IT seems that there is an inexhaustible supply of questions regarding Scotland’s economy, which is good for me in providing ideas for matters to discuss in this column.
Today’s question comes from Joe McCusker, who asks:
To what extent is it possible to determine the level of Scottish exports given that many will flow through English ports?
The straightforward answer is that we do not know because the flow of goods and services over the border from Scotland to England is not monitored.
That means that the value of Scottish exports leaving the UK through ports in England, Wales and Northern Ireland is not known. New arrangements for the latter might increase the chance of that data form becoming available, very slightly.
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The reason why we do not know is threefold.
First, there has been no tax reason for this data to be collected and so it has not been.
Second, there has been no desire to know this data.
It would appear that the governments in both Westminster and Holyrood have to date been happy to rely on estimates of exports from Scotland based on VAT and other returns. They have presumed that the margins for error in those declarations were small enough to be ignored, which may well be wishful thinking in a great many cases.
Third, it has been claimed that this data would be too expensive to produce.
The result of this approach to Scottish economic data is that much of it is estimated. I am not going to repeat all the arguments over the estimates in Government Expenditure and Revenue Scotland again here, because that is something that I have done many times before.
However, the simple fact is that a great deal of Scottish economic data is based on what may well be fairly poor estimates, and that is what troubles me.
Take the case in point that Joe McCusker raises. The problem of not knowing the scale of exports from Scotland going through UK ports is a part of a bigger problem. We do not know the scale of imports through those ports either.
Perhaps even more significantly, we do not really know the value of goods and services flowing from Scotland to the UK, and vice vera.
If we did not want to know what Scotland’s true income was then this would not be a matter of much importance. However, knowing that figure is crucial.
Vitally, we cannot be sure what it is without knowing Scotland’s imports and exports, because exports add to that income and imports reduce it. And since those imports and exports include financial flows such as rents, interest, lease payments and others, trade data by itself is never going to be enough to make good this deficiency. I suspect financial flows flood from Scotland to England.
Why do we need to know?
Firstly, because the Scottish Government needs to make decisions on tax and managing the economy. It works with one hand behind its back at all times if it does not know what Scotland’s income really is.
Second, because any comparison with the rest of the UK (which is what GERS really is) is fairly meaningless without knowing what Scotland’s real income is, having taken all factors including financial flows into account.
Third, the case for and against independence is harder to make without this data. And I stress, this argument flows both ways.
Will we ever get the required data? Westminster will not deliver, I am sure. So, it is down to Holyrood to do so.
With a change in SNP leadership the incredibly slow progress being made in developing proper Scottish statistics for use by the Scottish Government might speed up.
It might not seem like a priority issue, but if the SNP is really interested in independence it should be high on its agenda.
Put your questions to Professor Richard Murphy
Any questions you have about the economy or finance in an independent Scotland, our columnist Professor Richard Murphy will be on hand to answer them.
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