Busting Fraser Whytes meme-busting-deficit-drivel!

Yesterday I was attempting to have an informal, off the cuff discussion with a couple of Unionists on Twitter who, for all intents and purposes were trying desperately to convince me of their line of thought by posting single emoji replies, calling me a foot soldier and a drone.

Sadly for them, there is no amount of name calling or emoji arguments they could present that would ever make me change my mind.

p.s. if you’re reading this blog, the SNP didn’t convince me to want Scottish independence, I will always vote for it no matter what.

Anyway, one of them posted a link to Fraser Whytes Meme-Busting-Deficit Drivel blog, I had a quick read of it and immediately noticed some pretty large gaping holes in it.  At which point said Unionist tweeted to Fraser Whyte saying something like ‘hey Fraser, this guy thinks your blog is rubbish’…something my 8 year old son would say happened to him at school.  Fraserm in earnest said ‘which one’, like a playground bully!

Anyway, I challenged myself, on the back of this childish tweet to analyse it here.  Fraser, you are welcome!

Below, in red are paragraphs taken from Fraser’s blog (his words against the original meme posted below).  My responses follow in black:

Honestly, I cannot believe that I have to respond to such utter nonsense but when MPs (ok, Angus MacNeil) are retweeting and disseminating such complete drivel then I think someone has to point out how wrong they are.  So… this pish:

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Where do you start with this?  I’m not sure there’s a single thing that is accurate in it.

Scotland has no deficit

Pointless sophistry.  Holyrood does have borrowing powers, extended through the Scotland Acts 2012 and 2016, but the overall deficit that is laid out in GERS is the gap between Scotland’s public revenue, i.e. taxation, and Scotland’s spending.  It is a deficit in the same way that health boards have deficits, councils have deficits and… erm… governments have deficits.

Scotland has no deficit is indeed correct.  Scotland did not create the debt, the UK did.  Legally, Scotland does not have to pay any of the debt.  13 Jan 2014 – The Treasury has today made explicit that an independent Scotland would have no legal obligation to service any of the UK government’s debts. So could and should an independent Scotland insist on being debt free?  http://www.bbc.co.uk/news/business-25712350. Looking at Scotland’s national accounts (GERS) you can see that there is an expenditure line labelled “Public Sector Debt Interest” in 2011/12. This amounts to £4.1 billion and begs the question, if Scotland has no legal obligation to UK debt, as confirmed by the Treasury why would we have a deficit with an additional £4.1 billion thrown in for good measure?  Yes, Scotland has borrowing powers, but those powers did not start until 2015 and only allow Scotland to borrow up to approximately £300m.  Scotland did not create the deficit, the UK government did.  The UK government is legally obliged to repay ALL of its debt, as confirmed by the Treasury.  Please also note Fraser that the £4.1 billion is simply the cost of servicing the interest on a much larger debt, there is no actual capital repayment element in that figure.

Looking back at 32 years of historic GERS data:

  • Every year for 32 years (the entire available data) GERS includes a deduction from Scotland’s block grant equivalent to Scotland’s population percentage share of Westminster debt.
  • Over the 32 years, Scotland’s share of UK debt interest amounted to £64.1 billion.
  • However, during that time had Scotland been an independent country with its geographic share of oil revenues established under international law (as would be the case under independence) Scotland’s’ borrowing over 32 years would have been zero, nil, nothing, no pounds sterling at all.

I hope that is clear but for absolute clarity let me put it in other words. Scotland paid £64.1 billion (sixty-four thousand one hundred million pounds) interest on debt that Scotland had no need for, simply because we are not an independent country!   As a result, on average, £2,000 million was ripped out of the heart of Scotland’s economy every year for 32 years, to pay interest on loans that Scotland didn’t take out and didn’t need.

1) We didn’t create it

Erm… yeah we did.  For 2015/16 Scotland raised £53.7bn in revenues including our full geographical share of oil and gas whilst spending £68.6bn.  That leaves a £14.8bn deficit, the gap between what we raised and what we spent.

