Tag Archives: affordability

The affordability of staying in the Union – part 2

Posted by Euan Bennet on 25/09/2013

DEMOCRACY

We are often told by the No campaign that Scotland benefits from being able to influence the UK – and that we benefit in some nebulous way from the “clout” that being part of the Union brings us. The “best of both worlds” narrative has been developed by the Better Together campaign as one of the meaningless platitudes that sounds positive enough to (they think) mask the dark heart of negativity that comprises their entire campaign.

That being said, recent pronouncements by senior Labour party MPs have somewhat undermined this case for the Union.

Whatever one expects to happen in the event of a No vote, it is worth examining the assertion that as part of the Union, Scotland has a say in the government and policies that are put in place for us. Here the facts are so public, and so established, that browsing Wikipedia practically tells you everything.

Scotland’s Influence

It is well-documented now that Scotland’s votes have never swung a UK government one way or another, and that in 60% of the years since 1950 Scotland has had a government that it rejected at the ballot box.

Within the UK Government there are two Houses of Parliament – the Commons and the Lords. Both still govern Scotland in Reserved matters (which will be the topic of a future post, but headline matters include welfare, nearly all taxation, energy, macroeconomic policy and defence & foreign affairs). The No campaign argues that since Scotland is represented in these Houses, we have democratic influence within the UK. Since we certainly don’t have influence in electing the government of the day, how do these claims stack up in the context of overall representation?

  • House of Commons – 650 MPs – of which representing constituencies in Scotland – 59
  • House of Lords – 819 – of which representing Scotland – technically zero

Since membership of the HoL is by appointment rather than linked to any constituencies. 92 of the 819 are hereditary, while another 26 seats are reserved for Church of England bishops (with a further 12 allowed). No other Church of the British Isles is afforded such a privilege. As this report from the London School of Economics shows, only 22 countries in the world have one Parliamentary chamber which is entirely unelected – and ten of those are not classified as ‘electoral democracies’, while the other twelve are Commonwealth countries which are still using the UK model. The UK HoL is of course the largest of the 22.

As an aside, by age the House of Lords is shockingly unrepresentative of society: there are 8 times as many Lords aged over 90 as there are aged under 40.

In the final analysis Scotland, with 8.4% of the UK population, has the democratic capability to influence just over 4% (59 out of 1469) of members of the Houses of Parliament. In a bizarre twist, the 38 Church of England bishops sitting in the House of Lords technically have more say over the defence, welfare and economy of Scotland than do the 129 directly and proportionally elected MSPs in the Scottish Parliament.

This is probably an even more serious democratic deficit than the fact that Scotland rarely gets the government it votes for. The UK Parliament is a medieval institution that has demonstrated for more than a century that it is incapable of meaningful reform: even when given the chance to vote on a change to the terrible first past the post voting system, the system on offer was a very minor improvement that was campaigned for extremely poorly and ultimately defeated.

I had intended to compare the voting systems in the UK and Scotland to other comparable nations, but that will have to wait until a future post: this one has gone on for long enough already. It’s clear that Scotland’s voters have very limited influence over our nation, but with independence we will have a modern democracy worthy of the name.

Image

Image credit: Wings over Scotland

[Updated 10.30am 25/09/2013: removed section on devolution to save for a future post and shorten this one]

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The affordability of staying in the Union – part 1

Posted by Euan Bennet on 20/09/2013

This is a companion piece to yesterday’s. The question that is never asked by the media is “can we afford to stay in the Union?”, yet it is becoming clearer that this is an issue that people are going to have to consider. In order to make an informed decision one must investigate both options in equal detail. There are no guarantees under the Union just as there are no guarantees with independence, but there are plenty of indicators for how both could turn out. In order to assess how things might get better or worse, we should establish a baseline of how things are now, and how we got here. After all, the best way to predict future behaviour is to look at past behaviour.

We frequently see the Yes campaign making the assertion that the UK is the fourth most unequal country in the Western world , so let’s take a look at the figures to see how they stand up.

Economy and Inequality

Let’s start with the headline points. The UK is the 6th richest country in the world in terms of total GDP. Sounds great, except when you look at how that wealth is distributed. The UK is the seventh most unequal in the OECD.  Wikipedia has handily already compiled historical figures into a nice table. Three of the countries in the OECD that are more unequal than the UK are Mexico, Chile, and Turkey. There are several definitions of “developed country”, but for example this list (citing page 166 of this report) shows that if we do consider only developed nations, the UK is indeed fourth most unequal: behind the US, Portugal and Israel.

The wealthiest 10% of UK citizens are 4.4 times better off than the bottom 50% combined. 62% of total wealth is owned by the top 20%, while the bottom 50% own just 9% of the total wealth between them. The latest figures from 2010 show that the UK has become more unequal compared to the previous figures from two years earlier.

