GERS Report 2012-13: How much can the figures be relied on?
Saturday, 17 May 2014
Tuesday, 25 March 2014
I woke on the morning of 11th March 2014, and
reached out with a lazy arm and switched on BBC Radio Scotland to hear the
words –
"Later today we will hear how much further Scotland has
fallen into debt".
I sat bolt upright realising that the BBC and the Unionist
controlled right-wing media were going to have a field day attacking Scotland's
drive for Independence because of this year's temporary fall in oil
revenues. Needless to say, my thoughts
proved to be no exaggeration.
The latest Government Expenditure and Revenue Scotland (GERS)
figures showed that North Sea oil revenues had fallen by £4.4 billion. This was seized upon with glee by the ‘No’
campaign to use this figure to try and prove that an Independent Scotland could
not survive on its own, with such right-wing newspapers like the
"Scotsman" (should it be renamed the "Englishman"?) leading
the charge on 12th March with its front page heading
"Scotland's cash from the North Sea drops by £4.4 billion".
But wait a minute. Is
it not the case that Scotland has not received one penny of cash from North Sea
oil revenues for the last 40 years? That
cash has all gone straight into the coffers of the London Exchequer to do with it
whatever it wishes (a total of approximately £300 billion). The GERS figures will not affect a single
person north or south of the border, all that it will result in is that the
London Exchequer will have to borrow extra cash on top of the approximate £115
billion it has to do every year, simply to balance the UK budget.
Below the Scotsman main heading came a further set of news grabbing
headlines.
"Oil and gas shortfall in 2012/23 means Scotland is
£12.1 billion in the red". What it
did not say was that the UK deficit is now £114.8 billion, so I know which side
of the border I would wish to live on, following Independence. At least the newspaper did try and give part
of the reasons for the decline, quote …
“A major downturn in North Sea receipts, which dropped to
£5.6bn in 2012-13 from £10bn the year before, was behind the rising deficit, as
well as a spending push on building
projects to boost Scotland’s economic recovery. [N.B. What it did not say
was that, in contrast, Westminster had slashed its capital spending.] A gas
leak and evacuation at the vast Elgin oil field in the North Sea a year ago,
which led to an 11-month unplanned shutdown, was by far the biggest cause of
the slump in oil and gas production. The closure of the oil field, which
accounted for around 5 per cent of the UK’s total oil and gas production before
the accident last March, knocked an estimated 0.2 percentage points off the UK
economy in 2012. It resumed production earlier this week but is not expected to
reach full capacity until 2015.”
This is exactly the reason why an Independent Scotland will
set up a small Oil Fund, into which a percentage of oil revenues will be paid
every year to cover the lean years.
But what the Scotsman conveniently forgot to tell us, and
what accounts for almost £2 billion of the fall, was the huge investment in new
plant (much of which was given as allowances on taxable earnings). This more efficient and modern equipment is
now ready to meet the challenges ahead.
The total money invested was £14.4 billion, the highest for 30
years. So, far from the ‘No’ campaign’s claim
of doom and gloom that would result from Scottish Independence, this proves
exactly the opposite.
As Douglas Fraser, business and economy editor of BBC
Scotland put it –
"John Swinney welcomed new figures from the OECD club
of developed economies that point to Scotland being "the 14th
wealthiest nation in the world" positioned on a table between Belgium and
Finland, with Luxembourg and Norway atop the table and Ireland at seven. Using the data from 2012-13, this compares
with the UK ranked 18th (between France and Japan) out of 34 countries
included. You can see why that's quite
a useful assessment from a 'Yes' campaigner's point of view".
Douglas Fraser makes some further interesting points.
“The latest year for GERS saw hardly any cut in the UK
government's deficit, though the economy grew a bit, so its share of GDP was
down. It wasn't helped by a reduction in offshore oil and gas receipts from UK
waters from £11.25bn the previous year to £6.6bn.
“In that previous year, 2011-12, the tax Scotland
contributed, including Scottish oil and gas, showed it was more than paying its
way in the UK, and could justify roughly 10% higher spending per head.
“After such a sharp one-year cut in oil and gas revenue, the
tax take per head in Scotland remains higher than the UK. But it's harder to
make the case that Scotland is punching above its weight.
“Much of this is based on estimates. How much is spent per
Scot by the Ministry of Defence in London? How much on the Foreign Office's
services around the world? We can only make informed guesses, or equalise
across the UK.
“How much income tax is paid by Scots for work in Scotland, when
there's nowhere in your tax form that says where you earned it? How much
corporation tax can be attributed by Britain-wide firms to their activities in
Scotland?
“We don't know. The statisticians have to guess. Only on
things like stamp duty or council tax, because these are property based, can
you tell precisely how much tax is raised and where.”
So, in my mind, I cannot but suspect the accuracy of the UK
figures. Earlier Treasury figures to
support the various "scare stories" have not stood up to close
scrutiny. As the current GERS figures
are so close to the date of the Referendum, I cannot but be suspicious of how
the various estimates are arrived at.
Forecasts tell us that oil production will increase by 14%
between 2013 and 2018, and of course, still to be exploited reserves of oil
west of Shetland will, far from seeing production reducing, increase output and
revenues, lengthening the period of productivity at least for the next 50
years, and, as investment in the new equipment shows, the oil companies are all
geared up ready for this.
As a former budget specialist, on analysing the figures over
the last five years, I have found that even during the deepest economic downturn
since the 1930s, Scotland's finances have been healthier than those of the UK
to the tune of £8.3 billion, or nearly £1,650 per person in Scotland. The figures show that, over the past 5 years, Scotland has generated 9.5% of UK taxes but received just 9.3% of UK spending. Whereas Scotland ran a current budget surplus in 2005-06, 2006-07 and 2008-09, the UK last ran a current budget surplus in 2001-02. Furthermore, Scotland has
generated more tax per head than the UK as a whole for every single one of the
last 33 years.
Having worked on the preparation of UK National Budgets for most of my working life, it irks me when I hear the likes of Danny Alexander spouting forth figures condemning Scotland to financial disaster if it votes for Independence. All that a UK politician needs to be is a good actor. Danny Alexander has no life experience of producing these figures, he is simply reading from a script given him by his Tory chums. He is the puppet, they pull the strings. In fact I once met a Chancellor of the Exchequer who could not even work out the PAYE tax for his domestic employees. The only reason why he didn't get someone else to do it was that he was ashamed of how little he was paying them!
Amidst all the claims and counter-claims being thrown around at the moment, I am sure of one thing – if Scotland votes for Independence on the 18th September, those living north of the Border will not lose out.
Only with a ‘Yes’ vote can our finances be used for the benefit of all the people of Scotland.
See also: More blogs by John Jappy
Having worked on the preparation of UK National Budgets for most of my working life, it irks me when I hear the likes of Danny Alexander spouting forth figures condemning Scotland to financial disaster if it votes for Independence. All that a UK politician needs to be is a good actor. Danny Alexander has no life experience of producing these figures, he is simply reading from a script given him by his Tory chums. He is the puppet, they pull the strings. In fact I once met a Chancellor of the Exchequer who could not even work out the PAYE tax for his domestic employees. The only reason why he didn't get someone else to do it was that he was ashamed of how little he was paying them!
Amidst all the claims and counter-claims being thrown around at the moment, I am sure of one thing – if Scotland votes for Independence on the 18th September, those living north of the Border will not lose out.
Only with a ‘Yes’ vote can our finances be used for the benefit of all the people of Scotland.
See also: More blogs by John Jappy
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