For the usual desperate excuses on “yeah but what about”, see here:

we shouldn’t be paying for debt. Nonsense – #4 here [LINK]

we pay more for defence than is spent in Scotland – Drivel. Part 1, here [LINK]

we pay for Crossrail and London Underground and London sewers. No we bloody don’t. See below

GERS Denying and Wishful Thinking [LINK]

Reserved and Non-identifiable spending [LINK]

Fraser, with all due respect, I’m not even going to comment on the above points for a number of reasons but mainly because you present proof of your arguments via links to your own blogs.  Secondly, what you have written is amateurish and to be honest not really worth my time after posting a reply to your first section!

2) We’ll get some assets, DEFICIT GONE

You what?  Are you going to sell the Forth Road Bridge?  Every single year?!

Again an amateurish response.  No Fraser, the UK has Embassies, defense equipment etc. all around the globe.  The United Kingdom is made of 4 nations, Scotland and England were the creators of that union and are legally tied together, that means they are legally entitled to the assets.  Now there is an argument to be had that if we were to seek to negotiate a population percentage share of assets, then we would likely have to accept our share of debt.  Business for Scotland does a good run down of it, better laid out than I can really do.  See below…

There are two methods of calculating what assets Scotland is entitled to. By a current population share, Scotland is entitled to 8.4% of UK assets. By this estimation, Scotland would receive £109 billion of UK assets. A second method would be to distribute assets on the basis of Scotland’s tax contribution to those assets since figures were available in 1980/81. Last year Scotland paid in 9.9% of total UK taxation. That would equal £129 billion of assets for an independent Scotland.

These figures are calculated from the UK Whole of Government Accounts. (page 178) £109 billion is a conservative estimate.

The full UK Asset Register – which is based on UK tangible, intangible and fixed assets – has not been fully compiled since 2005. A more detailed reading of recent UK acquisitions has therefore not been given a full breakdown. For instance, between 2000 and 2005 defence acquisitions were £30.3 billion higher than disposals.

Previous Asset Registers were compiled by Westminster in 2001 and 2007. Yet there remains no plans for a 2013 register. This delay appears to have political motivations as without an asset register Scottish voters will lack up to date information on the huge range of assets than an independent Scotland is set to inherit.

Through the Asset Register 2007 and the UK Whole of Government Accounts, which have been studied by Business for Scotland, we can generate outline figures and provide certain details on Scotland’s position.

This information adds up to two important facts. One, Scotland will be in a strong negotiating position after a ‘Yes’ vote. Two, our share of UK assets will place Scotland in a strong economic position. This is significant when establishing a framework of cooperation after a ‘Yes’ vote.

This is the case for a number of reasons.

