Disclaimer: I’m not an economist, thank God, but I think I know what’s wrong with this stoatally wrong ‘Fact Check’ and can weaselly rebut it. Famous last words. Maybe I should ask Contrary before I post this. Ah, WTF, I’m going for it.
The Ferret piece is here: https://theferret.scot/claim-scotland-pays-out-more-than-gets-back-false/
I’ve read it and it seems to rely on GERS figures, just like the Tories do. These data are almost entirely based on estimates. I know the SG now colludes in the process, but no one really knows how much revenue Scotland would have. See this from Professor Murphy who knows a lot about this:
Note that there are 26 variables. As far as I can tell two (local authority income and, maybe, the estimate of Scottish oil revenues) are definitely calculated in Scotland, and the latter is an estimate, not a fact, which is pretty significant in this case. Another three or four minor ones (car tax, aggregates levy, airport taxes) are likely to be locally accurate. The remainder which is the vast majority) are figures supplied, as I suggested, by Westminster linked organisations, or ‘London’ as I called it. I think I can happily rest my case with regard to that claim. If anyone suggests this data was made in Scotland, they are deluding themselves. Whatever else might appropriately be described as such, this data is not.
Second, is it reliable? Let’s just think the big taxes such as income tax, NIC, VAT and corporation tax. As yet Revenue Scotland are not sure who is tax resident in the country, although they are working on it. This data is not based on any such split. It could be wildly inaccurate, just as Revenue Scotland’s attempts at working out who is tax resident were.
Am I right or meringue?
If that wasn’t enough, here’s the Prof’s full demolition of the GERS figures as the basis for calculation revenue in Scotland:
So, before we see anything let me remind those who will get excited by this (and I am sure some graphs will be coming our way) of just why I think this.
First, this was and to some extent remains a Unionist exercise. The short name says it all, and is not, I am sure coincidence. No one puts expenditure ahead of revenue in the name of an accounting document. It was done here for a reason, and it was to make a point that is still repeated. I will treat it with more respect when it is renamed.
Second, this is very largely UK based data. It is simply an extrapolation of that data to Scotland in most cases. And UK data is prepared for UK purposes. The result is that the inherent reporting bias in it, recently referred to by the Tax Justice Network, for example, is not removed. Large amounts of economic value created in Scotland is not reported there as a result.
Third, GERS is not intended to show how an independent Scotland would perform, and does not. For the sake of the independence debate it is almost irrelevant.
Fourth, GERS reflects a lot of spending Scotland would not incur. It would not have a nuclear deterrent, for example.
Fifth, as I have argued many times, the accounting is biased and theoretically utterly flawed. When accounting it is vital that all estimates are prepared consistently and on the same basis. GERS has not been. Income is estimated on the basis of that arising IN Scotland but spending is estimated on the basis of that arising FOR Scotland. So, only taxes paid in Scotland are included. But expenditure in England (mainly), Wales and Northern Ireland is also charged to Scotland when Scotland is deemed to benefit from it. But the tax paid to generate that expenditure is not taken into account. The system is, then, inherently designed to show a deficit. This is why the Scottish government claim about it is wrong.
Sixth, no one really has a clue about the level of Scottish imports and exports, including services, because as yet the data to check these does not exist. And since this data might significantly impact GERS, and any other debate on the Scottish economy, that leaves a gaping hole in the estimates that nothing can fill.
Seventh, even now Scotland has a tax authority we know it is having difficulty identifying Scottish resident people and their tax liabilities. And that is for easy taxes. On VAT, corporation tax and many other taxes the figures are stabs in the dark, especially as much Scottish added value is recorded elsewhere.
In other words, don’t get too excited by GERS. I will not be. It’s CRAp, however it is polished.
AND, the Ferret has previously displayed a smell of anti-SNP sentiment. See: