Murphy on GERS

In the week of the now annual GERS ‘debate’ it’s worth getting some perspective from the much derided ‘experts’.

Richard Murphy has just re-posted an excerpt from his Holyrood Select Committee appearance on GERS last year. It very concisely summarises the issues for anyone to understand.

“The simple fact is the amount that is known about Scottish taxation is very little indeed”.

“Put it bluntly, inside GERS 25 of the 26 income figures are estimates”.

It’s amusing the way political argument changes. Until very recently GERS was considered a cast-iron authoritative reference with which to deride and lampoon Scotland’s economy [the Express hasn’t got the memo]. It’s now considered in a completely different light.

To be a ‘GERS denialist’ was an insult, now to believe in these figures as anything other than abstracted projections makes you look like a propagandist.

This is not to say that Scotland doesn’t or wont face financial or economic challenges, which we clearly do and will do. Saying “everything will be fine when we’re indy” is as dumb as saying “Scotland is a basket case cos these figures we made up says so”.

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  1. Graeme McCormick says:

    And talking of estimates, wouldn’t it be better if the Scottish government and citizens knew at the start of every financial year the minimum amount of public funds for the year ahead at their disposal?

    It can be done by replacing all taxes with an Annual Ground Rent charged per square metre on land and floor space at land type rates.

    Raise public expenditure to £100 billion and the charge for urban land type is £7 per square metre . A Citizens income of £10,000 per annum for everyone can be afforded, and no one or business needs to pay any other taxes.

    1. Crubag says:

      If the average UK house size is 76 square metres, wouldn’t it cost £39,062 per property to raise £100bn?

  2. Alan Weir says:

    What a relief: for an awful moment I thought this was Jim Murphy (remember him?) on “the ‘Gers”.

    Thanks for re-posting Richard Murphy’s most apposite and perhaps understated comments: the GERS figures are more guestimates of data, in some cases guestimates of Scottish share of estimated UK data (the GERS statisticians themselves note the estimates of UK share could be done in different ways)

    But I think there are two things more important than the worries over GERS methodology. 1) THERE IS NO FISCAL DEFICIT AT ALL. Sorry to go Trump-ish on capital letters here, but this just doesn’t get across to the public at all. All the media (including the National) write as if this non-existent deficit is a hard economic fact, like a bank statement telling a district council it’s overdraft has risen an extra £13 billion over the last year. But Scotland doesn’t have, and can’t have, a fiscal deficit for the simple reason that it’s not fiscally autonomous. The ‘notional’ deficit is a ‘counterfactual’, in the same ball park as ‘what would have happened if the Nazis has won WWII’.

    In my view (and I write as an SNP member broadly supportive of the leadership), the SNP have been too timid about pointing this out: a few mentions of ‘notional’ deficit here and there but folk don’t know what that’s about. GERS still plays the same role it always did: to convince Scottish people that we are crap, incapable of paying our own way, parasites living off English largesse. Every time a supporter of Scottish independence is confronted with GERS she or he should point out right away there simply is no fiscal deficit at all, it’s a conjecture as to what a deficit might be, under very specific assumptions. Which leads to my other point:

    2) The conjectured deficit is based on specific, BritNat assumptions. One can accept the GERS methodology and come out with a completely different deficit, or indeed a surplus, if you input in a different fiscal settlement as the basis of the non-existent fiscal autonomy within the UK on which the GERS figures are based. Take away the transfer to rUK for our supposed share of the UK debt and for pensions to existing Scottish pensioners for example, and substitute a transfer in the other direction of just compensation for the huge oil rip-off of the 1980s (during which we paid our debt share multiple times over) and you get a completely different figure. Or build in a transfer to effect the ‘union dividend’ No voters were promised and you get a fiscal deficit the same as the UKs, for that’s what the union dividend promised. Such transfers do not compromise fiscal autonomy any more than EU rebates mean the UK is not fiscally autonomous.

    And there’s another area in which the SNP leadership have been too timid in my view: they should be pushing much more strongly for fiscal autonomy. This, I would suggest, is probably a stage we need to go through en route to independence, one needed in order to convince hesitant Scots that we are no too wee, stupid, feckless and incompetent to run our own financial affairs. I’d go as far to say that agitating for fiscal autonomy, which will require rubbishing the ‘Scots are subsidy junkie’ message which is part and parcel of GERS, is what we should be doing rather than pushing for an early 2nd referendum we are almost certain to lose.