  • A) It will be in Westminster’s interest to negotiate in good faith when sharing assets and on wider issues such as defence, common trade and common travel cooperation. Scotland’s balance of payments is crucial to the UK economy. Scottish trade and exports are crucial for UK business. Scotland also contains assets of significance for the rUK government. Defence ministershave already stated that Scotland will be entitled to its share of defence assets. The Department for Work and Pensions has already confirmed that state pension provision will be unaffected by independence.
  • B) If Westminster refused to negotiate fairly, it would be a disaster for the rest of the UK. Without a fair deal on UK assets, Scotland can drop UK liabilities. This includes UK national debt. Scotland would then save over £80 billion immediately. The rest of the UK would be far worse off as a result.
  • C) £23 billion of assets were attributed to Scotland in the old UK Asset Register. (half of this is the valuation of the road network) Yet an independent Scotland would inherit a far greater value of assets. This gives Scotland substantial room for negotiation in decided what assets are best for Scotland.
  • D) Scotland does not need all the assets currently stationed in Scotland. For example the Trident nuclear submarines are valued at £2.1 billion. This will strengthen Scotland’s position in negotiation as UK politicians are desperate to move the missiles.
  • E) Scotland does not need certain high cost items located outside Scotland. Scotland’s share of UK defence assets equals £8 billion, as of the UK Asset Register. This will include assets like the UK aircraft carriers (currently without aircraft) constructed to project UK power and influence. Capital spare military items were valued at £5.6 billion in 2007. Apache helicopters were valued at £2 billion. UK guided missiles and bombs were valued at £1.5 billion. Tornado Aircraft, Merlin HMI Helicopters, Trafalgar Submarines and Frigate Type 23s were worth a total of £5.5 billion Scotland will have a defence policy that suits Scotland’s interests. Relinquishing the Scottish share of certain assets will therefore have a substantial and positive impact on Scotland’s financial accounts.
  • F) There are many assets that it will make perfect sense for Scotland to control. These include Dover House in Whitehall, Abercrombie House in East Kilbride, military bases situated in Scotland, Jobcentre buildings in Scotland and Dungavel detention centre. Scotland’s share of UK Embassies and British Council resources will also provide the foundations for international engagement. This, incidentally, is the position that was proposed in the White Paper on page 341.
  • G) Therefore the Scottish Government has proposed that Scotland’s assets are “realised in a combination of ways – through physical assets, cash transfer and continued use of assets through shared service agreements.” Link

3) Scotland contributes to London projects like: 

  • Crossrail, £18bn – no, we don’t. £0 is assigned to Scotland in GERS for Crossrail because we only pay for rail infrastructure in Scotland. [LINK].  Indeed, we benefit from Barnett consequentials for Crossrail so not only do we not contribute the mythical £18 billion dreamt up by the meme, we gain funds to spend in Scotland.

Wrong.  I wonder Fraser, do you actually understand how taxation and general spending works? £5 billion is earmarked for Crossrail 2 in the South-East from central Government. Scotland future cost share of this project is huge. On a head of population basis this would cost Scotland £400 million. i.e. scotland will pay £400million via general taxation…

  • Olympics, £8bn – no, we don’t.  GERS assigns £0 to Scotland for capital spend on the Olympics.

The unfairness of the institutional arrangements surrounding the Barnett formula is an issue that the devolved administrations fairly regularly raise.  Most recently, they did so at their trilateral meeting in Belfast (there’s a news report from the Scotsman here and the Scottish Government’s news release here). Over the last couple of years, the classic example has tended to be funding for the 2012 London Olympics. It’s one of few financial issues where the three devolved governments speak with one voice, and where their interests are the same.

The devolved governments say that they have been unfairly deprived of Barnett consequentials they should get from spending on the 2012 London Olympics, most of which relates to regeneration projects in east London.  They argue, rightly, that if this spending were on any other regeneration project in England, they would get those consequentials.  In Scotland’s case, the figure being used is £165 million, which implies a total ‘lost consequential’ of about £330 million for all three devolved governments (£104 million for Wales and £61 million for Northern Ireland).  Figures cited by Plaid Cymru and Northern Ireland finance officials in evidence to the Lord Barnett Formula Select Committee were rather higher – Plaid claimed a loss to Wales alone of £330 million (taking into account the effect of the Olympics on distributions from the National Lottery as well as the missing Barnett consequential), while Northern Ireland quantified the loss to the Executive’s budget there as over £100 million. The Treasury’s classification of this spending as ‘UK’ rather than ‘English’ had the effect of depriving them of this money. It has become both a cause célèbre, and a rod which the devolved governments use to beat the back of UK Government.  It’s not just a ‘nationalist’ argument, either – I know that the views of devolved Labour politicians were profoundly affected by how the Treasury behaved in this case, and so they have sought a more disciplined approach to how funding is allocated.  The story of how this actually came about doesn’t appear to be widely known, though, and so I’ll tell the story as I’ve pieced it together.

