Wednesday, 23 March 2016

The Price of Independence


This analysis uses the 2014-15 Government Expenditure & Revenue Scotland (GERS) report as its primary source.  These figures are used to explain Scotland’s past economic performance (as an integral part of the UK) so as to inform our understanding of the future choices a possible independent Scotland would face.

During the Independence Referendum the Scottish Government proposed March 24th 2016 as “Independence Day”.  This context is highly significant.  Had there been a Yes vote, the GERS figures analysed within this report would have been the “actuals” used for negotiations around EU membership and currency sharing.

The GERS figures show that Scotland’s total net fiscal deficit in 2014-15 was £14.9bn or 9.7% of GDP.  Scotland’s deficit/GDP was bigger than any EU country in 2014.  Only Greece and Ireland (at the peak of the financial crash) and more recently Slovenia have shown worse deficits over the last 14 years.  In 2014-15 the UK as a whole ran a deficit of 4.9%; on a comparable basis Scotland’s deficit was twice as bad.

In the Independence White Paper (“Scotland’s Future: your guide to an independent Scotland”) the Scottish Government asserted: “On independence in 2016, Scotland’s estimated financial position will continue to be healthier than the UK as a whole. We will set out on a firm financial footing” (p.78).  Those who suggested at the time that this was at best an extremely optimistic assertion were accused of “talking Scotland down”.  The actual figures now show that those people were guilty of nothing more than understanding the tenuous nature of the case presented.

The EU’s Stability and Growth Pact Excessive Deficit Procedure (EDP) defines an excessive deficit as 3% of GDP.  It’s inconceivable that a prospective independent Scotland could be negotiating EU membership terms today without having a clear and aggressive deficit reduction programme in place.

Scotland has had an onshore deficit gap to the UK of £8bn – £10bn over the last decade.  This onshore deficit gap has been disguised in the past by North Sea revenues.  In three of the last 16 years these revenues have been sufficient to more than eliminate that gap and make Scotland a net contributor to the UK.  Declining North Sea revenues fully explain why Scotland’s deficit has diverged from the UK’s.  This onshore deficit gap is not just a snapshot view, it’s a long-term structural reality.

The outlook for North Sea revenues is bleak, with the OBR now forecasting negative revenues for the foreseeable future.  Even a significant recovery in the oil price is unlikely to lead to them returning to anything like their historic levels.  An independent Scotland would need to be fiscally sustainable without income from the North Sea, would need to be fiscally sustainable based on its onshore economy alone.

In this context the crude economic case presented in the Scottish Government’s Independence White Paper is, frankly, discredited.  The North Sea oil revenue forecasts used were clearly optimistic at the time, and subsequent claims that “oil is a bonus” simply cannot be reconciled with the harsh economic reality described in the Scottish Government’s own GERS report.

Arguments that the onshore deficit gap between Scotland and the rest of the UK represents evidence of Westminster mismanagement are difficult to substantiate.  As a region of the UK, in absolute terms Scotland’s onshore revenue generation per capita is relatively healthy and Scottish onshore revenues have been growing in line with the UK as a whole.  The deficit gap is primarily a result of higher expenditure per capita in Scotland due to structural issues that would not go away were Scotland to become independent.  It seems perverse to blame “Westminster mismanagement” for allowing Scotland to continue to receive £1,500 higher spend per capita than the rest of the UK.

Had Scotland voted Yes, EU and currency negotiations would place Scotland under pressure to rapidly find in the region of £9bn pa through increased taxes or reduced spend.  That’s equivalent to £1,700 annually for every man woman and child in Scotland.

For context: £9bn pa represents 13% of total Scottish public spending and is greater than Scotland’s entire education & training budget; it’s 17% of total Scottish onshore revenue and 77% of the total amount Scotland raises in income tax.

The White Paper proposed just £0.6bn of net savings, primarily through defence cuts.  These saving were not to be used to reduce the deficit but to pay for childcare reforms, end the bedroom tax and introducing “competitive business taxation”.  Not only is it clear that in fact a newly independent Scotland couldn’t afford these reforms, there would need to be net savings 18 times as large as anything identified in the White Paper.  There can be no reasonable doubt that had Scotland voted Yes we would be required to pile austerity on top of austerity, we would be subject to austerity squared.

Because Scotland voted No it is possible to take a more considered long-term view of how to close this deficit gap; we have time to try and address the deficit gap through economic growth while benefitting from support from the rest of the UK.

That the rest of the UK provides fiscal support to Scotland can be seen as simply the quid pro quo for Scotland’s North Sea tax revenue contributions since 1980.  If we had “started the clock” in 1980 then Scotland would still be in credit as a result of the large contribution made during the oil boom years (and seems likely to remain so for the next 7 years).  Of course starting this calculation in 1980 paints the most favourable picture for Scotland, but it clearly illustrate the benefits of pooling and sharing over time.

To close the deficit gap with the UK – to be in a situation where becoming independent wouldn’t make Scots immediately worse off – would require Scotland to out-grow the rest of the UK by 17%. That’s quite a challenge. If Scotland were to achieve the rates of superior growth that the White Paper suggested as illustrative of the “bonus of being independent” it would take over 90 years.

None of this is to suggest that Scotland couldn’t be an independent country or that raw economics should be the only consideration. But if we’re to be honest about the economic implications, it now seems clear that independence will only happen within our lifetimes if the majority of Scots are willing to vote to become considerably worse off, quite possibly for generations to come.

Read the Full Report Here

The linked pdf above provides full explanations around methodology and sources along with a carefully worded commentary - so please do read it if you are interested in the detail (and before posting ill-informed comments that will lead me to post a reply saying "why don't you just read the full report?").

For those who would rather just surf the data or want quick and easy access to the exhibits without the caveats and methodological explanations, I include them all below.

Please note that the pdf above includes considerably more information than the following HTML, it covers all the tediously predictable "but GERS tells us nothing about an independent Scotland" arguments you'll here from the mouth-breathers on Twitter really should just read the pdf. 

You're not going to are you? OK let me just drop this in here then

It is worth noting that those commentators who suggest that “the GERS figures tells us almost nothing that can be related to the finances of an independent Scotland”  are insulting not only the intelligence of their readers but the also the Scottish Government’s statisticians and the authors of the Independence White paper (which cites GERS figures on no less than 15 occasions and used them as the basis for the economic case presented). To deny the validity of the GERS data would be to deny the source of the data that gave rise to such observations as:

1. How does Scotland’s fiscal position compare with the UK’s and other EU countries’?

The following charts show absolute and % GDP figures for Scotland and the UK

Th next chart shows the difference between Scotland's and the UK's deficit. Above the line Scotland's doing better, below the line we're doing worse (than the UK as a whole including Scotland)

This is a helpful graph for placing some of the independence referendum rhetoric in context. Although the numbers have been restated slightly since, the highlighted area below shows the figures used to support the many “in the last 5 years” [1][2][3][4] claims made by Alex Salmond during independence referendum debates and the (at the time correct) assertion by John Swinney that “Scotland more than pays her way in the UK”. This is worth remembering when some of the more intellectually challenged cybernats suggest that GERS tells us nothing of value.

