Marco Biagi: GERS debate must be about what we'd change if Scotland were independent

The fixation with Government Expenditure and Revenue Scotland is surreal. If you’re having to persuade people in a political argument by contradicting their views by quoting statistics, you’ve already lost. People believe statistics that accord with their prior views and generally ignore those that don’t. The concerns people have about how well-off Scotland is are better met by reminding them of what they can already recognise – the strengths of our key industries – and/or providing plausible strategies to make the country richer.

Of course, that needs some plausible strategies.

After all, to adopt the polling cliché, GERS is a snapshot, not a prediction. A survey showing a party 10 per cent behind doesn’t show they are inevitably going to lose an ensuing election, it just shows how much they need to do to pull ahead. During the 2014 referendum independence campaigners had the fortunate position of being able to point to a favourable run of GERS figures and did so with gusto, while opponents of independence used predictions of future doom to discredit it. A heroic (or foolhardy) attempt by the Institute for Fiscal Studies to estimate Scotland’s finances for the next 50 years was a favourite tool of the No side.

Now that printing GERS requires rather a lot more red ink, many Scottish nationalists feel compelled to discredit the report they used to eagerly cite, while some opponents have been born-again in their GERS literalism. And in a polarised, perennially simplified debate where subtlety is given as much welcome as a petri dish of live Ebola cultures, no wonder.

Are GERS estimates perfect? No. Significant uncertainties exist around them. Anyone who treats GERS figures as sacrosanct to 10 decimal places can safely be disregarded with your preferred euphemism for idiot. But substantial changes to how they are collected have already taken place. The methodology was substantially interrogated in 2007 after the SNP came to office: nearly every revenue estimate was revised.

Richard Murphy has repeatedly argued operational data would be superior to these survey-based estimates. Indeed it would, but that data could only realistically be collected by HMRC, a department of the UK Government. In 2013 an attempt was made by HMRC to publish some. (Incidentally, it broadly corresponded to the GERS figures.) In the politically charged atmosphere it was seen by independence-campaigners like myself as highly suspect. The same suspicion would meet any such figures, and rightly so. There was quite enough propaganda produced in Whitehall in 2014 without adding more next time.

The real question is what an independent Scotland would do with its economy. GERS represents, with some imperfection, Scotland-in-the-UK, not an independent Scotland. But Scotland-in-the-UK is the starting point for the journey.

Two instant divergences would take place on defence spending and debt. Scotland is assumed by GERS to receive £3.03 billion in defence spending, even though no accounts exist any more for how much is actually spent in Scotland. Figures vary for what an independent Scotland might actually spend on defence, but no one supports UK levels which are burdened with two financial balls and chains: the nuclear missile force, and the bases around the world that the UK retains to reassure the US that it can be a dutiful ally. Finland’s air force, army and navy have a combined budget of around €2.8bn. Adopting a similar approach would represent several hundred million pounds of annual savings while also providing higher levels of equipment and manpower than the UK’s military presently deploys in Scotland. This was roughly the position of the Scottish Government in the 2014 referendum. At the other end of the spectrum Ireland, with minimal navy and no combat aircraft, spends only around €900m and is probably closer to the Green view of post-independence armed forces.

GERS also assumes Scotland pays £2.8bn in annual repayment of the UK’s national debt. The exact amount of national debt an independent Scotland would take on is a matter of debate and would not be resolved until independence took place, but it would likely mean a lower repayment than this. The Scottish Government initially offered – too generously – in 2014 to take on a population share of debt, which would entail similar payments before then making this conditional on asset distribution and hinting at a stronger negotiating position. Another analysis incorporates the historic contributions of Scotland to the UK Exchequer (as estimated, incidentally, through the GERS methodology) combined with the cost of servicing those debts cumulatively and suggests a much lower share. Since any debt is owed by the UK Treasury and Scotland would be a seceding rather than the continuator state, there is in any case no obligation on an independent government to assume any – a strong card in negotiations. Even if such a renunciation was seen with hostility by international creditors, the zero-ing of total debt would mean repayments would be lower for decades – more than enough time to build up credibility and bring those interest rates down.

This is why it is right to say GERS does not describe the finances of an independent Scotland, but there still needs to be recognition of the challenges it contains. These two measures would be able to save, maximally, almost £6bn per year for an independent Scotland. It takes a lot of assumed inaccuracy, and all in one direction, to conclude that the rest of the relative deficit simply isn’t there. What an independent Scotland needs are new fiscal policies. Why is this something independence campaigners should shy away from, given that the whole point of gaining the powers of independence is to do things differently to the way the UK has been doing them?

The instant answer for No campaigners is the doom and gloom of tax rises and spending cuts, yet countries that implement tax rises and spending cuts generally do not see strong growth. Just ask George Osborne and Philip Hammond who, after 2010, have used this austerity cocktail and missed every public finance target they’ve ever set. So the task for nationalists is to be both imaginative and convincing about how to transform Scotland’s economy.

Those of us who believe in independence I hope do so because we do not want to duplicate the mistakes of the past. A substantive, detailed vision of doing things differently can win those arguments, bring people on board and capture their imagination. And speaking as someone now at great remove from the official proto-campaign for the second referendum, this is something I am now looking to the SNP Scottish Government to provide.

Marco Biagi is a former SNP Government minister.