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point where increasing tax rates will become counter productive has been
replaced by a theory that lower tax rates will somehow bring higher tax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.
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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