Professor Richard Murphy claims that GERS tells us nothing. This is not the case. GERS tells us that Scotland’s finances are weaker than the UK’s because we spend far more per person on public services than the rest of the UK. And this would still be the case if Scotland became independent.

Over the last thirteen years or so, Scotland’s public spending, per person per year, has exceeded that of the rest of the UK by about £1500. But over the same period, Scotland has generated in taxes about £350 *less* per person per year than has the rest of the UK. (This excludes taxes from North Sea oil, which latterly have fallen to virtually nil.) So Scotland’s deficit – the excess of public spending over the tax take – is about £1850 larger, per person per year, than the deficit of the rest of the UK. Prof Murphy says that he’s bemused by this £1850 difference, but it isn’t in fact baffling. A small part of the reason for it is that we generate less revenue, but a larger part of the reason is that we spend more.

So we need to understand why we do this – why Scotland spends more per capita on public services.

Prof Murphy offers two possible reasons for why the Scottish deficit is proportionally larger than the UK’s: that ‘non-identifiable expenditure’ is allocated disproportionately to Scotland, and that the figures are unreliable because they come from estimates or surveys. He also says that the difference is surprising. However, none of these three claims is true:

a. ‘Non-identifiable expenditure’ – that is, expenditure that benefits the whole of the UK equally, rather than one part of it – is allocated to Scotland strictly in proportion to population.

b. The figures for Scottish expenditure do not come from estimates or surveys; they are based on data and are not disputed. (Some of the figures for Scottish revenue are estimates, however.)

c. Scotland needs to spend more because of its population is more spread out, and slightly more subject to long-term ill health, than the rest of the UK. So it’s no surprise that it spends more on health, education and economic development. These last three items account for about one-third of the additional spend.

It follows that Prof Murphy should not be doubting the GERS figures, which are easy to understand. They tell us that the reason Scotland’s deficit is larger than that of the rest of the UK is that we spend more per person. Murphy should be asking why it is that that we spend more and whether it’s justified by need, and he should also acknowledge that savings are almost impossible to find. He should not be saying – as he does – that the GERS figures overstate the Scottish deficit. GERS figures for a given year are revised later year by year, and over the last few years each revision has shown that the true figure for the Scottish deficit is worse than that shown in the earlier versions. This demonstrates that there is no hidden intention to overstate the deficit.

The conclusion must be that GERS is accurate, it shows us that the reason for the deficit is that we spend more than we raise in taxes, and this higher spend is necessary given the problems that are endemic to our country. The mystery is not why we have a deficit, but why Prof Murphy does not understand it. His picking at the details of allocation is like moving the deckchairs on the Titanic to see if it was that that made it sink.

Does this make it clearer? What do you think?