We Need To Talk About: GERS (2017-18 Edition)

“Facts are stubborn things, but statistics are pliable.” – Mark Twain

There’s no day that’s guaranteed to set the heather alight amongst Scottish political social media sects like the release day of the annual Government Expenditure and Revenue Scotland report – also known as GERS.

GERS

I want to make one thing clear up front. No serious commentator now suggests that GERS can be used as is as a projection of the finances of an independent Scotland. My 2016 paper “Beyond GERS” shows some of the changes that would need to be made for this to be the case. But as a set of accounts for Scotland, the region of the UK, I’m content to use GERS as it is. Maybe improvements can and should still be made, but this is true for all statistical publications and the team behind the report do the best they can within their remit.

So what does this year’s publication tell us about Scotland, the region?

It shows a deeply divided, deeply unequal UK that is failing to serve all of its people.

Scotland’s notional deficit, though smaller than previous years, is much higher than the UK’s and there’s a very strong case to be made that says that this is due not to the poor performance of the devolved government as some would claim but due to the increasing concentration of economic activity in London and the South East. The UK is, by a vast margin, the most regionally unequal country in the EU.

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Evidence for this has been shown directly in recent reports which estimate “GERS-like” statistics for each of the UK regions and show that only London and the SE are “surplus regions” of the UK. All other regions are in deficit – some much more deeply than Scotland is.

We also see a concentration of people towards that economic activity. Whilst Scotland’s population is growing, it is growing a lot more slowly than the UK as a whole. Scotland’s “share” of population is declining. This has a significant impact on revenue and expenditure lines which are allocated to Scotland based on that percentage share.

Scotland's population as a percentage of the UK, dropping steadily from 8.30% in 2013-14 to 8.21% in 2017-18.

To show the impact of economic inequality using GERS, we can look at the notional per capita share of tax revenue in Scotland compared to the UK. Scotland’s 8.2% of the UK’s population produces, for instance, 9.2% of the UK’s non-domestic rates and 9.7% of the UK’s alcohol duties but Scotland only brings in 6.9% of the UK’s income tax, 7.0% of corporation tax and 5.9% of the UK’s inheritance tax. High income and wealth is concentrated elsewhere. Interestingly, Scotland contributes about 8.1% of the UK’s VAT which suggests that the very rich might have a lot of wealth and income, but they’re not spending it at a significantly higher rate than those of us in the “real” economy. There’s a lesson in there.

To show the impact of all of this, we could recalculate Scotland’s revenue “as-if” each tax brought in a population share of the whole of the UK. If we do this, we find that Scotland’s accounts bring in £2.8 billion less than would be expected if the UK’s economic activity was equally spread – this figure has risen sharply in the past few years.

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Some will claim that this is a good thing. That this is “pooling and sharing” in action. But, again, the UK is the least equal country in the EU and that spread is growing. It is not a healthy country that “pools” all of its economy into its capital (along with the investment and infrastructure spending that encourages even more pooling) and then “shares” handouts to the regions left without that investment. It’s an outright poisonous political culture that tells those regions that they should be happy with their handouts.

The whole obsession with GERS and deficits is a problem in itself. The goal of “Austerity” in the UK has transferred billions of pounds of spending from the public sector onto the shoulders of the private sector. Where the government used to provide services for you, now you need to pay for them. This may mean putting the bills on your credit card. In effect, a public sector deficit is YOUR surplus.

With this in mind, it’s no wonder that economic growth is flat across the UK. Businesses can’t invest, the government won’t and the public barely have enough money to pay their rent, their gas bills, childcare and the cost of their commute – never mind go to the shops for anything but the bare essentials.

Scotland deserves a healthier debate about finances and fiscal policy. Common Weal will be publishing a paper this week talking about precisely this. Instead of focusing on GDP and “growth” – which cannot be “sustainable” on a finite planet – we want to focus instead on the metrics that actually matter to the people of Scotland. Scotland should be measuring its environmental impact, it should be measuring levels of inequality and it should be measuring the wellbeing of the people of Scotland. It doesn’t matter how fast our economy is growing if the wealth is being captured by the already wealthy or is shipped overseas as fast as its earned. But we won’t get there by obsessing annually about GERS.

It’s time to grow beyond it.

Versions of this blog post appeared in The National and in CommonSpace.

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6 thoughts on “We Need To Talk About: GERS (2017-18 Edition)

  1. I would point out that £billions of the Barnett block grant is wasted on the bloated budget of an incompetent police state that takes political prisoners, crushing us Scots’ ability to govern ourselves democratically and competently.

    Barnett consequential cash splashed on the UK’s fascist police state in Scotland is of no “benefit” to the Scots whatsoever, but in fact ruins our economy, locking up or otherwise disabling the most productive of Scots.

    The UK is splashing its cash in Scotland precisely to keep us Scots down, manipulating UK puppets like the Sturgeon government to allow the police and the courts to try to shut up those Scots like me who would lead Scotland to independence, economic growth and prosperity.

