The soon to be Visiting Professor tells us that the GERS numbers about the Scottish economy simply are not true. And then dances around with his fingers in his ears shouting “La, La, La”.
The reason is:
I’ll be candid: that makes not one iota of sense. For the record this is the proportion of population of the UK as a whole living in Scotland according to official estimates. What GERS is asking us to believe is that with 8.2% of the UK population Scotland created between 54% and 60% of the UK deficit last year, depending on the basis used.
Hmm, well, I tend to think that the number is entirely believable myself. The deficit is the sum of two very large numbers – spending and taxation. The deficit currently is a pretty small number as a result of that sum too. That some significant portion of that small sum is attributable to one constituent part of the Kingdom? Well, why not?
After all, we do know that Scotland is poorer than the UK as a whole. We also know that expenditure per capita in Scotland is higher than it is in the UK as a whole:
Lower tax revenue from poorer people in a poorer place – tax revenue is rather geared to marginal income – and higher spending on poorer people. Yes, OK, seems likely that Scotland disproportionately contributes to that deficit. There’s about £8.5 billion there in just that higher spending.
And my answer is very simple: no it did not. How do I know that? Because Scotland would not have chosen to spend some of the cost charged to it by the UK government.
That doesn’t actually work as an excuse. I wouldn’t contribute to the paying of the Senior Lecturer’s wages by choice but if I don’t pay my taxes as demanded I still get jugged. Equally, an independent Britain wouldn’t spend cash on Polish motorways but we’re abjured from complaining about EU expenditure, aren’t we?
Then this is barking at the Moon:
But let’s still be clear what GERS is about. Its aim, as is the aim of almost all UK government-produced data, remains to prove that a financial services elite produce most of the value in the UK and that as such the interest of those with wealth, based in the City of London and largely living in the south-east of England, must have priority in all matters, including tax, fiscal policy, regulation and more besides. The rest of the country must behave as supplicants to ask for their mercy and goodwill for the handouts that they are offered. And GERS in this form really suits their purposes very well.
No one does say that financial services – let alone any elite – produces most of the value in the economy. This is something easily testable by anyone with the slightest clue about economics. Like, say, a Professor of International Political Economy:
In 2018, the financial services sector contributed £132 billion to the UK economy, 6.9% of total economic output. The sector was largest in London, where 49% of the sector’s output was generated.
Total economic output here is GDP, that is also a synonym for value added.
No, GDP is not turnover, it’s not the amount of money sloshing around, it is value added. Financial services produces some 7% of the UK’s value added. That international stuff concentrated in The City some half of that, or the 3.5 to 4% that people like Willem Buiter estimate independently.
That expansion of the universities, leading to such Senior Lecturers at Islington Technical College, was such a good idea, wasn’t it?