Wednesday, 30 August 2017

Holocaust, Climate Change, GERS?

Of all the things which lost the last Independence Referendum for the SNP, the thing near the top of the list would have been the SNP’s failure to win the economic argument.  Anything that the SNP said or planned to say was instantly obscured by their nonsensical policy of adopting the English Pound as currency.  So far, things are altogether different.

If you got past the currency issue, the SNP tended to promise all things to all people.  They offered Scandinavian style social and public service policies, which would be built not on high direct taxation (like the Scandinavians do) but on an Anglo-American model of low direct and corporate taxation.  The people driving Salmond’s vision of Irish levels of corporation tax was the pro-business Business For Scotland.  The high profile members during the referendum, namely Gordon MacIntyre-Kemp and Michelle Thomson, put forward visions of an independent Scotland reliant on low business taxes.  In other words, they were disciples of the cult of Laffer – Arthur Laffer’s theory is that there is a point where increasing tax rates will become counter productive has been replaced by a theory that lower tax rates will somehow bring higher tax revenues.

The claims that Business For Scotland made might have been feasible claims, but without any workings on show, they looked outlandish.  Although Business for Scotland were mostly up against the might of the pro-Union parties, it was the blogger Kevin Hague, and his methodical posts outlining how and why Independence could (potentially) not work and debunking BFS which, essentially torpedoed BFS’ credibility.  So much so that, I do believe that the vestiges of BFS’s credibility can still be located somewhere down the back of Hague’s sofa.  Hague’s posts, particularly on the GERS figures, made him a cause celebre among the London centric Progress supporting elites.  Personally, I thought Hague’s posts to be the benchmark for the economic debate we should be having, even if I disagreed with his conclusions that a £9 billion black hole in the finances (at that point) meant that we couldn’t be independent – my own thoughts being that the deficit would only be the jumping off point and that dealing with the fiscal black hole should be an election issue in the first Scottish General election.  After all, there are smaller independent countries with less advantages than Scotland would have that have made a successful go of being independent.

With great irony, another critic of the Scottish Government’s fixation on low Corporation Taxes in the belief that they generate wealth was one Richard Murphy.  A long time campaigner for fair taxation and the closure of tax loopholes, Murphy began writing a series of posts in relation to the Tax Gap – the shortfall between tax expected and tax collected and received by HMRC.  One of Murphy’s arguments has been with HMRC, who have been slow to provide accurate numbers or had obfuscated Murphy’s attempts to find out what the exact size of the Tax Gap was.  Several years ago, Murphy estimated that the tax gap could be as high as £119.4 billion, of late HMRC have claimed that they have the tax gap under control.  Murphy remains sceptical and has continued to question the competency and the veracity of HMRC.

Surprisingly, the tax gap issue did not cross into the referendum debate.  At a time when HMRC prepared figures were being used by the Scottish Government and then fed into arguments over whether Scotland could afford to become independent, it was somewhat strange to see widespread acceptance of those figures at a point when HMRC were being accused of not being effective enough in gathering tax and spinning figures to hide the extent of the problem.  After all, if the £119.4 billion figure, which HMRC refused to confirm only saying the true figure was lower, is close to the truth then it would impact on the GERS figures.  This means that Scotland’s tax take could potentially be a lot healthier.

That Murphy then has a reputation for challenging HMRC’s figures should not have been a shock to pro-Union campaigners.  What is surprising is that the intervention in relation to the GERS figures came from Murphy himself.  Granted, it would have taken the mother and father of all reverse ferrets for the Scottish Government, however both the wider “Yes” supporting community and Business for Scotland should have made this argument.  In the wake of Murphy’s posts on GERS, both groups look to be spectators in an argument they should be in the thick of.

That intervention in the spring had essentially lit the fuse on the economic debate ahead of an at that point likely second Independence referendum.  Murphy’s posts make two arguments, continuing the tax gap argument over HMRC’s poor data gathering into specific country-by-country data that is the GERS figures themselves and by highlighting that the GERS figures themselves are “estimates”.

Yip, you read that right.  HMRC’s figure gathering does not extend to accurate figures on region/country by region/country tax receipts so all figures are estimates.

Of course, Hague does have a point that most economists produce estimates and forecasts.  The problem is that the forecast debt/deficit for Scotland on day one of Independence is not reported as forecasts or estimates.  Hague’s produced figures are reported and circulated as cold sober fact.  The pro-Union politicians talk up those figures as fact.  Pro-union journalists, including friends of Hague in the national media (yes, you Nick Cohen and you John Rentoul), talk of a profligate Scottish government running up a debt in the billions as if the Scottish Government had those powers...  with those figures as fact.  Indeed, there is something of a cottage industry surrounding these factually reported estimates that it is often forgotten that alongside the figures being estimates that economists are not the one homogenous group thinking the same thoughts.  They have different thoughts and different opinions.  As an example, Monetarism still divides opinion, though not as much as it did when it formed the economic centrepieces of the nascient Thatcher and Regan administrations.

That fact seems to have evaded Hague as any time the ‘estimates’ line is raised with him on Twitter, he deliberately attempts to denigrate Murphy’s work and smugly shows off the people who agree with him without any attempt at discourse.  On Murphy’s more pertinent point, if there was no tax gap then how does Hague explain away the conduct of one Dave Hartnett.  Consultant at Deloitte, former Permanent Secretary of Tax at HMRC and the person responsible for HMRC’s notorious sweetheart deals with such companies as Vodaphone.  HMRC not being fit for purpose regarding cracking down on tax avoidance has been a regular fixture of the pages of Private Eye for years, and yet Hague and his increasingly Wings-esque union jack brandishing supporters seem oblivious to this and HMRC’s other failings while they trumpet statistical estimates as cast iron fact in a fashion that Stuart Campbell would be proud of.

I had started this post in April and had thought of the title at the time as Hague had taken to calling pro-Independence supporters “GERS deniers”.  A couple of weeks ago, during a spat with your’s truly, he went as far as drawing parallels with climate change sceptics, holocaust deniers and GERS sceptics. Instead of discourse, Hague attempt’s to lure people into a cut’s versus tax argument.  All very Osbornesque, intolerant and deeply petulant.

The problem with Hague’s tax versus spend argument is that the question of what you’d cut, a favourite question among pro-union econo.. coment... bloggers, is a simplistic one.  Independence means the opportunity to start afresh and raise revenue that would be to the benefit of the Scottish people and not be tied to the structures of the UK’s tax architecture.  Looking at how we gather money in, it must surely be in the interests of Independence supporters to look at ways of raising living standards as a whole and raise the income tax take purely through higher wages and generating jobs rather than glib 'We could all have had a bar of gold if we were independent' thinkpieces from MacIntyre-Kemp.  After 10 years of stagnant wage growth, an average wage of £27,820 seems a tad small (even if this is just above the UK average).  Of course the other area that could be looked at could be some form of land tax system.  Of which the Scottish Greens no doubt have several thoughts on that subject.

Much like everything else in Scottish politics, this debate is deeply coloured by the debate on Independence where everything is either right or wrong depending on where you sit on the great divide.  While we do not need Hague’s penchant for hallucinogenic graphs to tell us that Independence would be a bumpy ride at the start – and for that matter the SNP & BFS’s disingenuousness on this subject only feeds the cult of Hague.  We surely should have known before Murphy’s spring intervention that HMRC as a tax gathering and tax reporting organisation is simply not fit for purpose.  What Murphy has successfully done therefore is to create reasonable doubt surrounding the GERS figures.  Something the combined forces of the SNP and Business for Scotland failed to do in 2014.

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