The chart below place the UK's and Scotland's deficits in an EU context. Note these figures use calendar year and "general government" deficit figures (so as to be consistent with Eurostat EU deficit definitions)

The following chart places Scotland's 2014 deficit (when we still had £1.8bn of oil revenues) in the context of the EU Stability and Growth Pact's 3% "excessive deficit" threshold

It's tedious, but to preempt the knee-jerk reaction of the reality deniers, let me state one more time:
We should be very clear about what this analysis of historical fiscal data can and cannot tell us.
The figures only tell us how an independent Scotland’s finances would have looked if we had already been independent but were still raising taxes and incurring public spending (including reserved expenditure) as we have been as an integral part of the UK. We are looking at what in financial accounting terms would be considered pro-forma accounts.
The figures do not tell us what the future accounts of an independent Scotland would look like. They do however describe the starting point (the “run-rate”) from where we can start to consider the possible impact and fiscal implications of independence.

2. What causes the fiscal gap between Scotland and the rest of the UK?

In this section comparisons are all on a per capita basis, in real terms (inflation adjusted using the UK GDP deflator) and compare Scotland with the rest of the UK (i.e. the UK minus Scotland).

The charts below show Scotland's onshore (i.e. excluding North Sea) revenue generation by year by major category - note the steady year-on-year growth since 09-10

The chart below comparing these figures on a per capita basis with the rest of the UK:

The chart below simply adds up all the lines from the graph above to show that, in aggregate, Scotland’s onshore economic activity (i.e. before factoring in the impact of North Sea oil) consistently generates £300 - £400  per capita less than the rest of the UK.

The chart below shows the actual total oil & gas revenues over our analysis period, as split in GERS using the Scottish Government’s preferred geographic share definition

The following chart shows the implications of this in terms of per capita revenue difference (the grey line). Adding this to the onshore revenue per capita difference (the green line) show Scotland’s total public sector revenue per capita difference to the rest of the UK (the black line).

The following chart shows absolute total Scottish public sector spending in real terms over the last 17 years, broken down into main categories.

The following chart illustrates how this varies by major spending category on a per capita basis vs rUK. Note that because Defence, Debt Interest and Foreign Affairs are allocated on a per capita basis they’re excluded from this chart (as they would simply show zero in every year).

As with the revenue categories, the chart below simply adds up all the lines from the graph above to show that, in aggregate, Scotland receives public spending (including shared UK costs) of around £1,500 per capita more than the rest of the UK. This gap has increased in real terms by £500 per person since 1998-99.

The Net Fiscal Deficit Gap
To understand how these figures create a fiscal gap we simply need to combine the per capita figures we’ve already shown for revenue and spending.

When Scotland’s relatively higher revenue raised exceeds the relatively higher expenditure received (when the black line is above the red line) then Scotland has a lower deficit per capita than the rest of the UK. Simply plotting that gap between the red and blue lines shows us the difference between Scotland’s per capita deficit performance and the rest of the UK.

Given we know the split of the revenue difference between onshore and offshore revenue sources, we can now summarise on one chart the scale and historical trend in both the total deficit gap and the onshore deficit gap.

The onshore deficit gap (the gap between the red and the green lines) is the most important figure to understand here. Whilst the actual deficit gap has been volatile as a result of fluctuations in oil & gas revenues, the onshore deficit gap has been fairly consistent. In the most recent year this gap is £10bn (or £1,900 for every man woman and child in Scotland).

The following chart plots this onshore deficit gap over time and compares it to the figures we would get if we had instead used GDP (excluding oil & gas) and total UK as our comparison basis. The analytical method chosen makes no material difference.

3. What does this mean for the case for Independence?

Reliance on North Sea Oil
The importance of North Sea revenues (oil & gas) to Scotland's performance is clear. The following chart shows the difference between Scotland's historic deficit with and without oil

For comparison and on the same scale, the next chart shows the UK's with and without oil - illustrating how much less exposed the UK economy is to oil revenue fluctuations

The importance of oil & gas to the Scottish economy is perhaps most starkly illustrated if we place a notional independent Scotland without oil & gas revenues in an historical EU context. This is surely compelling evidence of the absurdity of Alex Salmond’s assertion that, within the context of Scotland’s economic performance, oil is merely “a bonus”.

The Scottish Government have produced illustrative figures that go back to 1980  which, although not as robust as the GERS figures, allows us to place oil & gas revenues in a more complete historical context.

[Where the old and new data overlap we see the impact of historical restatements to the GERS figures]

This graph shows us the massive contribution that “Scotland’s Oil” made to the UK economy in the 1980’s. Given that when the black “higher per capita revenue” line is above the red “higher per capita spend” line, Scotland can be judged a net contributor to the UK (and vice-versa) we can work out Scotland’s real terms net contribution since the oil boom began. These numbers are relatively crude, but Scotland’s cumulative net contribution from 1980-81 to 2014-15 on this basis works out at £12,600 per capita (or £67bn).  With Scotland’s run-rate onshore deficit gap being £1,900 per capita, assuming no oil recovery it will take about 7 years before Scotland becomes a net recipient of funds since 1980. Of course 1980 is the starting date that most favours Scotland; were we to start at an earlier date we’d see a different picture.

This is a rather narrow transactional view of Scotland’s relationship with the rest of the UK and based on an arbitrary date that favours Scotland - but this analysis does show that within the context of the last 35 years Scotland can be said to still be “in credit” with the rest of the UK. Some would argue this is all the more reason for Scotland to remain within the UK: Scotland made a massive net contribution to the UK during the 1980’s and the current ongoing fiscal support the rest of the UK offers is simply the quid pro quo for that. It could be said that we’re experiencing pooling and sharing in action. 

Outlook for North Sea Oil
The key point here is that oil & gas tax revenues are a function of a lot more than just the oil price because they are a tax on total production profit . We can illustrate this very simply by plotting the ratio between actual oil & gas revenues and the dollar oil price. If there was a direct correlation between $ oil price and North Sea Tax generated then this would be a horizontal line.  This illustrates why a return to $100 a barrel oil prices would not translate into a return to historical North Sea revenue levels).

The optimism of the White Paper oil and gas revenue scenarios is clear to see when we look at how they compared with contemporaneous OBR forecasts, actuals and more recent OBR forecasts.

At the time of writing the White Paper, the Scottish Government chose scenarios (£6.8bn and 7.9bn) which were about twice as optimistic as the OBR were forecasting at that time. The OBR had always been shown to be optimistic prior to this date, a record which it continues to maintain. The effect of decommissioning costs and tax credits from the carry back of trading losses means that the OBR is now forecasting a negative contribution from the North Sea for the foreseeable future .

It’s clear that oil & gas revenues would not come to an independent Scotland’s rescue any time soon, if ever.

In this context and assuming we’d voted Yes, Scotland would have to find roughly £9bn  a year through some combination of higher onshore revenues or lower public spending (than that allocated to Scotland in GERS). This would be required simply to close the gap with the UK (to avoid independence making Scots poorer) or, within an EU context, to be seen to be addressing the excessive deficit.

For both EU membership negotiations and UK currency sharing arrangements a plan to rapidly reduce the deficit (to close the deficit gap with the UK) would clearly be required. It is simply not credible that in this context an independent Scotland would be able to simply borrow more to fund what would be considered by most observers to be an excessive deficit.  

There are really only three ways this £9bn pa could be achieved;
  1. Reducing public spending (compared to that allocated to Scotland in GERS)
  2. Increasing public revenue through raising tax rates
  3. Increasing public spending through real economic growth

1. Reducing Public Spending
We’ve seen that GERS shows Scotland receiving £68.4bn of public spending in 2014-15, so in overall terms a £9bn saving would represent a 13% real terms spending reduction. To put that figure in context, in the five years from 2009-10 to 2014-15, Scotland has seen real terms spending reduced by just 2.3%.