First, it’s worth a reminder about the practical effect of the Barnett formula.  Changes in spending for England trigger consequential payments to the devolved governments, of around 15 per cent if a programme is entirely a ‘comparable’ one.  While a  spending department may not notice it, from a Treasury point of view this means adding in 15 per cent to the ‘English’ cost of extra health, education or environment spending, to cover the cost of the Barnett consequentials as well.  It’s a bit like an auction where bids may be denominated in guineas as well as pounds.

When the financing arrangements for the 2012 Olympics were being discussed at the time of the 2007 Comprehensive Spending Review, the initial idea was that there would be three funding streams for the costs.  One would relate to ‘Team GB’ expenses – training, sports promotion and so on.  A second would cover the direct costs of building the stadiums and other facilities for the event.  The third would cover the costs of the wider regeneration projects.  The first two would be ‘UK’ matters, even though the second only had a direct impact in London, and the devolved administrations were willing to accept that – not least because the consequential payments they might get were not that large.  But the third stream – by far the largest of them – would be avowedly for England only, and so the devolved would receive consequential payments for that.

That was the basis on which the negotiations about the devolution effects of the financing proceeded, until the very last stage.  At that point, the Chief Secretary to the Treasury jibbed, as the amount was clearly too large once the Barnett consequentials were added in.  The Chief Secretary decided that the easiest way to bring the costs under control was to eliminate the Barnett consequentials.  (He may also have had in mind that this would reduce the Treasury’s exposure to any further cost over-runs.)  So he merged the three funding streams into one single stream for the Olympics 2012, and designated that as ‘UK’ spending so it did not trigger consequentials for the Scottish or Welsh Assembly Governments or Northern Ireland Executive. This appears to have been sanctioned by Cabinet (that was Shaun Woodward’s evidence to the Lords Barnett Formula Committee), but the initiative was clearly the Chief Secretary’s.

There are two reasons to tell this story now, apart from the fact that the events should be better known than they are.  One is to show the danger of a decision taken for short-term, instrumental reasons.  The decision to have a single ‘UK’ Olympics funding stream saved the Treasury money, helped control some risks and made administering a complex project a bit easier.  It wasn’t, in that sense, a bad decision.  But it was a bad decision because it illustrated the arbitrary nature of the Treasury’s power over the block grant and formula system, and how it acts as both judge and jury in its own cause.  This power had existed since the present system was put in place, and regularly exercised (often in favour of the devolved administrations – for example, over London Transport in 2000, or Crossrail in 2007).  But this use of it discredited and undermined a system that suited the Treasury very well.  Politically, it has been a gift to the devolved administrations who regularly and repeatedly raise it as an example of what’s wrong with the present arrangements.  The short and medium-term benefits have been hugely outweighed by the medium and longer-term costs.

The other will particularly concern Labour Party members who are considering whom to support in their party’s leadership election.  The Chief Secretary involved was Andy Burnham, now one of the candidates to be party leader.  They’ll have to decide whether this sort of approach is what they want to see in a potential future leader of their party.

https://devolutionmatters.wordpress.com/2010/06/03/the-barnett-formula-and-the-olympics/

  • Refurbishment of London Underground, £16bn – no, we don’t.  As above, we pay for railway expenditure IN Scotland only.

Again, look at the total cost, where the payment comes from (General Taxation) and then divide by population share – it’s not hard Fraser.  We simply wouldn’t pay for these things if we were independent – that is a fact!

  • New airport / 3rd runway – well, no.  First, it hasn’t even started yet so clearly it hasn’t cost anyone any money, nevermind Scotland and so clearly hasn’t had any impact on our near-£15bn deficit.

No comment required.

  • New sewage tunnel, London, £16bn – no, we don’t.  This isn’t even public spend.  It’s funded by the private sector and Thames Water customers.  No government money is being spent on this so obviously no Scottish contribution.

