Just a bit of fun - no cheats, no repeats
p.s. I didn't create this (I wish I had)
Sir, with reference to today’s letter from Professor Andrew Hughes Hallet “Scottish Oil and the case of the missing 45%”, I’m afraid that the esteemed professor has failed to understand a rather fundamental point. North Sea oil revenues included in the Government Expenditure and Revenue Scotland (GERS) figures to which your editorial referred are generated by taxes on production profits, not revenue.
The only mystery is therefore not why they’ve declined so dramatically, but how a member of the SNP’s Fiscal Commission Working Group (FCWG) could be ignorant of this basic fact.
MD, M8 Group
This is shocking not just because a member of the FCWG should be aware of this basic point, but that he chooses to leap to the erroneous conclusion that our national accounts must be flawed. It's almost as if he's trying to help the SNP by offering voters an excuse to ignore the hard economic facts.
Coming hard on the heels of fellow FCWG member Prof Joseph Stiglitz's admission that "Independent Scots currency union plan 'may have been a mistake', you have to hope that even Yes supporters are starting to realise that Sturgeon's "Council of Economic Advisors" might not be the infallible seers that she would have us believe.
“the GERS figures tells (sic) us almost nothing that can be related to the finances of an independent Scotland” (Gordon MacIntyre-Kemp in the National)
"the total expenditure in GERS says nothing about the total public expenditure resource which a Scottish Government might choose to deploy [..] the GERS revenue figures say relatively little about the tax revenues that could be available to a Scottish government" (The Cuthberts, as quoted by Paul Kavanagh using this meme)To suggest that how our fiscal balance would look based on the taxes we're used to raising and the public spending we're used to receiving tells us "nothing", "almost nothing" or only "relatively little" about an independent Scotland's potential finances is frankly insulting to the intelligence of the reader.
"This GERS follows a major review, which has been carried out by officials after consulting widely with users of GERS, (including economists and statisticians like ourselves) [..]
HM Treasury data, which is the basic source for the expenditure figures in GERS, and which until recently was a black box to all outside the Treasury, has been vetted thoroughly by statisticians in Scotland, and they have shown themselves willing to override the Treasury's figures [..]
In presentational terms, the report is now supported by very much more detail: this not only gives it increased credibility, but also makes it a very much more useful document"A further eight years have passed since then, eight years of ongoing improvement and refinement by an SNP controlled Scottish Government. That's why the SNP now take confident ownership of these figures;
"For many companies, VAT and Corporation tax for the whole of UK operations are paid at company headquarters which is most often in London or the South East of England. It doesn’t count as Scottish revenue, despite the fact it’s a tax paid on sales / profit generated in Scotland."The GERS Detailed Revenue Methodology states very clearly (page 13): “GERS apportions a share of UK corporation tax revenues based on the economic activity undertaken in Scotland and not the location of companies’ headquarters”.
"Put simply, if you buy a packet of Walkers shortbread in Tesco in Edinburgh, the VAT you pay is taken to be generated at Tesco’s head office in Hertfordshire."Apart from being fundamentally wrong about how VAT is allocated in GERS, they're also amusingly wrong about which products incur VAT. Shortbread is zero-rated for VAT purposes (unless it's chocolate coated).
"There are other ways in which Scottish revenues are invisible in GERS. Much of the alcohol duty paid by the whisky industry is not counted as revenue from Scotland. Alcohol produced in the UK which is exported abroad becomes subject to UK alcohol duty at the point of export, and a large proportion of Scotland’s multibillion whisky exports gets shipped out from ports in England. The UK Treasury counts the duty levied on this whisky as income from the tax region in which the port is situated.
Billions of pounds of Scottish revenue is magicked away in the official statistics, and doesn’t count as Scottish revenue. It masquerades as revenue from other parts of the UK, most commonly as revenue from London. In total, the extra revenues which don’t currently figure in the GERS stats, but would accrue to an independent Scottish Treasury, would likely be larger than the entire annual income from the North Sea"That article states: “The original version of this piece appeared on the splendid ‘Wee Ginger Dug’” and the first paragraph appears in precisely the same form in this Business for Scotland document. It also includes completely incorrect assertions about the effect of "head-office" reporting (see 1. above) on reported Scottish revenue figures. This is how myths are spread.
"In GERS, VAT and excise duty estimates for Scotland are based on the consumption approach.
This is appropriate as the burden of the duty is borne by the final consumer rather than the producer. This is considered best practice as within a system of regional fiscal accounts, the VAT liability 'sticks' when the item is purchased by the final consumer. The location of production is of no relevance.
Tobacco and alcohol duties are only collected if the product is consumed in the UK. If the product is exported, the producer receives export relief. For example, while duty is levied on Scotch Whisky when it leaves a bonded warehouse, in reality it is only collected if the whisky is consumed in the UK. Consequently, the ultimate payer of the duty is the UK consumer of the product.