The White Paper suggested that “savings or increases in revenues” could have generated £0.6bn a year, primarily from a £0.5bn reduction in defence spending (i.e. effectively including “scrapping Trident”). This figure also includes £0.05bn savings related to “contributions to the costs of the House of Commons and the House of Lords”. This money was then to be used to pay for childcare reforms, end the bedroom tax and introducing “competitive business taxation".

If there were other easy wins we can be confident that the SNP would have included them in their outline economic case. That there aren’t is testament to the quality of the GERS cost allocations and gives a lie to the often repeated (but simply wrong) claims that Scotland is unfairly burdened with costs in the GERS figures.

Debt interest is sometimes cited as a possible saving on the basis that Scotland might negotiate to not take on its per capita share of debt. Given that this would be seen by capital markets as an effective debt default and that the “Plan A” for currency was to share Sterling with the UK, this seems a somewhat unlikely scenario. Scotland’s total per capita allocated debt cost in 2014-15 was just £2.8bn, so even if this figure could be wished away, it doesn’t come close to solving the £9bn deficit gap we’ve identified.

Considering the fact that the notoriously optimistic White Paper could only come up with £0.6bn of savings helps us appreciate the scale of this challenge. Scotland’s draft budget for 2015-16  shows just a £0.5bn saving to Fiscal Departmental Expenditure Limits (DEL). £9bn is more than 3 times Scotland’s total annual Public Order & Safety spend, greater than total Education & Training costs, is 80% of Scotland’s total Health costs.

It would be no exaggeration to say that were Scotland to be in a position of having to rapidly tackle its stand-alone deficit – had the Yes campaign prevailed – the level of austerity required would have put existing austerity measures in the shade. This would be austerity on austerity: austerity squared.

2. Increase Public Revenue through raising taxes
Raising revenues through raising tax rates is of course fraught with difficulty, not least because the act of raising tax rates can adversely affect the level of economic activity available to be taxed.

We’ve seen that GERS shows Scotland generated £51.6bn of onshore revenue in 2014-15, so in overall terms generating an additional £9bn would require a 17% real terms increase.

£9bn is 77% of Scotland’s income tax generation, it’s 84% of total VAT raised in Scotland, it’s 4.5 times the total amount raised through council tax.

It seems pretty clear that to have a material impact on Scotland’s deficit, a combination of higher taxes and dramatically reduced public spending would be unavoidable.

3. Increase Public Revenues through real economic growth
In the five years from 2009-10 to 2014-15 Scotland has seen real terms onshore revenue increase by 8%. So even if spending was frozen in real terms, at this rate it would take a decade to deliver the £9bn required from onshore revenue growth alone. This is time that Scotland would be unlikely to be given by the EU or indeed the UK as a currency partner had we voted Yes.

But reducing the deficit through revenue growth while freezing public spending for a decade doesn’t close the gap versus the UK. This would only get us to where the UK is today (a 4.9% deficit) in ten years’ time - by which time of course the UK itself would have grown. Growing in line with the UK doesn’t help close the deficit gap, it doesn’t address the issue of Independence making Scots poorer. To address that issue Scotland needs to deliver superior growth to the rest of the UK.

It’s very hard to find any evidence or indeed any tangible policy ideas (other than reducing Air Passenger Duty, which frankly simply isn’t that significant) that might explain how an independent Scotland could use policy levers to out-perform the UK. In fact the White Paper itself had a go at scaling the likely superior revenue growth that the “bonus of being independent” might deliver;
“Similar countries to Scotland have seen higher levels of economic growth over the past generation. That is because they have the bonus of being independent and are able to make the right choices for their nation and economy. If Scotland had matched the levels of growth of these other independent nations between 1977 and 2007, GDP per head in Scotland would now be 3.8 per cent higher” 
Putting aside the arbitrary nature of the time period chosen and countries used for the illustration, the suggested figure was 3.8% cumulatively over a 30 year period. At that rate it would take over 90 years to close the fiscal gap with the UK through superior GDP growth alone . 

It is worth noting that while Independence would undoubtedly give Scotland the freedom to pursue different economic policies from the UK, there is little evidence (particularly given the decline in North Sea revenues) that the Scottish economy has significantly different needs from the rest of the UK. In this case the pro-independence argument collapses down to little more than a belief that Scottish politicians serving Scottish people would simply make better decisions. 

One doesn’t need to believe that the case for independence is just about the economics to wish for the economic implications to be understood. None of this analysis suggests that Scotland couldn’t be independent, it merely highlights the likely price that we would have to pay. 

What the GERS numbers show us is that the likely price we would have paid for independence had there been a Yes vote would have been of the order of £9bn a year; that’s about £1,700 a year for every man, woman and child in Scotland.


Ken Bell said...

I do wish that people like you would stop being bad winners. The point is that you did win, but you don't seem to realise it. So you keep rehashing arguments from a debate that ended, as far as I am concerned, in September 2014.

I was on the other side in that debate and I voted Yes in the referendum. We lost, and the Smith Commission led to the new Scotland Act that got its Royal Assent yesterday. We have a general election in May to choose a government that will have real powers at its disposal. Maybe not as many powers as some would like, but a damned sight more than we would have had if the vote in 2014 had not been as close as it was. I can live with this, and look to the future, rather than dwell on the past.

It would be nice if the winners in 2014 could do the same.

Jamie Clarkson said...

Thank you, once again, for an excellent analysis of exactly what independence would mean for Scotland. None of the rhetoric, assertions and I dare say bare faced lies of the yes campaign and prominent nationalist blogger.

Today we wake up in the UK, a day like any other, and a day we should be grateful for our position in a strong, stable and prosperous country, one of the safest and most developed in the world. I love Scotland, our landscape is beautiful, our culture unique, (one of many varied regional and national cultures in the UK), but the simple fact of the matter is that we are simply a (mostly) rural region of the U.K., with the attendant higher costs of providing services. Being in the UK allows us to enjoy the same level of provision as other regions, but with the added benefit of wide unspoiled areas of stunning countryside.

Of course in times of financial crisis, followed by austerity, people are bound to feel disenchanted with the current setup, but it is important to look objectively at the facts. Had we voted to leave, the savage irony of people rejecting the UK government's austerity only to end up with cups of a far deeper and more damaging nature would not be lost on those who had seen it coming.

We can only do our best to continue to talk to our family and friends, to help everyone understand just how lucky we are.

Terry said...

Today should be a Public Holiday called UK Day to celebrate our good sense and fortune at not breaking up the most successful an enduring political an economic union in the world.
By The way, why do the Cybernats think calling you a dog food salesman is an insult, it is a useful and valuable trade and contributes to Scottish GDP, unlike most of these keyboard warriors.

Drew said...

Excellent analysis again Kevin.

No campaigners won a hard fought campaign and deserve to not only enjoy that victory but to take electoral advantage of it before May's Scottish elections and during elections for years to come.

As an independence supporter myself it became obvious to me a good year or so before the referendum that the SNP's economic case and position on the currency was flawed.

However I knew a large yes vote was important to deliver much more devolution that Scotland needs because without the threat of the referendum and the SNP, I don't believe the UK Government would have conceded more powers over tax.

In fact without the threat of the SNP through the decades, I don't think we would have the devolved parliament at all.

But your figures should serve as a wake up to all politicians in Scotland, not just the SNP.

Scotland is in dire financial straits in terms of our public finances. We are spending well beyond our means. None of the main parties in Scotland have anything remotely approaching a plan to get greater equilibrium between our revenue and spending.

