Richard Murphy: Why GERS reflects badly on the UK - NOT Scotland

Let me start by getting some facts straight.  First of all, GERS stands for the Government Expenditure and Revenue Scotland statement.

Second, GERS was created by the Tories in the early 1990s with the obvious political intention of showing that Scotland was not viable as an independent country.

Thirdly, to do this they created GERS as a half-baked set of accounts prepared each year for an entity that quite literally does not exist. We could call that make belief entity "government in Scotland", if we wish. We could just as easily call it Narnia. Neither is real.

READ MORE: The GERS figures reveal chronic inequalities within this Union

That’s because GERS is not about the accounts of the Scottish Government. Nor is it about the accounts of the Westminster government in Scotland. And there is no entity that exists in Scotland that embraces both those things and Scottish local authorities and other government agencies, but GERS presumes that there is, and supposedly accounts for them, albeit atrociously badly. The reality is that what GERS represents is an account for something called "make believe".

This makes a mockery of the claim made for GERS in the press releases that supported its publication today that said: "The aim of GERS is to enhance public understanding of fiscal issues in Scotland. The primary objective is to estimate a set of public sector accounts for Scotland through detailed analysis of official UK and Scottish Government finance statistics. The report is designed to allow users to understand and analyse Scotland’s fiscal position under different scenarios within the current constitutional framework."

GERS does not do that. That’s because you cannot prepare accounts for something that does not exist and then claim to appraise it within the current constitutional set up when quite specifically no one inside that current constitutional set up has any responsibility for managing the figures that GERS reports. Since no one is accountable for these numbers – and never will be within that constitutional settlement – whatever the preparers of this statement might claim - GERS is not about analysing Scotland’s financial position within the current constitutional framework when no one is in a position to answer any meaningful questions on it.

Most of all, GERS cannot be used to appraise the performance of the Scottish Government. That government is constitutionally required to balance its budget, and it does.

Likewise, local government is Scotland is also required to balance its budgets, and it does, so GERS cannot be used to appraise them.

READ MORE: What is the GERS report and how is it calculated?

In that case, if GERS reports a deficit – and it does, of either £19.1 billion if North Sea revenues are taken into account, or of £28.5bn if you want to ignore them (although why you would so is anyone’s guess, because it would be utterly illogical to do so) – there can only be one organisation responsible for that deficit, and that must be the Westminster government.

Quite literally, that is the only possible conclusion that GERS permits. Except, of course, the UK Government does not, GERS apart, publish any separate figures for its economic involvement in Scotland and the Westminster based Secretary of State for Scotland has no responsibility for almost any of the figures in GERS that represent figures Westminster claims are spent for Scotland.

So, let’s draw the obvious conclusion from this analysis, which is whilst the various forms of government that exist in Scotland are managing their affairs in a responsible and accountable fashion, Westminster very clearly is not. It’s apparently out of control with regard to the management of its affairs in Scotland and, worse still, has no one available with any responsibility to put that right, making a complete mockery of the idea that good government begins and ends in London, when it very clearly does not. That is the conclusion that must be reached using the criteria that are set out for GERS by those who prepare it.

I should go on to point out all the usual nonsense that is included in GERS, because doing so suggests one further important conclusion.

First, GERS only includes Scottish revenue, and this is massively understated because most of the UK’s rents, profits, interest income and other financial services gains are recorded in the London and the southeast of England, and no tax on the outflow of these funds from Scotland to these places is credited in the GERS statement, which it should be if it was to really reflect what happens in Scotland.  

Second, as ever, GERS includes expenditure for Scotland, not all of which is spent in Scotland but the tax paid on the spend outside Scotland is not credited to GERS, meaning that once more the GERS deficit is overstated.

And then, thirdly, and as the GERS admits, the biggest increase in government spending in the year is on government interest costs. I suggest that Scotland should not be paying a proportionate part of that sum because it ran a surplus for decades and so did not generate the deficit on which much of that interest is being paid. In addition, about one third of this interest spend goes straight back to the UK Government because the debt is owned by the Bank of England and there is no evidence from the GERS report that this is credited back to Scotland. I suggest as a result that the £9bn of interest charged to Scotland in GERS may be £6bn  or so more than it should be. Adjust for that and the Scottish deficit in 2022-23 would be maybe 6% or so of GDP, which is very little different from that for the UK as a whole. Credit the missing tax income due to Scotland from financial flows out of it and paid on expenditure for it that I note above and Scotland may well, in fact, be doing better than England.

READ MORE: SNP government infiltrated by British agents, ex-MSP claims

What to conclude then? All that can be said is that, once again, a meaningless set of accounts that prove that Westminster is out of control and is seeking to dump costs on Scotland, which accounts have been prepared using accounting methodologies that appear decidedly incomplete, are being used to suggest that Scotland is a drain on the rest of the UK when it looks very likely that this is simply not true.

It would be so good if GERS was done properly.

It would be so good if Westminster took responsibility for the mess it is creating in Scotland.

It would be so good if we could have sensible data to inform debate on this issue.

Instead we still get nonsense of the sort published today.

For how much longer do we need to suffer this farce?