By Alasdair Galloway

On Thursday of last week, the Herald published this from well-known Better Together supporter and long-time Labour party member, Peter Russell

Begins

AMANDA Brown (Letters, September 27) asks for one single reason why anyone living in Scotland would not “want to cut from England and rejoin the EU”.

She has surely not heard of the Scottish Government’s own GERS figures that give 10 billion such reasons: each of these one pound sterling in revenue which Scotland receives from the rest of the UK. These support the services we receive here and which she praises so fulsomely. (She should also check the status of prescription charges for her elderly relatives in England: if they are paying them, they should not be, as over-60s are exempted.) Ms Brown needs to know that if she had her way, we would lose that revenue without any clear plan to replace it. Moreover, EU membership would mean massive cuts in public expenditure to meet the Stability and Growth Pact, VAT on items exempted under UK membership (such as children’s clothes and shoes) and fulfilling the other functions of a small member state.

These include supplying workers such as doctors and nurses,   and providing state assets for privatisation by French and German companies. In the absence of other such assets the most likely candidate would be Scottish Water.

Peter A Russell, Glasgow.

Ends

The first half at least is a fairly repetitive message from Mr Russell, which I have corrected on a regular basis, as you will see below.

Begins

If Peter Russell is going to quote GERS, is it too much to expect him to read it first, as in the very first paragraph of the summary he would find it “addresses three questions about Scotland’s public sector finances under the current constitutional arrangements”.

The most relevant words here are of course, “under the current constitutional arrangements”, ie Scotland as a region of the United Kingdom, and thus not an independent country. The foolishness of using GERS as Mr Russell and others often do is that it can only mean holding an assumption that an independent Scotland would continue to tax and spend in exactly the same way as while part of the UK.  Otherwise, the deficit, of which they so triumphantly boast, would be different. However, since the GERS deficit is the outcome of tax decisions, 70% taken in Westminster, just as 40% of decisions about expenditure in or “on behalf of Scotland” are, should we not be asking whose responsibility the claimed deficit is? And asking could we not do better on our own? In any event, what is the point of being independent if nothing changes?

When he turns to the EU, I’m afraid that Mr Russell’s accuracy is little better. He suggests that Scottish Water would have to be offered up to be sold to a French or German company. Citing France is interesting, as clearly, he is unaware that EDF (Électricité de France) is 85% owned by the French government. It’s how France kept its electricity prices low last winter – their management were so instructed by their majority shareholder. Some of the shortfall was no doubt made up from EDF’s earnings in the UK.

Nor is this the only example. For instance, standing behind Abellio, is the Dutch government’s national railway company, Nederlandse Spoorwegen (NS). Would it be grievance mongering to ask why if the French and Dutch can do this, Scotland could not? Thus, Mr Russell’s certainty that Scottish Water would end up with a hedge fund owned outside Scotland or even a foreign government, is about as trustworthy as his forecasts about the scale of a future deficit.

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There are two ways of approaching this. One would be to challenge the veracity of the report, which is always a contentious approach as Unionists will defend it to the nth degree. Thus time I drew attention to the GERS authors’ own exclusion of their report not being written for an independent Scotland, but one that is a region of the UK. That after all is in the first paragraph of the report’s summary. It’s hardly hidden away. Yet many Union supporters – not just Russell are content to ignore this hardly trivial point and simply to read into independence the findings of a report written about Scotland as a UK region and certainly not as an independent country. This though is quite illegitimate, as the report is being used for a purpose it wasn’t written for. A bit like buying a car for its economy and then complaining it doesn’t do off-road.

Perhaps even worse is that this error keeps getting published. I find it hard to believe that it is repeated in ignorance of the reality. It’s not even like it’s a matter of interpretation, other than understanding the words used by the authors. An illustration of Goebbels’ famous aphorism that “Repeat a lie often enough and it becomes the truth”. Or, if you prefer, the “illusion of truth” effect.