The complacency is quite worrying. Simply shrugging and saying, 'ach it's fine, the UK will pick up the tab' won't cut it with voters down south for much longer.

Perhaps if the UK overall was making huge surpluses and could afford 'pooling and sharing' it would be okay.

But the reality is, every billion more spent on Scotland's deficit means higher borrowing costs for all UK taxpayers and deeper cuts to services elsewhere in the UK.

I don't fancy having the closure of libraries, community centres or poorer schools and social services in England on my conscience.

If Labour, the Lib Dems and the Tories are serious about tackling the UK's deficit, then they need a plan to address Scotland's public finances.

Anonymous said...

@Ken Bell

Your comment about 'moving on' would only hold traction if the SNP were not planning another drive towards Independence:

For clarity, every time the SNP mention independence, companies rethink their position in Scotland and look to safer waters in rUK. Our economy takes a hit because of this, which ultimately leads to the deficit gap widening.

There are also those who, despite ALL evidence pointing to separation being a disaster, will still vote for independence because they're either too naive or too stupid to understand the implications. These are the people who think cutting £0.6bn from our budget 'austerity', but don't consider cutting £8bn (16 times the amount) to be a problem.

You mention more powers, but we are doing nothing with them. Why?

The answer is clear; the only way the SNP can deviate from Westminster is to make things tougher for the taxpayer. What's being done with these lovely, shiny new tax powers? Nothing. In NS's own words during FMQ, she admits that paying higher taxes in Scotland would drive people away and the notion of implementing such changes would be 'daft'. What she fails to understand is independence would do exactly the same thing, as there's only one realistic way we could close our unmanageable deficit. Would people stay to contribute? Don't be stupid - of course not.

So this is why the report Kevin has produced (along with many others he's compiled) need to be published in the public domain. The Yes campaign attempted to hoodwink an entire country by falsifying data to suit their agenda, crimes (IMHO) which should be answered in a court of law. Separation would have been forever and we the taxpayer (well, those of us who chose to stay) would foot the bill and pass our monumentally stupid decision onto future generations to endure.

Just think: Today would have been our first day as independent. No rUK backing, no EU backing (we'd need to gain membership by unanimous vote. No chance of that happening). We'd be relying on one of the two parties to save us from destruction and there would be those criticising the rUK for not doing so, even when we chose to leave.

One more thing - we didn't 'win'. The fact the referendum (largely due to downright lies in the White Paper) has caused one of the the biggest divisions in Scotland means we all lost.
It's now "us and them".
It's "well, you voted Yes/No so I will treat you differently".
It's "I'm not voting Labour because they sided with the Tories".
It's "I'm voting SNP regardless of how badly they manage Scotland".

We can only start healing until ALL sides concede the vote of 'once in a generation' stands, and we all look to get on with our lives and accept the democratic will of the country.

If you want to help the cause of healing, make sure you circulate the facts of separation and then lobby your local SNP MP/MSP to ask why they are looking to push for another referendum.

Enough is enough.

Ed Wynn said...

Ken Bell: I somewhat agree with your sentiments. Unfortunatley a significant number of the Yes side fail to either accept or recognize publicly that the economic argument is lost. The rhetoric by SNP leadership is a key case in point. I would support Kevin moving on when the FM says Indy ref 2 is off the table because Scotland cannot maintain its peoples standard of living in an iScot scenario.

One point which is also rightly neglected in this analysis is actually the incremental costs of iScot. Government set up and running costs will be very substantial. I shall never forget Salmonds off the cuff remark about having a couple of naval ships and someone in the room with me at the time (who knows about these things) said - that will cost £100sM per year to run.

Nial said...

Ken Bell Said: "I do wish that people like you would stop being bad winners. The point is that you did win, but you don't seem to realise it. So you keep rehashing arguments from a debate that ended, as far as I am concerned, in September 2014."

You might see the debate as over but unfortunately many of your fellow Yes voters don't seem to see it the same way. Sturgeon's "indy2" rhetoric is constantly bubbling along, although she won't commit to it as she knows she'd lose. Salmond has been talking about reviewing the currency issue in the last few days and many zoomers are pressing for another vote.

It's important that we clearly highlight what things would have been light it the vote had bees Yes.

Martin said...

@Ken Bell

How can you come here and post about 'bad winners'?

The ONLY reason, I suspect, that Mr Hague feels the need to post articles like this is because of the SNP and its obvious, continuing campaign to get another referendum ASAP.

You complain of bad winners, all I see in Scotland today are 'terrible losers' who want to usurp the will of the Scottish people by continuing their agenda of grudge, grievance and downright lies in order to keep this independence nonsense going.

The SNP may have the democratic right to push once again for another referendum but they also have a moral duty to at least be honest with the Scottish people about the true cost of it and to stop their attempts at buying independence with lies.

kailyard rules said...

Business for Scotland says it all.

"This report smacks of desperation. It's almost as if the Conservative Party in Scotland is desperate to draw attention away from the double disasters of George Osbourn's unraveling amateur budget and the No campaign's disintegrating project fear claims. This is an amateur blogger report that demonstrates a kindergarten level understanding of economics and contains assumptions and calculations that fall apart with the slightest inspection"

That you ,Kevin, are given so much credence by Unionists says volumes about them.

Ron Sturrock said...

Kevin, I would assume you were commissioned to do this report prior to the March 16 budget, therefore negating the BfS claim of drawing attention away from G. Osborne.

In conjunction with "we are where we are" economic situation I entertain the idea that if "Yes" had won an entirely different economic scenario would have possibly resulted.
A. Salmond is looking at "refurbishing" the currency question and apparently has as good as admitted that a Currency Union would not have ensued, so what would it have been "sterlingisation" or " a new currency"
The forecast oil revenues for the next 5 years is circa minus £1bn per annum. To cover this loss would require a growth in GDP of £2.7bn per annum approx 1.7% of 14/15 GDP.
With the constant reference to Indy Ref2, these and other questions must still be asked.
I wonder if A. Salmond would have called off Independence? of course blaming Westminster.

Wildgoose said...

Alternatively, today should be a public day of mourning at the failure to end the continued "Celtic" parasitism on the English taxpayer.

A successful "political and economic" Union? Apart from a brief period in the 1980s, England has subsidised Scotland ever since the Goschen formula in the 1880s, a century before. The first time Scotland helped subsidise the UK, it was promptly a case of "It's our Oil" and "time to leave". You will note that the earlier discovery of Gas off the English coast didn't cause the English to declare "It's our Gas, and we're leaving...".

For a political Union to be judged a success you have to share a polity. The SNP won 56 out of 59 MPs at the last Westminster Election and are expected to win a majority of the seats in the forthcoming Holyrood election. Shared polity? What shared polity? Where is this successful "Political Union" that required the creation of a devolved Scottish Government in the first place!

I can understand why you would indulge in this kind of wishful thinking, I am even sympathetic - I used to be an (English) Unionist myself after all. But it behoves us to recognise reality for what it is and not what we would wish it to be.

The "Unionist" Labour Party is in favour of Northern Ireland leaving the UK and rejoining the Republic. It instructs people in N.I. to join the nationalist SDLP. Similarly, the "Unionist" Liberal Democrats urge sympathisers in N.I. to join the Alliance Party, (which is neither Unionist nor Nationalist).

The Conservative Party does allow members and does stand for election. At the last Westminster election the lowest vote received by one of the main parties anywhere was a Conservative candidate who across an entire Northern Irish Parliamentary constituency managed to get just 15 votes. And remember that he needed 10 electors to sign his nomination form just to stand.

