Wednesday, 24 October 2012

Too much detail?


Tom Gordon

In the wake of the SNP EU row, it's worth going back to the original texts and transcripts.

As every anorak now knows, Alex Salmond was interviewed in March by Andrew Neil about Scotland and EU membership.

Neil asked: Have you sought advice from your own Scottish law officers in this matter?

To which Salmond replied: We have, yes, in terms of the debate...

Bear in mind that law officers in this context has a very specific and limited meaning - it refers only to the Lord Advocate and his deputy, the Solicitor General.

After Nicola Sturgeon revealed there was no legal advice and the law officers hadn't been asked, Mr Salmond came to the chamber to explain what he'd meant in the Neil interview.

He said he had been referring to documents in more general terms, but stressed they were "underpinned" by legal advice from the law officers.

This is from the official report:

"As the full transcript of that interview makes very clear, I was talking about the issue of Scotland’s continued European Union membership in terms of general debate and in terms of many eminent legal opinions that were offered.

I was also—as the interview makes clear—speaking in terms of the various Scottish Government documents that contain reference to an independent Scotland’s membership of the European Union. Those publications are, “Choosing Scotland’s Future”, which was published in August 2007, at page 24; “Your Scotland, Your Voice”, which was published in November 2009, at page 107; and “Your Scotland, Your Referendum”, which was published in January this year, at page 4. All those documents are underpinned by legal advice from our law officers: they have to be. That is the reality." [my emphasis]

But as the 2011 Ministerial Code makes clear, it is actually rather unusual for the law officers to get involved in the fine print of government publications. Usually, it's the Scottish Government's Legal Directorate.
Moreover, the responsibility of the law officers is to advise on the law of Scotland, not EU law.

Here's what the code says:

Maybe the passages Salmond refers to were particularly important?

Here they are:

Choosing Scotland's Future
 Your Scotland, Your Voice

Your Scotland, Your Referendum

Do the law officers, who also have the Crown Office and Procurator Fiscal Service to oversee in their spare time, really get dragged into proofreading such documents?

They must be very diligent.

If not, Mr Salmond's gloss on events doesn't quite add up.

Tuesday, 16 October 2012

Deficit Reduction

16 October 2012

When is a deficit a surplus? When it's a "relative surplus" of course.

In the wake of the Edinburgh Agreement yesterday, there's been much #indyref chatter about Scotland's relative fiscal strength based on the annual GERS figures.
Some say there's a deficit, some say a surplus.
The answer is both, sort of.

Alex Salmond frequently quotes Scotland's 9.6% contribution to the UK tax take (including North Sea revenues), compared to the 9.3% of UK spending that goes to Scotland.
For example, on the BBC last month he said: "We contribute 9.6% of the UK's taxation with 9.3% of the spending and just over 8% of the population - that is a relative surplus of £2.7bn in 2010/11, but £500 a head for every man, woman and child in the country."

Sounds healthy, right?
But look again at the absolute figures.
That 9.6% of taxes raised £53.1 billion in 2010/11, according to GERS.
But the 9.3% of UK public expenditure going to Scotland was a far higher sum, £63.8bn.
In other words, Scotland had a deficit of £10.7bn last year, even accounting for a geographic share of North Sea revenue.

Yes, 9.6% is bigger than 9.3%, but it's 9.6% of a different, and smaller, number than the 9.3% refers to.
The 9.6% refers to UK income and the 9.3% to UK expenditure, and as we all know, the UK's income is smaller than its expenditure and as a result it has a large deficit.
Hence Salmond's careful use of the phrase "relative surplus".

