GERS figures flawed
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
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.