In Scotland the SNP, the Greens, the Scottish Socialists and a host of smaller parties all favour Independence. That's the mainstream view of native Scots.

Wales still shares a polity with England and I hope this will continue. But the sooner Scotland and Northern Ireland take their anti-English bigotry, leave the UK, and grow up, the better for all of us.

Anonymous said...

It would be nice if the loudest voices on your "side" agreed with you.

Paul Robson said...

@KenBall, have you written to or emailed the failed video game journo running W*nks Over Scotland to tell him the same ?

Thought not.

Nial said...

Wildgoose said..
"But the sooner Scotland and Northern Ireland take their anti-English bigotry, leave the UK, and grow up, the better for all of us."

You see the majority in NI voting for Unionist parties rather than the Conservatives (because it would split the anit-SinnFein vote)as being anti English?

Wise up.

bucksboy said...

Record needs to be set straight and articles such as this provide the indisputable facts.

Unknown said...

The Scotland-UN Committee was active from July 1979 till being wound up in mid 2007, a period of 28 years, with its peak activity leading up to the reconstitution of the Scottish Parliament and Government in 1999. The Committee played a leading and very decisive role in the devolution process, since it was not only the source of some of the more revolutionary ideas on the Scottish political structure, but principally because its incisive international diplomatic campaign was what finally brought about action on the restoration of democratic government in Scotland, and also Wales. In terms of results achieved Scotland-UN is unique in the history of the Scottish home rule movement over the past 300 years. It is not practicable to list the entire range of material covering the 18 years of its main activity, much of which is repetitive, and most of its verbal diplomatic negotiations are unrecorded, but the cross-section presented gives a rounded picture of its activities, ideas, and contribution to the future government of Scotland.


The thing is the leading lights of this committee went on to produce a number of papers on how Scotland could run as an Independent country, For example through total mismanagement of our Fisheries by the EU we lost over 100,000 jobs in our Fishing industry and some 2 billion in annual revenue. Reversing this total gutting of this industry would go some way towards helping us tackle the deficit.

They also recommended that we not join the EU and instead join the EEA, EFTA and the Nordic Council. That would save us 600 million a year, As a result we would also be able to be directly represented on the major UN organisations such as the WTO, etc.

Building back ties with the Commonwealth could also provide extra income for Scotland but to me the main challenge is the SNP who in my opinion have little idea of how to run an Independent Scotland. As it stands they have full control of our NHS, Education and our Justice system yet all three are being poorly managed and freezing the council tax for all those years has just ended up with major job losses and lack of services.

And when it comes to welfare and social security how about looking much closer at the Finland model that they are about to try out? It might seem a crazy idea but it's well worth exploring and could produce significant savings.

I voted for Independence but in the hope we would not have an SNP government for very long and could start to build a new political systems that would run a much improved Scotland. As it is we're looking at more wasted years with a defunct SNP government that doesn't seem to have an original idea in their collective body.

Anonymous said...

"Business for Scotland says it all"
Given that they are best known for Michelle Thompson - yes, they do. They really do.

Anonymous said...

kailyard rules:

Unfortunately for you, quoting Business for Scotland is taken as seriously by us as quoting Wings over Scotland. Thank you for the compliment, by the way - the fact that we Unionists give so much credence to Kevin does say volumes about us. That we like intelligent objective analysis, clearly laid out and well researched.

Have you ever looked into who Business for Scotland are? Dodgy former SNP MP, Michelle Thomson, for one (currently under investigation by police for her own dodgy business dealings). Have a read of one of Kevin's previous blogs to find out more

Anonymous said...

Partly in reply to Unknown@20:27

I’ve heard a number of SNP voters around Glasgow make similar statements regarding a hope/wish that the SNP is just a temporary party, there to get independence, and after that it will split/wither away…

My (non expert) view is that history just isn’t on your side on this. Once a party gets to the size of the SNP – and especially if it then gets its key wish – its going to be a strong position for the indefinite future. There is just too much vested interest within the party. And if things go “well” or even just “OK” it can play the “aren’t we wonderful” card. If things go badly initially it can play the “pull together (around us obviously)” card. Now if it had got independence yesterday it’s quite possible that things would have been so bad economically that maybe it would have disintegrated. But frankly – even as someone with little time for the SNP – I’d not wish that scenario to be the case.

My personal view is that the big weakness of the SNP has always been that it’s looked for Independence on the cheap. I think we can all probably disregard the possibility of an “armed uprising” al la 1916 Dublin in Scotland (in a modern western democracy its also hard to see it succeeding anyway). Its also pretty unlikely that a UDI could work – the political and economic impact of such an approach would be pretty devastating IMO. So the SNP approach of building up a perception that Scotland has been hard done by, coupled with a pretty effective political machine (albeit one that seems to have inherited many of the problems of Labour’s central belt machine it has cannibalised) was probably “sensible”. Their big problem is that it looks like they got to that point 30 or 40 years too late to use oil revenues to subsidise it all.

Meanwhile their “cheapness” regarding the hard decisions needed to secure independence is now a problem. When the Euro was flavour of the month (and the £ a millstone) they correctly saw that as a great escape route on the currency question. I’d be willing to bet that had the UK joined the Euro when Salmond was advocating it then – all other things being equal (and I know that’s a long shot as the 3% deficit would then have become a “problem” – but then it would for the UK as a whole) they would probably have “won” the referendum. When the Euro option effectively disappeared they were unwilling to face the problems that advocating a Scottish £ would have meant so they went with the “cheap” option of “currency union”.

Similarly they currently clearly believe that significant tax rises might be ineffective OR politically difficult. So they side step that hard decision and go for the “cheap” option of hoping they can blame “Westminster” for problems while hoping no one pulls them up on their – effectively – do nothing different approach.

In effect I think they are just hoping that something will turn up and meanwhile their whole effort is to maintain the party and the sense of grievance. To be fair – its both cheap and, potentially, will deliver their goal. Trouble is, if it does deliver the goal then things get difficult… But hey, they will have their place in history.


Anonymous said...

Thanks again Kev, for pointing out what the economically literate understood all along in a clear and concise way. I'm a fan of graphs. We in the North East have more reason that most to be thankful Scotland didn't let adolescent nationalist emotion run away with itself. What vexes me most is when Nats say the white paper was in line with other UK/ independent projections for the oil price (that no one saw this coming) It simply isn't true - the indicators of potential oil price volatility and North Sea structural decline were identified long ago 1) Rapid US shale production - US becoming energy exporter rather than importer - a major policy change in the White house to become energy self reliant 2) Maturing supply chains and new production elsewhere - South East Asia, Africa, Brazil, the Australian continental shelf - there is an awful lot of oil in the ground other than the North Sea 3)Iran/ Saudi - politics in the middle east 4) The slowing of China and reduced consumption 5) Advances in technology that mean deep water drilling is increasingly possibe outwith national sovereign zones (this is the point - not the projected oil price based on current circumstances, but the risk of them being based on false assumptions. Salmond, a supposed oil economist either knew this (and it is therefore near criminal to gamble with other people's lives) or he didn't, in which case he has no right running an administration.

Ken Bell said...

Reading through all the replies to my earlier comment, the consensus seems to be that the SNP has not changed, so you won't. However, the problem with that line is that the SNP will not have another referendum in the 2016 manifesto, and I doubt very much if there will be one in my lifetime - I'm 60 by the way.