Scotland isn't running an absolute surplus at all - it was £10.7bn in the red last year - it's just that the deficit isn't as bad as the UK's.
According to GERS, the Scottish deficit was 7.4% of GDP in 2010/11 compared to 9.2% of GDP for the UK.
And here it is in black and white on the Scottish Government's own website

Thursday, 4 October 2012

The Sterling Twilight Zone

Something is afoot with Alex Salmond's plans for keeping the pound.
In January, the First Minister couldn't have been clearer:
Talking to the Economist about how an independent Scotland could form a "sterling zone" with the rest of the UK, he said: "I'm in favour of a stability pact".
In other words, an agreed set of rules for Scotland's spending, taxing and borrowing which would ensure fiscal discipline and ease fears of a rogue Scottish national debt undermining the currency. (See Euro for details)
In March, Mr Salmond expanded on his theme in a BBC interview with Andrew Neil.
"There would have to be a stability pact which would have criteria on what you could borrow," he said.
What a difference six months makes.
Last week, the First Minister performed an off-the-cuff U-turn, and told an audience in Chicago there was no need for a "fiscal stabilisation pact" after all.
Fiscal self-discpline and trust would suffice.
In the wake of the Eurozone crisis, it was a jaw-dropping remark.
In one sentence, he dismantled the scaffolding around the SNP's plans for keeping the pound.
Naturally, no government ever sets out to be profligate, incompetent, or irresponsible, yet many are (see Euro again).
So the idea that the rest of the UK would let an independent Scotland - perhaps for generations - use the pound without some kind of underlying pact is quite a claim.
"Not a cat's chance in hell," as Salmond's own former economic adviser, Professor John Kay, put it.

In today's Herald I report on the Treasury's response to the development.
Here's a longer version of the story

Tom Gordon

THE Treasury last night cast fresh doubt on Alex Salmond’s plans for an independent Scotland keeping the pound, after the First Minister abandoned his idea of an underlying “fiscal stability pact” with the rest of the UK.

Chief Secretary to the Treasury Danny Alexander said the Eurozone crisis showed strict controls on tax and spending had to be a pre-condition of monetary union, contradicting Mr Salmond.

Earlier this year, the First Minister backed a stability pact with the Bank of England and Treasury which would have set limits on how much an independent Scotland could tax, spend and borrow from the international money markets.
Although the arrangement would limit Scotland’s ability to set its own fiscal policy, he said it was necessary for creating a sterling zone, and “no more than the fiscal discipline a sensible country would have in any case”.
Critically, the pact would cap borrowing so a Scots national debt did not undermine the pound.
But in an off-the-cuff remark in Chicago last week, Mr Salmond unexpectedly abandoned the idea, and said a stability pact was no longer needed.
The U-turn prompted former Labour chancellor Alistair Darling, in his role as chair of the pro-Union Better Together campaign, to accuse Mr Salmond of flip-flopping and confusion.
Alexander, Liberal Democrat MP for Inverness, Nairn, Badenoch & Strathspey, last night joined the attack, saying: “Perhaps all these foreign trips have led Alex Salmond to forget about the Eurozone crisis on his own doorstep, though he clearly remembered to pack his flip-flops.
“The very simple lesson that taught us is that you can’t have a shared currency without controls on fiscal policy. I firmly believe that Scotland is stronger within the UK and the UK is stronger with Scotland in it.”
His comments echoed those of Professor John Kay, a former member of the First Minister’s Council of Economic Advisers, who at the weekend said a lesson of the Eurozone was that tight rules were needed for monetary unions, and there was “not a cat’s chance in hell” of an independent Scotland using the pound without a stability pact.
The First Minister’s reversal was revealed by the Herald’s sister paper, the Sunday Herald.
In January, Mr Salmond told the Economist magazine: “I’m in favour of a stability pact.”
In a BBC interview in March he added: “There would have to be a stability pact which would have criteria on what you could borrow.”

But answering a question about the restrictions of monetary union, such as the Bank of England setting Scotland’s interest rates, Mr Salmond told the Chicago Council on Global Affairs on Friday: “I don’t believe that a monetary policy restriction would have to have a fiscal stabilisation pact. I think we can have plenty of room for manoeuvre within a currency union.”
A Scottish Government spokeswoman said: “Scotland is in a stronger financial position than the UK as a whole, and therefore will have no difficulty adhering to fiscal discipline within a sterling zone as an independent country.”