Therefore, GERS estimates duty collected from Scotch Whisky based upon the level of whisky consumption in Scotland, even though Scotch Whisky is only produced in Scotland. Similarly, the estimate of tobacco duty collected in Scotland is based upon the level of consumption of tobacco products in Scotland, even though most tobacco goods are produced outside Scotland"A senior industry insider with decades of experience working at the highest level in the industry offered the following quote for Chokkablog :
"No alcohol duty is levied on Scotch Whisky exported from the UK to the EU or third countries, whether from Scottish ports or from ports elsewhere in the UK. UK alcohol duty (excise duty) is only levied on Scotch Whisky when released from bond for consumption in the UK. Under EU law, the rate of excise duty has to be consistent across the territory of a member state. If Scotland were an independent country, the rate of excise duty on Scotch Whisky would be set by a Scottish Government within the parameters for excise duty on alcoholic drinks set by the European Union. The excise duty revenue accruing to a Scottish exchequer would only be the amount raised on the release from bond of Scotch Whisky for consumption in Scotland."This has also been confirmed by the Scotch Whisky Association, but the myth has gained so much traction that the Scottish Government posted the following “response to GERS query” relating to whisky Export duty:
“Exports, including exports of whisky, do not attract UK duty. Therefore, no 'whisky export duty' revenue is allocated to Scotland in GERS.”
"£2.8bn of whisky revenue counted as English export (because it goes out through English ports)"This takes a bit of unpicking;
“Public sector expenditure is estimated on the basis of spending incurred for the benefit of residents of Scotland. That is, a particular public sector expenditure is apportioned to a region if the benefit of the expenditure is thought to accrue to residents of that region.
This is a different measure from total public expenditure in Scotland. For most expenditure, spending for or in Scotland will be similar. For example, the vast majority of health expenditure by NHS Scotland occurs in Scotland and is for patients resident in Scotland. Therefore, the in and for approaches should yield virtually identical assessments of expenditure. However, for expenditure where the final impact is more widespread, such as defence, an assessment of 'who benefits' depends upon the nature of the benefit being assessed. Where there are differences between the for and in approaches, GERS estimates Scottish expenditure using a set of apportionment methodologies, refined over a number of years following consultation with and feedback from users.
The for approach considers the location of the recipients of services or transfers that government expenditure finances, irrespective of where the expenditure takes place. For example, with respect to defence expenditure, as the service provided is a national 'public good', the for methodology operates on the premise that the entire UK population benefits from the provision of a national defence service. Accordingly, under the for methodology, national defence expenditure is apportioned across the UK on a population basis.”Needless to say, not all of the money spent "for but not in" Scotland would be replaced by money spent "for but in" Scotland were we independent: international services and debt interest being the main obvious examples.
“as discussed in previous editions of GERS, all capital expenditure associated with the Olympics has been assigned to the rest of the UK, primarily London and surrounding area, on the basis that Scotland will not receive a lasting benefit from the infrastructure and regeneration associated with the games. Current expenditure on the Olympics has been assigned across the countries and regions of the UK using the estimated regional distribution of the associated increase in tourism expenditure.”Another widely quoted example is HS2. Because Scotland’s share of the economic value of HS2 is assessed to be 2%, this is the figure used in GERS (page 77).
“Within GERS, the expenditure has been apportioned to Scotland in line with the regional breakdown of the benefits of High Speed 2 reported within The Economic Case for HS2, published by the Department for Transport. This assigns Scotland 2% of the total expenditure.”The same page of the GERS report explains the more general point which would apply to the likes of London's Crossrail project
“As discussed in previous editions of GERS, railways expenditure, alongside expenditure on roads, is apportioned to Scotland on an 'in' basis. This means that expenditure 'in' Scotland on railways is apportioned to Scottish public sector expenditure while, where possible, a zero share is allocated to Scotland for all expenditure on rail across the rest of the UK. This required a number of modifications to the underlying CRA data which affected the expenditure by London and Continental Railways, the Channel Tunnel Rail link, and Network Rail.”Obviously London sewers costs and the like are not allocated to Scotland in GERS as they are clearly examples of "Identifiable expenditure" (that is expenditure that can be clearly allocated to a country or region in terms of having been spent for the benefit of that country or region).
*** ENDS ***it's worth noting that the London sewers aren't a public spend at all, it's all private sector investment with Thames Water customers and some foreign investment paying for it. There's some government underwriting of risk (overruns etc) but no direct money. It really is a stonker of a myth.Also worth noting that we actually *benefit* from Westminster spend on Crossrail and HS2 as they qualify for Barnett consequentials, see Table C16 here for source
If we go to the source document (Export Statistics Scotland 2014) we can see it has nothing to do with GERS figures or GDP calculations and in fact it explicitly excludes North sea oil and gas@MikeRamsay4 @afneil @Hamish_Moir @kevverage HRMC RegionalExportOfGoods2014 UnknownRegion not attributed to ScotGDP? pic.twitter.com/3Y9whTxctA— rockysimson (@r0ckyr0cket) July 26, 2016
@MikeRamsay4 @afneil @Hamish_Moir @kevverage HRMC RegionalExportOfGoods2014 UnknownRegion not attributed to ScotGDP? pic.twitter.com/3Y9whTxctA— rockysimson (@r0ckyr0cket) July 26, 2016
@jegteg @taylordauthor @Maclabhrainn This NorthSea 'Unknown Region' oil wealth is counted but not counted & listed as SCOTLAND wealth(GDP)?— rockysimson (@r0ckyr0cket) July 24, 2016
@RogueCoder250 @LabourOutOfScot "unknown" region... so, that will be Scotland oil & gas then. Nice one.— Tony McAllister (@Tonester_7) July 27, 2016