The leaders need to keep the ultras happy with smooth talk, but they make damn sure that they never commit themselves to anything. On that basis I reckon that the SNP is on the road to becoming the party of Home Rule, and I would be quite happy with that.

Let's face it, they got a great deal for us with the fiscal framework talks, as the owner of this blog admitted in his February postings.

Dointhebiz 1 said...

Oh Dear!...All these lovely charts and indisputable facts, have suddenly come under closer analysis, could you correct him please Kev?

Anonymous said...

Actually, the BfS piece is really just a bit of name-calling and a half-hearted go at muddying the waters.
Anyone persuaded by this has to be really trying:

BfS? More like F'BS.

Anonymous said...

So what remains as the purpose of the SNP?
The "resource grab" nationalism, or the "fairer society" nationalism?
Sounds like the resource grab, except it isn't about oil anymore, just an extra helping of the wider UK resources.
All I can say is I don't find that very admirable.

Anonymous said...

Closer analysis perhaps, but also amateurish. Obviously incorrect in many parts and (unjustifiably) smug in its tone. I'm not sure that Kevin need spend too much time correcting it; it will only convince those determined to believe it.

Anonymous said...

I dare say KH can answer for himself, but all the same...

The essay you link to doesn't really make one coherent point, but a succession of little pointlets.
I think these can be put in 3 groups:
1. The analysis by KH lacks the nuances of professional or academic economics.
2. When looked at by superior economic expertise, Scotland's economy is not lacking in any way.
3. When looked at by superior economic expertise, Scotland's economy is lacking, but it's Westminster's fault.

My responses:
To 1. Well maybe, but that basic arithmetic is quite stubborn, no?
To 2 and 3. First, I think if you want a sensible discussion, you need to choose between these self-contradictory claims. Secondly, none of them is very substantial, so I think it's my turn to go for a pint.

Grendal said...

Kevin, once again, all your comments and graphs illustrate is that Scotland has been very badly served by Westminster under the union. This is a country which, after years of record high oil prices, has ended up apparently performing worse than any independent state in Europe. Why are we not up there with oil-rich independent Norway, which has invested its oil wealth in its future generations instead of being "a worse economic basket case than Greece?"
Did the Tories actually pay you proper money for this nonsense? "These figures are used to explain Scotland’s past economic performance (as an integral part of the UK) so as to inform our understanding of the future choices a possible independent Scotland would face." If past economic performance informs us of anything about our "future choices" it is that we can't keep on like this.
Onshore revenues since 1998 should have seen steadily increasing figures as our fabulous offshore revenues were invested around the nation to strengthen our economy. But your graphs clearly illustrate that that did not happen and that Scotland was knowingly and systematically robbed of its riches.
Concentrating on high Scottish public spending while ignoring low investment in Scotland also demonstrates your own deliberate attempts to ignore the most obvious issues pertaining to economic performance. Being selective about what you analyse might suit your Tory bosses but ignores the real economic issues surrounding Scottish independence. What you give is a skewed snapshot of how Scotland's economy might have looked on the last day of the United Kingdom. Your conclusion that we are economically unviable is intellectually inept. Your solution that we should therefore change nothing is laughable.

Kevin Hague said...

Grendal - your comment simply demonstrates you didn't bother to read the actual report. bravo.

Kevin Hague said...

Here is my detailed response to "Moh Kohn"'s rather embarrassing attmept at a critique (be warned, you'll find yourself cringing quite a lot, you may even end up feeling sorry for him)

Clowns Left, Jokers Right

Grendal said...

Not sure what I am supposed to cringe at, Kevin.
The fact remains that you introduce your article with these words "These figures are used to explain Scotland’s past economic performance (as an integral part of the UK) so as to inform our understanding of the future choices a possible independent Scotland would face" but the figures you present do nothing of the sort. They simply track the results of Scotland's economic mismanagement from 1998 till 2014-15 and give us some hints about what is and isn't being done during that process.
Now I am no economist but the key point I take from your graphs is that Scotland failed spectacularly to create a healthy economy in the later years of its oil boom (unlike similarly oil-blessed and populated Norway).
Economics, of course, is not about cataloging and illustrating finance using graphs. It is about studying the complex relationships between the production, consumption, and transfer of wealth and, in our case, using these studies to make the best decisions for future development.
The point I'm making is that your illustrations fall far short of this. In fact, they don't even go very far beyond laying-out the GERS figures again.
They certainly don't "....explain Scotland’s past economic performance (as an integral part of the UK) so as to inform our understanding of the future choices a possible independent Scotland would face" otherwise they would point out the obvious, that Scotland's economy was grossly mismanaged between 1998 and 2015, and probably because the government which was mismanaging it was not answerable to the people of Scotland.
If outsiders come in and mess up your life then your first action should be to stop them from continuing to do it in future. This is why this democracy thing has caught on so well in Europe in recent decades and centuries, because people realise that the best way to run their affairs is to run them themselves. By all means enter into mutually agreed co-operative arrangements with others (that tends to be a good thing) but if your household finances are run by that crowd at number 25 and your house is neglected and decrepit, your children are malnourished and the no. 25 lot have drunk away your granny's huge inheritance in the local pub and are now telling you to thank them for all their help, well, quite simply it’s time to man-up and take control of your own finances.
Interminable deficit/GDP graphs prove nothing and you use yours as a smokescreen to hide the truth. The UK is now in debt by about £25,000 for every man, woman and child in the UK and, in spite of OBR graphs and Treasury charts over the last few years predicting future economic prosperity, the UK economy has stubbornly failed to meet even their most modest targets.
Of course, digging ourselves out of a hole which others have dug for us is likely to be hard but that shouldn't stop us from trying.

Kevin Hague said...

Goodness Grendal - there wasn't an option of going back to 1980, we weren't voting for a time machine. You really need to get your head around the future rather than trying to rerun the past - and if we'd voted Yes the future would start from here, with these numbers. Numbers that bear no resemblance to those the Yes campaign and the White Paper were pitching as our starting point.

Your misplaced sense of grievance may make you believe it's still the right thing to do - I'm just suggesting you don't lie to the electorate about the economic reality we would face just so that you can achieve your the goal wit which you have become mindlessly obsessed.

Is that so much to ask?

Grendal said...

I wasn't asking for the Tardis, Kevin, but, as you begin your article by suggesting that past disasters can inform and influence future actions, I simply point out that there is one, big, bedazzling factor in our past actions which you have studiously avoided addressing and that relates to our place in the UK all through the years that disaster was taking place. To recognise that fact has nothing to do with grievance or obsession.
We all now know the White Paper predictions turned out to be inaccurate but, as I illustrated while commenting on one of your previous articles, they were based on the available data at the time. If the White Paper lied to the electorate then so did the OBR, the UK government and OPEC.
Your last three or four articles have just rehashed the previous one using your selective graphs and charts to illustrate your belief (obsession?) that Scotland could not be economically viable as an independent state (though I've noticed you've recently begun to suggest that this is not really your conclusion at all, you tease!). I simply point out that surely Lesson 1 should be, don't let the people who messed-up the last time anywhere near the reins of government in future.
Of course you know this is correct so, like all good scientific economists working for a Party which is trying to push the opposite message, you ignore it completely and try to suggest your figures show something entirely different.
In any situation, success tends to be about making the right decisions and, of course, Scotland's No vote the referendum means that we are still not in a position to make these correct decisions for our own country. That is a situation we can and will change in future.
You end this article "What the GERS numbers show us is that the likely price we would have paid for independence had there been a Yes vote would have been of the order of £9bn a year; that’s about £1,700 a year for every man, woman and child in Scotland" but fail to remind us that the UK government debt stands at about £25,000 for every man woman and child in the UK. Both figures are frightening and illustrate the economic incompetence of those who have run Scotland's and the UK's finances to date. But if we are to stop digging Scotland into a deeper hole then our first action should be to take the spades away from those who got us here. That, Kevin, is what your graphs and charts teach us without the help of a time-machine.