    1. Crubag says:

      The fiscal autonomy route is an interesting one – hard for Westminster to refuse, and if you’re already experiencing the pain (possibly), why not the freedom?

      But it would be a bold politician who moved to end the Barnett formula.

      (I think the deficit also has a kind of political reality at least – it would be a negotiating tool, like access to the DWP databases).

      1. Alan Weir says:

        Aye it would indeed be bold- but best rolled out over a period of years taking on more and more tax and welfare powers as the structures to administer those were created. Thus the Barnett formula would be gradually scaled down in its range of application, via indexed block grant abatements and as it has been to an extent as a result of the (dreadful) Smith commission changes. And of course the fiscal settlement on which it was based would have to be very different from that assumed in GERS otherwise it would indeed be crippling for Scotland.

        It would also raise more sharply than ever the West Lothian question. It would be hard to justify Scottish MPs having voting powers outwith defence, foreign affairs and the like, and that would then give the Tories a straight majority in GB matters.

  3. bringiton says:

    As far as Scottish fiscal autonomy goes,the unionists in Scotland made it clear that it will be over their dead bodies.
    Take away the GERS narrative and their case for the union will disappear.
    GERS is about all they have left to deny our sovereign right to independence so they are not about to let that happen (ever).
    Likewise,the London establishment,for the same reasons and some more,don’t want Scots to see the true picture of their economy and used Dugdale and friends during the Smith commission to ensure that fiscal autonomy was taken off the board.
    Along with Federalism,it will be dangled in front of gullible Scottish voters and immediately withdrawn following the election.
    However,now that more people are informed about the true nature of the GERS figures,it is making it more difficult for HM press to spin them against independence and our government.

  4. Alasdair Angus Macdonald says:

    Thanks to AFAlba and Ann Forbes for providing the links.

    My feeling re GERS has generally been to see them for what they are – a piece of quasi objective mendacity designed to ‘shoot the nationalist fox’ – and to wait until the brouhaha had died down and the media had moved on to something else.

    However, it is clear that they are influential with a significant part of the electorate and, so, to brush them aside leaves open the accusation of ‘hiding from reality’, ‘burying one’s head in the sand’, ‘always blaming the English’, etc.

    So, I think that there is much to be gained by subjecting the data and the methodologies associated with them to increasingly forensic scrutiny as Professor Murphy, CommonWeal and the Cuthberts, for example have been doing. Setting aside the independence argument for the moment, this might result in greater transparency and accountability and provide a better statement for not just Northern Ireland, Scotland and Wales, but also for the various ‘regions’ of England. It could arouse more people in England to a genuinely righteous discontent (as opposed to the hatred fomented by lies about immigration, the EU and ‘welfare’.)

    Since the responsibility for producing GERS lies with the Scottish Government (ditto in Northern Ireland and Wales) then if they have powers to change the accounting approach it would be worthwhile.

    Of course, Colonel Davidson, Ensign Dugdale, Seaman Rennie and the media will tag it as ‘changing the rules, because you aren’t winning.’

  5. GrahamH says:

    ….not forgetting John S Warren’s Bella article from last August on the failings of the Gers methodology: https://bellacaledonia.org.uk/2016/08/24/gers-or-a-wayward-exercise-in-the-capricious/

  6. XenonTheMegablast says:

    I’m sure there is a lot of estimation in GERS, as there is in these sorts of analyses anywhere.

    However during IndyRef – and in the accompanying White Paper, the SG were keen to promote GERS and declared it authoritative. So the idea that it is used purely to denigrate Scotland is nonsense. It has been used by politicians on either side when it suits their cause – and criticised when it doesn’t.

    The question is not ‘are there estimates in GERS’ – but ‘what is the potential level of innaccuracy in the estimates that are in GERS’. If GERS is saying a £13bn notional deficit, then what sort of margin could that be? £12.5bn to £13.5bn? £0bn to £26bn?

    Personally, I’d be surprised if that £13bn difference between expenditure and taxation entirely disappeared….

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