There are frequently complaints of ‘passive’ interviews where the interviewee is asked several easy questions which they respond to with a combination of misleading statements, irrelevant claims and even downright lies. Despite all that, this practice has consequences, as, in this case at least the proposition that a GERS report can just be read into the situation an independent Scotland would find itself on independence, has almost become wisdom.

But, its nonsense – even ignoring the exclusion clearly stated by the authors – is vividly revealed by the fact that to achieve this, in Scotland’s first year of independence we would have to repeat the tax rates and spending levels of our last year as a UK region. Even then, circumstances would intervene. For instance in the three years since the pandemic, the deficit, as a percentage of Scottish GDP, has declined from 23% to 9%.

One final stake to the heart of this stupid argument, is two-fold. First that as a non-sovereign entity Scotland cannot have a deficit. But secondly, many of the decisions which underlie the deficit, we don’t really have but fuss over, aren’t taken here. Some 40% of expenditure is on non-devolved matters, and that figure could be an understatement as spending by the Scottish Government as Westminster’s agents in Scotland for (eg) business schemes is attributed to the Scottish Government.

With regard to tax, it is estimated that 70% of tax decisions – mainly Corporation Tax and National Insurance – are determined at Westminster. However, even the main devolved ‘Scottish tax’ (Scottish Rate of Income Tax), while it can vary from the rest of the UK remains to some extent  tethered to the UK, as it can only vary so much. Or in the case of unearned income (interest, dividends etc) not varied at all, as HMRC apparently would find it “too difficult” to impose different rates on unearned income tax.

Russell’s point about the EU was a new one, but once again more interesting for what it doesn’t say than for what it does. That there are plenty of EU governments still running public sector organizations. They may have had to genuflect to the rules put in place by the EU, but they made quite certain that they continued to do so. EDF and Nederlandse Spoorwegen are merely two examples.

Perhaps we should consider why the UK has been so compliant with EU direction, particularly given its antipathy to many things EU? Perhaps the reason is that it suited Westminster to do this, or putting the point more strongly still, that Westminster might well have proceeded in this direction without the EU.

Privatisation in the UK has a history longer than in the EU. In the UK, an early sale was of British Gas – “if you see Sid …. Tell him” (https://www.youtube.com/watch?v=nedVpG-GjkE for 40 seconds of nostalgia), supposedly the foundation of a share-owning democracy, though this was no more than a cruel hoax, as most of the Sids in the video flogged the shares off asap. This was usually at a profit, though this raises the issue of whether the shares were priced too cheaply (almost certainly) and how much sense it makes to sell off national assets at a discount (even to its citizens). Anyhow, relatively quickly ownership of BT, British Gas, the railways, the electricity industry etc, gravitated to where it belonged – hedge funds, investment funds etc, as well as some to foreign governments. For instance, Scottish Power is part of the Iberdrola Group, an international energy company. BT is owned by multiple international institutional entities.     

This neo-liberal approach to key strategic parts of the UK economy, underlying which is a touching faith in the wisdom of “the markets”, is one which is not replicated in other European countries. Without being nationalistic about it, the role of such organisations – telecoms, energy production and supply, transport etc – are crucial to the future prospects of an economy. A well-performing economy doesn’t have unreliable trains, or a telecoms system that is slow to respond, energy costs greater than competitors (even when it has its own energy resources!). To the extent that these are found wanting, economic growth will be more difficult, and just to make it more difficult the UK has flogged these organizations off into international capitalism, allied to a dependence on businesses not just foreign owned but foreign government owned. The scope for political pressure is therefore limited.

If there is something to be learned from Russell’s point it is the dangers of following the UK’s disastrous example of marketizing state assets. This is particularly so given Scotland’s experience with oil and gas. Would an independent Scotland really have stood back from the developing industry and allowing the oil companies to do as they pleased. Or might we have been more likely to follow the Norwegian example of Statoil, their tax regime and essential involvement of their government in the development of each and every field? That lesson is one that should be etched into the mind of an independent Scottish Government.

To the extent that an independent Scotland is the UK writ wee, we have failed, and not least in this regard.