Anonymous said...

The GERS figures show that revenue raised in Scotland is pretty similar to that raised down South (and across the North channel). This should probably be taken as a sign of Scotland having a "fundamentally strong economy" - as pointed out by Nicola Sturgeon. The GERS figures also show that against this background, the Government spends more public money in Scotland than it does down South. More than is raised in revenue.
Yet you seem to be suggesting that it is incompetent or malign of the Government to maintain this difference. Could you explain?

(I love what you did with your last sentence. 'Dumb and dumber' is one of my favourite movies, too)

Kevin Hague said...


You quite clearly haven't understood a word I've written. That must be my fault for using words that were possibly too long or maybe not sugar-coating the message enough for you.

You simply ignore the fact that the White Paper oil scenarios were *double* that the OBR were forecasting - now *that's* selective interpretation of information on your part. You can't have read my blog and not be aware of that fact.

I have *never* said Scotland couldn't be economically viable, I have taken great care to say that we *could* be independent, the only question is what the implications would be for us. Why do you have to make stuff up so that you can complain about it?

What is selective about my graphs? I show every year for which GERS data is consistently available, I cover all costs and all revenues, I compare to UK and rUK, I used per capita and GDP comparisons, I compare consistently across EU. Again: stop making stuff up to complain about.

My analysis is objective - I am looking at the facts - if you read the report I allude to the fact that depending on your perspective you can choose to attribute any positives or negatives in the figures to success or failure of Westminster rule. You are voicing a grievance-laden opinion (which you are welcome too) but you look frankly ridiculous claiming a fact-based report doesn't share your ridiculously skewed world view.

You bore the arse off me with your repetitive and idiotic comments (as if "we" haven't been involved in running the UK for the last few hundred years) so - for the record - if you repeat this drivel I won't post the comment.

Anonymous said...

Grendal, I find your mindset interesting. You seem, incorrectly, to think that the oil was purely Scotland's and should have been for the exclusive use of the Scottish people, even though Scotland is part of the UK. You also seem to think that Scotland is and never has really been part of the UK. Scotland has therefore been cheated by being denied a sovereign wealth fund and having to share its oil with other Britons. Without English incompetence, Scotland might have been as rich as Norway. Scotland has been denied any say in how the economy has been managed or the oil wealth spent. Scotland's economic failings are therefore due entirely to the economic incompetence and mismanagement of the English.

This is a very intellectually limited understanding of a series of complex and interrelated issues. We can all decry British government economic mismanagement, which affects the entire UK (and not just Scotland), although part of that can be blamed on the desire of the British people for having a standard of living, fuelled by spending and debt, that the underlying economy has never been able to support. Even today, courtesy of Barnett, the Scots are being propped up in a way that the English can only envy.

I was living in Scotland when the oil started flowing and given the state of the place there was no question of setting up a wealth fund. I cannot help but suspect that you are too young to actually remember life in the 1970s or early 1980s and the dire state of the economy after the 1973-74 economic crisis. The early impact of globalization meant that older industries such as steel and shipbuilding were in steady decline (despite government help), not helped by militant union activities, constant strikes, excessive pay rises and the low productivity that marks the UK up to today. Anyone who worked in Scotland in the 1970s can remember just how difficult and indolent much of the workforce was. Many people would do as little work as possible and talk openly about getting redundancy windfalls and then being supported by 'the welfare'. The country was un-entrepreneurial, lazy, parochial, hung-over and lacking in aspiration; too many saw the oil as a quick windfall to be spent, by reducing taxes and allowing subsidies for failing shipyards and other rust bucket industries (unlike the Norwegians). In other words it was a 1950s socialist sort of country, where many people thought the state should give them a job in a traditional industry and they should not do too much work for it, not unlike Eastern Europe at that time.

We should accept the argument that Scotland has received back through subsidies its share of the oil and has not been robbed. Norway had far more oil and a smaller population, as well as a workforce both better educated and more willing to accept change. The economic mismanagement to which you allude has been the result of excessive spending and failure to deal with problems like poor education, investment in training, new technologies and productivity measures, an obsession with property ownership, as well as the bottomless demand for health and welfare sending among an ageing population.

There is no evidence that an independent Scotland would do any better and a lot which suggests that the Scottish unwillingness to change and desire to remain wedded to the past would have made things worse. Scots can hardly complain this is all the fault of the English, when we see Scots Prime Ministers and Chancellors of the Exchequer (1997-2010). In fact the boot is on the other foot; the English can reasonably complain much more strongly that they have been dragged down by Scots political and economic mismanagement.

So, why not get off your high horse and stop moaning. It is time you started to ask how an independent Scotland, faced with massive economic start up problems that cannot simply be wished away by your magical thinking, would do things better. As it is, you come over as someone who would not recognise reality if it hit you between the eyes.

Grendal said...

Kevin, I'm sorry I bore you to verge of censorship. I know you never tire of the sycophantic flattery from your followers but threatening not to post my comments by pretending to find them too boring speaks volumes about your intellectual confidence. Grow up. Though, having said that, it must be almost impossible to bore the guy who has blogged, effectively, the same article four times in the last month.
From memory, when the White Paper was being compiled in the second half of 2013, the OBR was predicting £6.7bn in oil revenues for 2013-2014 and it only dropped that estimate to £5bn after the paper was published. The IFS, OPEC and the UK's Department of Energy and Climate Change were predicting even higher figures. This is a fact and your continued denial is just pointless and childish. Also, by the way, at that time the Financial Times was reminding us not to take OBR predictions too literally anyway. "The OBR has itself stressed that forecasting oil revenues is notoriously difficult given the complex interplay of production levels, energy prices and capital investment by companies."
I know you like to stay in your comfort zone so I didn't expect you to address any of the points I raised above. However, if a small nation is over-dependent on oil, as Scotland would have been on the first day of its independence in 2016 (having been denied the necessary investment it has required over its years in the Union) then a crash in oil price will always lead to a huge deficit hike. It took you 4 articles to tell the world that? You ask how your graphs are selective. They are selective because they obsess on deficit. You pretend our recent deficit snap-shots are more significant than they really are but Scotland's economic problems lie, as you may recall me writing before, primarily in Westminster's mismanagement. Of course, this could be explained away by the fact that you were paid by Conservative Central Office but I suspect you just aren't as good an economist as you think you are.
But I think it’s your moral cowardice that I find most distasteful, the sleekit "I have *never* said Scotland couldn't be economically viable" protestation. Attacking the economic case for independence is your raison d'etre but you know to leave yourself a bolt-hole when the difficult challenges inevitably come along.
I have used your figures to point out Westminster's glaringly obvious failings in its handling of the Scottish economy over the years. You don't like this but your analytical pretensions have dug you too far in to dispute my conclusions so you feign boredom.
"My analysis is objective - I am looking at the facts" you bleat. Well, Kevin, you're "facts" point to a failing Union. Thank you for the revelation. Grovelling enough for you to print it?

Kevin Hague said...

Grendal - you are an absolute plank.