I agree in part with what you say here, but it’s not the whole picture is it? The £4.2bn cost of the Thames Tideway Tunnel project is to be wholly funded by Thames Water customers. This has angered some customers who believe the company has benefited from tax breaks sanctioned by industry regulator Ofwat, when it was allowed to add debt to its balance sheet, reducing its tax payments while at the same time allowing its shareholders to receive dividends – money they feel should have been spent on the Thames Tideway Tunnel. Thames Water has maintained it has done nothing unusual by raising debts to reduce tax bills and is following conventional practice. It says the money raised was used for essential maintenance and upgrade works, although some have asked questions about how Thames Water has paid so little corporation tax at the same time as distributing funds to its shareholders https://en.wikipedia.org/wiki/Thames_Tideway_Scheme

Dont think i need to elaborate on that do i?  Thames Valley pay little in Corporation Tax which has a direct cost imapct to Scotland due to less taxation recieved by the Treasury.  Are you understanding now that things are not as simple as just looking at GERS?

  • HS2, £50bn – this is the one exception where we actually do provide a contribution.  But not the 8.3% suggested.  In GERS, Scotland contributes 2% of the HS2 spend per the economic benefit agreed in the Economic Case for HS2   Further to that, we also benefit from full Barnett consequentials for all HS2 spend, meaning that we are net beneficiaries to almost 4 times the spend we are responsible for.

Won’t elaborate on this point. No real need too.

  • As for the percentages of power devolved, I think this is trying to refer to the revenue raising powers that are devolved.  As if the Scottish Parliament only receives funding commensurate to the devolved taxes.  This is, rather obviously, nonsense.  All of Scotland’s taxes and revenues are attributed in GERS and we spend them all and then some… hence the deficit.

That’s not what is being said Fraser and you know it.  What is being implied in the meme is that Scotland only has 30% of tax raising powers which restricts their ability to change financial course.  This is a no brainer Fraser, think of your own personal circumstances, imagine your salary being handed off to someone who gave you some back and only gave you a very limited ability to raise some extra for yourself.  There are many areas that are still reserved that could benefit Scotland financially with full control i,e, Crucially, what the Scottish government will not be able to do is alter the rates of National Insurance and VAT, which are the two big sources of revenue, along with income tax.

And one of the significant tax powers that is not included in this new batch of changes is Corporation Tax, levied on the profits of companies.

That’s unlike Northern Ireland which is set to be given control over that tax in 2018. Its politicians successfully argued that it needed to remain competitive with its island neighbours in the Republic which has a Corporation Tax rate of 12.5% – that contrasts with the current UK rate of 20%.

Although Holyrood will have more control over income tax, it will not be able to set the personal allowance – basically the starting figure at which people pay tax http://www.bbc.co.uk/news/uk-scotland-scotland-politics-35866776

  • This pathetic meme is nothing more than the latest desperate attempt from the lunatic online fringe to deny the veracity of GERS.  That they need to rely on such painfully obvious falsehoods should tell you all you need to know.  If there really were something wrong, they wouldn’t need to lie.

I think your paragraph above illustrates your mind-set better than I could on here…I shall say nothing much on it!

It’s clear that your research is skimmed and is used mainly as a vent for your anger at independence supporters.  This hasn’t taken me long and already I have provided more links and more factual information on the meme than you have in your article.  I know you will have plenty of rebuttals (all presumably linked to your blog or to GERS) but I care not to discuss it further.

You clearly know how you will vote, I know how I will vote but for the sake of argument, stop calling people derogatory terms and come down from your pedestool.

There is no need to belittle others or yourself!

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One thought on “Busting Fraser Whytes meme-busting-deficit-drivel!

  1. You forgot that £4,000,000,000 of spirit duty is assigned to england on a population basis copmared to £500,000,000 for Scotland. This is despite this being a tax on production and not consumption so 90% is raised from Scotland. Add this to the interest from england’s debt and we’ve just wiped out £9,000,000,000 of fraser whyte’s imaginary deficit.

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