Why GERS is a pile of pants

An open letter to Kevin Hague

Dear Kevin,

Kevin Hague said...

yes - unclouded by anger and not troubled with supporting data that is an excellent summary, thank you

31 August 2017 at 07:24

I'm glad you agree that I gave (here) an excellent summary of your post about GERS on your blog. I summarised your post because I wanted to get behind your vituperation and your avalanche of data, and look at the merit of your arguments. I have to say I'm not impressed. Let's take your five main points:-

1. Professor Murphy asks why the Scottish deficit is so much larger than that of the rest of the UK (the 'deficit gap'). You reply that it's because the difference between what Scotland spends on services and what it collects in revenue is larger that that of the rest of the UK. This answer is vapid: it doesn't explain, it just restates the phenomenon. If you asked an employee of yours why they were late, and they said it was because they hadn't arrived at the stated time, you wouldn't think you'd been given an explanation, you'd think you'd been handed a bunch of insolence, and fire them on the spot. Your response to Professor Murphy is like that bunch of insolence.

2. Regarding non-identifiable expenditure, you say that Murphy's claim is false, because non-identifiable expenditure is allocated fairly, by population. But Murphy doesn't claim that it's allocated unfairly: he claims that the revenue it generates is not allocated to Scotland.

3. You say that Murphy is wrong in saying that expenditure figures rely on estimates: expenditure, you say, is all supported by known data. But Murphy doesn't claim that expenditure is estimated: he says that revenue is estimated (which you partly agree with).

4. You say that Murphy needs to consider why the Scottish spend is higher, and claim that there are two causes: (a) Scotland's population is more spread out than in the rest of the UK, and (b) "slightly more" benefit claimants in Scotland suffer from long-term health problems. But the numbers here don't support your case:

• Two-thirds of Scotland's population live in the Central Belt, which has normal density, and only one third is spread out. Scotland's per-person spend is 12percent higher than in rUK, so for the low population density to account for the increase, every single service provided outside the Central Belt would have to cost 36% more than the norm, irrespective of its nature. I'm getting a futon bed delivered to Glasgow this week at a price of £130 + £10 delivery; your scenario says that if I lived in Dunoon, the whole bed would have to cost me £190. That's nonsense.


• You don't say what "slightly more benefit claimants" amounts to, but let's guess (unreasonably, in my view, but let's start there) that the number of benefit claimants who suffer from from long-term ill health amounts to 10percent more of the population than in the rest of the UK. Here your scenario is even more implausible: every single service delivered to those people would have to cost 120% more than the norm (i.e. more than twice as much}. So if my auntie in Dunoon had dementia, she would have to pay £308 for the self-same futon bed as cost me £140.


• Yes, I know I've accounted for the difference twice here, and the truth (if any) must lie somewhere between the two, but if you're going to argue that these two features account for the higher Scottish spend, you're going to have to provide some credible numbers. I put it to you that such numbers don't exist.

5. Your last point is that the yearly revisions of GERS, which present amended figures for earlier years, consistently show that the earlier deficit was in fact higher than was first reported, and this, you say, demonstrates that there can no hidden agenda to overstate the deficit. This doesn't make a lot of sense to me. Your creditor says to you, "Bad news. You owe me thirty grand," but you suspect he's lying, you don't owe him that much. A month later he comes along and says, "I'm sorry, I got the figures wrong. You owe me thirty-one grand," and you conclude from that that he can't have been lying the first time. Really? How exactly does that work? You must let me know some time.

So let's look again at your five-point rebuttal of Murphy. On the first point, that the deficit gap is baffling, you say that it's not baffling, the reason for the deficit gap is that there's a gap in the deficit. On the second point, that non-identifiable revenue does not accrue to Scotland, you say that non-identifiable expenditure is allocated fairly. On the third point, that revenue is estimated, you say that expenditure is not estimated. On the fourth point, that Scottish spend is necessarily higher, there is no credible way in which Scotland's different circumstances could skew spending by the amount you say it does. And your last point, that the yearly GERS revisions show that there is no hidden aim of overstating the deficit, don't show anything of the sort.

If I were feeling generous, I would call your alleged rebuttal of Murphy a pile of pants, and I'm sure you're bright enough to see that. I therefore assume you wrote it in a tearing hurry. However, early intervention of this sort makes the Union side look panicky, as though it knows it's losing the debate and has no more shots in its locker. Indies are already saying that Unionists no longer believe in their own economic case, they just jump up and down and scream when it's challenged, and I'm sure you're bright enough to see that too. It will be interesting to see how you deal with it as the debate unfolds.

Look forward to hearing from you.

Best regards,

Derek