You state "from memory" that the OBR only dropped their forecast after the White Paper was published and then say "this is a fact". If you read my blog you'd know fine well you're simply wrong and confusing price with revenue. Why can't you be bothered to look at what the OBR were actually forecasting for revenue at the time? Because you're fact averse, that's why.

It's covered graphically in the report or if you like you can read about here Master of Spin where you will see that the White Paper forecasts were roughly *double* the contemporaneous OBR oil revenue forecasts. STOP MAKING STUFF UP YOU INSUFFERABLE IDIOT.

Repeating "Westminster mismanagement" at every turn is not an argument, it's a knee-jerk grievance-seeking response. FACE REALITY AND STOP SEEKING SOMEONE TO BLAME.

My "recent snap-shots" cover 16 years - are you really such a mindless buffoon that you can't even look at the pretty pictures and see what they tell you? READ STUFF BEFORE COMMENTING ON IT.

As for my "moral cowardice" - well frankly fuck you. I have always been quite clear that independence is possible but we should be honest about the economic implications. That's not "leaving myself a bolt-hole you idiotic ball-bag - it's simply being clear and honest.

As for your assertion that you've used "my" figures "to point out Westminster's glaringly obvious failings" - what fucking planet are you on? Where have you used figures to make any kind of coherent argument? SIMPLY ASSERTING EVERYTHING IS WESTMINSTER'S FAULT IS NOT AN ARGUMENT, IT'S AN OPINION.

It's also an opinion which changes nothing - NOTHING - about the starting place we'd be in if we'd voted Yes and IF YOU ENGAGED YOUR BITTER MIND FOR A NANO-SECOND - you'd realise is the point of the report you are making such an arse of yourself over.

Now - seriously - fuck off.

Anonymous said...

Thank you. Well put and I completely agree on all counts. Unfortunately you are endeavouring to convince someone who wishes only to find the answers they have already decided upon, namely that any economic problems in Scotland *must* be the fault of Westminster's "mismanagement" rather than being systemic or (whisper) in any degree self-inflicted. Rocoham

Anonymous said...

Oh, go on Kevin, why don't you tell us what you really think about Grendal's opinions?

Anonymous said...

Hahaha. For those of a certain vintage - " shall we fuck off, O Lord?"

Grendal said...

And this from The Scotsman 7th December 2013 proving that the OBR WAS predicting £6.7 billion in oil revenues for year 2013-2014 at the time the White Paper was being compiled. "Revised figures, taking into account falling output and oil prices, suggest that North Sea receipts will amount to £5bn this financial year compared with the £6.7bn originally predicted in the Chancellor’s 2013 Budget."
Finding the truth too boring are we, Kevin?

Kevin Hague said...

Now you see Grendal at least you're trying to support your assertion, so I'll respond.

1. The forecast point in question (the *only* forecast in the White Paper) was for the year 2016-17 - so why are you quoting figures for 2013-14?

2. All your illustration shows is the ongoing track record of the OBR being optimistic and down-grading forecasts

3. Here's the OBR report that existed 8 months prior to the White Paper being published . OBR March 2013. If you look at page 110 you will see the total UK oil and gas revenue forecasts that existed at that time - for 2016-17 you'll see the figure was £4.8bn

4. Of course Scotland doesn't get 100% of that figure - over the last decade Scotland's geographic share has ranged from 80 - 90% (it depends on production and profitability mix by area) ... so Scottish revenue forecast for 2016-17 would be £3.8bn to £4.3bn.

5. So how optimistic was the White Paper compared to the OBR forecasts that existed at the time?

£6.8n was the low scenario: that's 57% to 77%, £2.5bn to £3.0bn higher than the OBR. This is the *low* scenario remember - and it's more than £2.5bn higher than the OBR, than the OBR who had a track record of only ever being optimistic.

£7.9bn was the high scenario: that's 83% to 105%, £3.6bn to £4.0bn higher than the OBR

So the White Paper only included scenarios that were 50% to 100% higher than the OBR were forecasting *at the time*

Of course in December (the month after the White Paper was published) the OBR further downgraded their forecasts and well before the actual vote it was clear to any half-awake observer that the oil forecasts in the White Paper were ridiculous and - frankly - that our Scottish Government was being negligent in not informing the electorate of the fact.

As you come to terms with quite how wrong your assertions have been I suggest you re-read the posts you wrote above impugning my integrity and falsely asserting you're mis-remembered and confused version of the numbers as "fact" ... you might consider an apology. Just a thought

Anonymous said...

And to quote from the 2013 article you so happily cite: "On the economics of independence, the CPPR report said: “In effect, Scotland would be giving up the net transfer from the rest of the UK implicit in the existing Barnett arrangement, of around £7bn a year in cash terms, whilst retaining its geographic share of North Sea revenues, now estimated by OBR to be between £3.3bn to £4bn by 2015-16 and projected to fall further.

“Hence, the OBR’s latest forecasts indicate that Scotland could be facing a net fiscal loss from independence.”" Seems pretty clear to me. "Now" oil revenue forecasts have been revised downwards and are projected to drop further.

The problem with your argument Grendal is that during that period the OBR was continuously adjusting its forecasts (downwards) as new trend data became available. Those watching the OBR forecasts revised their own expectations and plans accordingly. All except, that is, for the Scottish Government, which having printed its white paper continued unabashed to promote independence based on its oil revenue figures, even while these were becoming less credible by the month. You deride others for providing "snapshot" economic pictures (wrongly as it happens), yet you appear to believe that the only OBR figures that matter were those that applied when the white paper was being compiled. This despite oil being volatile, and its potential revenue impact on Scotland being proportionately far greater than on the UK as a whole. The Scottish Government had a whole year to be honest with the electorate that the white paper figures were looking increasingly less rosy and conspicuously failed to do so. Dishonest and cowardly, or blind drunk with the rhetoric of independence. To take a nation to the brink of economic catastrophe on such deliberate "trust me, I'm an oil economist" jingoistic arrogance was an act of criminal irresponsibility by the SG. One which you seem still incapable of grasping. Rocoham

Andy Thompson said...

I don't know how you do it Kevin, I honestly don't. In the face of people who regurgitate nonsense they've been fed by the SNP or their propagandists, it's no surprise you sometimes lose the rag. Yet still you keep sticking your head above the parapet.

I and many others are grateful that you carry on exposing the fiction that YeSNP peddled to the Scottish electorate. We can only hope that, eventually, enough will see through the tissue of lies, halftruths and misinformation. Some, like Grendal, look to be completely lost to all reason and evidence.

Unfortunately, I have little confidence that this is going to happen any time soon. It's like our very own radicalisation has taken place (fortunately verbal, not violent) - and this will take some time (and a lot of effort from people like yourself) for this to be effectively countered.

What will it take? The Quebec Effect to really take hold? Even then, the Nats will probably refer to investment levels from 2004/05 or summit.....

theambler said...

Grendal's obsession with the OBR simply reflects their need to blame Westminster institutions for everything. Even if the OBR was incompetent (and there is no reason to think they were given the unpredictability of oil revenue), it was incumbent on the Scottish Government to work that out and use a superior source. They cannot accept that the Scottish Government is responsible for its own predictions.

I am amused they they quote the FT when it says "The OBR has itself stressed that forecasting oil revenues is notoriously difficult given the complex interplay of production levels, energy prices and capital investment by companies." How does this help their case, when the White Paper presented two generous scenarios for oil revenue and did not countenance the possibility of lower revenue?

thedevilcorp said...

Good post.