GERS fig­ures flawed

Campbeltown Courier - - LETTERS -


Brian Gee, Courier let­ters Septem­ber 1, raises again a sub­ject that we have al­ready ‘dis­cussed’ in your col­umns at length, namely the Gov­ern­ment Ex­pen­di­ture and Re­view Scot­land (GERS) data pro­duced to show how well or how badly the Scot­tish economy is per­form­ing.

The GERS fig­ures are used by some com­men­ta­tors to show that Scot­land is un­able to meet all of its own costs and is sub­sidised by the rest of the UK.

I have ar­gued in your col­umns that this is in­cor­rect and that in fact GERS doesn’t and can’t tell us any­thing mean­ing­ful about how the Scot­tish economy per­forms, un­der the Union and far less what it would be like if Scot­land were an in­de­pen­dent coun­try man­ag­ing its own fi­nances.

I pre­vi­ously quoted Pro­fes­sor Richard J Mur­phy in sup­port of my ar­gu­ments for in­stance in Let­ters March 24.

Prof Mur­phy has dis­cov­ered a flaw in the GERS method­ol­ogy that ex­plains why Scot­land seems to be do­ing so badly.

The flaw re­lates to mis­takes in how GERS uses the ac­cru­als ac­count­ing sys­tem.

GERS de­scribes spend­ing in Scot­land, roughly 60 per cent be­ing spend­ing de­volved to the Scot­tish gov­ern­ment.

There is also spend­ing by the UK gov­ern­ment for Scot­land, in­clud­ing de­fence and the cost of the civil ser­vice, but spent else­where in the UK, not in Scot­land it­self.

These costs are recorded

as Scot­tish.

Un­der the ac­cru­als ac­count­ing sys­tem used in GERS, costs and rev­enues should be matched, but the tax paid as a re­sult of spend­ing for Scot­land doesn’t ap­pear to be cred­ited to the Scot­tish tax ac­count. In­stead it’s cred­ited where the ac­tiv­ity takes place.

For ex­am­ple, a share of spend­ing on the civil ser­vice in London is charged to Scot­land in GERS, but the rev­enue is counted against south east Eng­land.

If GERS was to present a true pic­ture of Scot­land’s in­come and spend­ing then not only should the costs be charged to Scot­land but so too should the tax in­come re­sult­ing from them be cred­ited to Scot­land.

At present, the in­come side of GERS is very sub­stan­tially un­der­stated. Given that GERS was set up by a Con­ser­va­tive gov­ern­ment to show that the rest of the UK sub­sidises Scot­land, we now know how this is done — mis­use of ac­cru­als ac­count­ing.

GERS is se­ri­ous- ly flawed. The ‘deficit’ and the ‘£1750 per head sub­sidy’ are the re­sult of faulty ac­count­ing.

We need bet­ter ways of es­tab­lish­ing our true fi­nan­cial sit­u­a­tion, and when we get them we’ll un­doubt­edly dis­cover that we’re ac­tu­ally rather well off and more than able to stand on our own feet as a na­tion. Wil­liam Crossan, Camp­bel­town.

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