Since 2010 there has been further increases in inequality, which have been contributed to by the public service and welfare cuts implemented by the current Westminster government (figures on page 27 of the report that links to). Successive budgets have made an indirect transfer of wealth from the poorest three deciles to the richest two.

Other highlights

These statistics are entirely a reflection of policies pursued by successive Westminster governments. They represent choices that have been made.

Making an informed decision

One of the questions that the media should be asking in relation to the referendum debate is: how did the circumstances arise in the sixth-wealthiest nation in the world where inequality is so bad that over a quarter of children live in poverty? Anyone who may yet decide to vote No in the referendum should at the very least examine the figures cited above and make sure that they are comfortable in voting to endorse a system that has systematically and continuously brought the UK to this economic scenario, because that is exactly what a No vote will be interpreted as – an endorsement of the system. How could it be interpreted otherwise?

This post is not intended to be a whinge about policies that I don’t like – it is intended to be a reality check of the situation that the UK is in. Nor is the post an effort at negative campaigning – I am simply asking that people acquaint themselves with the reality of the economic situation in the UK today, and that they understand that this situation is the result of choices made by successive Westminster governments.

 

[Updated 8.20am 24/09/2013: added more links to clarify “4th most unequal in West… 7th in OECD” statement.]

The affordability of independence

 Posted by Euan Bennet on 19/09/2013

This appears to be one of the central concerns people have about the prospect of independence. Can we afford it? Even though it seems self-evident to those of us who have already chosen to engage in politics and find out about the figures, there are still many people who are unaware of the true wealth of Scotland. It is important for those of us campaigning for a Yes vote next year that we provide truthful and accurate figures to the people who have still to make their minds up. Here we will tackle the two figures that are most commonly used by the media: Public spending and GDP.

Revenue and Expenditure

The figure that will be most familiar to people, because Unionist politicians and the media mention it quite a lot, is that public spending per head per year is £1200 per head higher than the UK average. See for example Tuesday evening’s Newsnight debate; skip to 2min30s for the beginning of the debate, or go to 4min25s to see Margaret Curran deploying this very argument as an apparent great benefit of the Union.

Understandably, people might hear the £1200 per head per year figure and get a bit concerned about the sustainability of such spending. It is a factually accurate statement to make however, although it is extremely disingenuous to present out of context. The context being that there are two sides to every balance sheet.

Tax revenue identified as coming from Scotland (and we will return to the theme of identifiability in the future I am sure) is £1700 per head per year higher than the UK average. As neatly demonstrated by Wings over Scotland, these figures from 2010-2011 coincide nicely with a recent opinion poll which claimed that a majority of people would vote Yes if they thought it would make them £500 better off each year.

In fact, the most recent figures show Scotland in an even stronger relative position than that. The Government Expenditure Review Scotland figures (GERS) are accepted by both campaigns, and for 2011-12 showed that Scotland contributed 9.9% of UK revenues with only 8.3% of UK population, and in return 9.3% of UK spending was identified as being spent in Scotland, or on our behalf. We shall probably return to what “spending on our behalf” means at a later date.

If Scotland had received 9.9% of UK spending, in proportion to our contribution to revenues, then in absolute terms around £4.4 billion more would have been spent in Scotland in that year. Or to put it another way, Scotland subsidises the UK to the tune of £4.4 billion every year. Just imagine what we could do with that money. We could spend it on something, save it, or elect to borrow less, or a combination of all three. To put it into context, the entire health service in Scotland cost £11billion. So more than a third of the cost of the health service goes to the UK treasury every year and is never seen again. And in exchange we get debt accrued in our name, and then more interest charged to that debt than our fair share.

GDP

Revenue and expenditure is only one part of the story when it comes to general finances – another figure that is commonly bandied around is Gross Domestic Product (GDP). Rightly or wrongly, this is normally used as a measure for comparing the relative wealth of nations, both to each other and to themselves over time.

What does GERS have to say about GDP?

  • Scottish GDP with oil (2011-12) = £151bn.
    • For a population of 5.3m = £28,500 per head.
  • UK GDP (with oil) (2011-12) = £1526bn
    • For a population of 62.65m = £24,350 per head

With oil Scottish GDP per head is 18% higher than UK GDP/head.

  • WITHOUT oil Scottish GDP = £125bn = £23,550 per head.
  • Without oil UK GDP = £1495bn = £23,900 per head

Without oil Scottish GDP per head is 99% of the UK level.

Hat-tip to Ivan McKee of the excellent Business for Scotland for compiling that list.

The GDP figures make it clear that discounting oil, Scotland would not be very different to the UK. The oil and gas should therefore be viewed as a bonus, rather than the basis for our entire economy. As page 59 of this report shows, revenues from oil and gas consistently make up less than 20% of all tax revenue collected in Scotland, and our economy is far more diverse than people realise. That diversity is a great strength, and is another topic that deserves an entire post dedicated to it.