Vital statistics and the Scots economy

Saturday 5 January 2013

THE figures for Government Expenditure and Revenue Scotland (Gers), which once seemed fairly arcane, will become one of the central battlegrounds in the debate about independence.

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The SNP claims there is an economic as well as a political case for independence. Specifically, it asserts that Scots would be individually £500 better off from an independence dividend from the £2.7 billion surplus Scotland contributes to the UK Treasury.

The Treasury has now run its own calculations based on the Gers figures and concludes that, while the £500 rebate would have been the case in 2010/11, on average over the 12 years since devolution, Scots would have been £1 worse off. Taking every year since 1999 and assuming a geographical share of North Sea oil and gas, Scotland's fiscal balance has averaged minus 3.8%. Without oil and gas revenues, this increases to minus 10.9%, according to the Treasury. SNP Finance Secretary, John Swinney has made much of the latest available Gers figures, which show Scotland generated 9.4% of UK tax with 8.4% of the population – the equivalent of £1000 extra for every man, woman and child. In light of the Treasury calculations over the 12 years of devolution, his assertion that Scotland's fiscal position is in a far stronger position than that of the UK "year after year" is clearly open to question. The essential problem with statistics is that they provide only a snapshot. By including some years but not all, Mr Swinney can justify his claim. However, in eight of the 12 years since devolution, a separate Scottish economy would have had a fiscal deficit. Generally, the more evidence that is taken into account, the more reliable the conclusion should be. The exception to this rule of thumb is when one element is expected to change significantly. In the case of the Scottish economy, the volatile factor is North Sea oil and gas revenues. The Office of Budget Responsibility (OBR) has forecast that, by 2017-18 , oil revenues would be 50% lower than what had been expected at the time of the 2011 Budget. However, industry analysts are currently forecasting sufficient stability to maintain the present high levels of investment, suggesting that only exceptional events would cause a sharp downturn. Nevertheless, revenues will decline over the medium term and much of the SNP's policy depends on oil tax revenues generating £1 billion a year.It is the nature of political dispute that different interpretations will be put upon the available evidence. Voters might be exasperated by conflicting claims. The more independent and unaligned the available information is, the better it will be for those who will decide Scotland's future in or outside the UK.If Scots are to make their decision with confidence, they must be able to rely on the neutrality of the facts and figures on which all assertions are based.

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Vital statistics and the Scots economy

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