    So “thanks” for bloated police state budget BUT NO THANKS!

    As for this years GERS figures, these are not merely “some” improvement, but MORE THAN SUFFICIENT improvement to represent a SUSTAINABLE DEFICIT of 7.9% of Scottish GDP.

    I REFUTE the fiscal conservative claim of the BBC’s “Business/Economy editor Scotland” Douglas Fraser that a 7.9% notional deficit would have to be “halved” to be sustainable.

    Actually, the UK government borrowing was sustained for 5 years at an average 8% of GDP from 2008.

    So I’m relaxed about a 7.9% GDP deficit but ANGRY that this deficit is not being managed by the Scottish government, but mostly on our behalf by the UK.

    We Scots should DEMAND a NEW DEAL Fiscal Framework Agreement for the Scottish government granting new powers to borrow interest-free from the Bank of England up to 8% of Scottish GDP, every year.

    ELSE we should set up a new Scottish currency and central bank, beginning now.

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  2. Tweet – BBC News misreports the “Scottish deficit”.

    video/1

    Think of the opportunity – IF ONLY the Scottish government WERE allowed to borrow 8% of GDP every year from the Bank of England which WOULD allow the Scottish government to spend £13.5 billion more every year than it raised in tax.

    Now THAT would be a GOOD NEW DEAL which would serve Scots well in future –
    * EITHER as a Fiscal Framework Agreement for devolution within the union
    * OR as a currency union agreement for an independent Scotland to continue using the Pound Sterling.

    Like Richard Murphy, like Common Weal, like so many others in the pro-independence movement, I favour establishing an independent Scottish currency and central bank. I’m more impatient than most, arguing that the Scottish government should press ahead now, to set up and to begin use a Scottish currency in parallel with the Pound Sterling.

    So I am not holding my breath, not waiting for a reasonable UK which had finally overcome its own fiscal conservatives finally to offer Scotland a good new deal fiscal framework or a good currency union in the event of independence.

    Rather I want to seize the opportunity offered by this BBC error and apology to explain that the difference between
    * the UK Tory governance of the Pound Sterling and Scotland’s fiscal framework which imposes austerity on Scots and
    * a possible good new deal British governance of the Pound Sterling and Scotland’s fiscal framework or currency union which Scots could grow our economy strongly and prosper with
    – is easy to understand, easy to describe and doesn’t require any detailed knowledge of economics to be part of the political debate.

    So if the UK, England, the unionists ever do want to do a deal with Scotland to save the Pound Sterling as a shared currency, then we pro-indy people ought to discuss and have in mind appropriate terms for such a deal, ready to be tabled, if ever such serious negotiations were to be entered into, perhaps with a new UK government, who knows?

    So what should be Scotland’s terms to consider keeping the Pound Sterling?

    I advise pressing ahead with a Scottish currency but on the other hand, if 8% GDP borrowing powers for the Scottish government were ever on offer then I could also happily consider the option of agreeing to keep the Pound Sterling and would invite my fellow pro-independence colleagues likewise to keep an open mind on this question.

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  3. At last, a graphic which illustrates the scientific truth about the GERS figures.

    How the royalist, fascist police state wrecks Scotland’s knowledge economy.
    For every £1 the Scottish government spends on science and technology, they spend nearly £6 on police, prosecutors, courts and prisons, to spy on scientists, to assault scientists, to torture scientists using rigid handcuffs, to take scientists political prisoners, to seize scientists’ technology, to fit scientists up on false charges, to obstruct scientists from doing our duty to humanity (which is a disservice to and a crime against humanity) and otherwise to abuse scientists.

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  4. Economics 101.

    Excluding the government, the rest of the country saves more than it borrows. Those net savings threaten a reduction in the money supply and a recession.

    To avoid recession the government must re-inflate the money supply and to do so it has two possible methods,

    * one responsible,
    * one irresponsibly funding the banksters’ (not “bankers” but BANKSTERS – members of the banking industry seen as profiteering or dishonest) high life of luxury and debauchery.

    (1) the responsible – government borrowing from its own central bank to fund a fiscal deficit, spending more than is raised in tax

    (2) the irresponsible – loose monetary policy of the Bank of England – very low interest rates, easy loans if you know the right people, no need to turn a profit with a successful business, just having the right connections to the bankers is all that you need to get that big loan, a membership of the Tory party helps a lot – and quantitative easing – blatant giving away of £100s of billions by the Bank of England, buying “assets” or IOUs from the best (Tory bankster) friends of the Governor of the Bank of England.

    And that’s how the Tory banksters steal the people’s money.

    Any budget surplus simply adds to the cash that the Bank of England can give away to the banksters.

    The lower the borrowing, the greater the surplus, the greater the cuts, the higher the taxes, the more intense the austerity, the more the people’s money is robbed by the government for and on behalf of the banksters.

    And it is daylight robbery, in front of the noses of the people, with the full connivance of their (Tory) elected representatives.

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