UK Politics Thread
03-16-2017
, 04:46 PM
Quote:
The reason I've focused on the £9bn subsidy is it's straightforward, it's there in black and white in the Scottish governments own figures and can't be disputed. It's the easiest starting point and in itself is massive.
With regards to the fiscal subsidy changing, you're right it could change but the signs are it's going to grow. The main, but not only, reason for he £9bn figure is the collapse in oil prices. Now there may be a recovery in that area but in terms of the tax take it won't recover to anywhere near what it was, oil is a declining resource, as you can see from the graph below (despite the small bounce at the end)
The large oil companies are moving out and it tends to be smaller companies looking to squeeze out any further possible profit in what is the costliest area on Earth to extract this resource. Oil is actually currently costing us money due to tax breaks for the oil companies. The other thing to add to this that people may not realise is that oil is about to become a burden due to decommisioning and that much of this will be paid by the government through tax reflief. Here's a couple of reports giving figures that start at £24bn of costs
https://www.ft.com/content/9b1d17d0-...b-680c49b4b4c0
http://www.bbc.co.uk/news/uk-scotlan...iness-38048562
So we know that the gap won't be closed by some recovery in oil and massive boost in production. So why do I think the deficit subsidy will increase? Well Scotland (and Wales and NI) receives funding based on public spending in England. As it stands the UK economy as a whole is growing 3 times as fast as Scotland's so the gap in revenue will be widening at a time when public expenditure is increasing. This is why next year Scotland's spending will go up by so much (just over £1bn), it's due to the UK economy doing surprisingly well.
https://www.ft.com/content/022aeeb2-...c-be108f1c1dce
As for the impact on income and revenues I'd mainly covered that in my previous post. The country would have to go through a severe austerity program that we haven't seen in our lifetime and we have very recent examples of the impact austerity (on a far smaller scale) has. Jobs are lost, wages are depressed, businesses close down etc.
Finally, with regards to the potential to increase revenues post independence, what exactly would these be that are outwith the powers of the Scottish government at the current time? They have tax raising and tax setting powers (but fail to use most of them after screaming for them). No doubt the SNP Growth Commision will soon report findings that will make vague claims about how they will grow the economy further but if that was possible they would be doing it now.
I'll quickly mention one other thing, the currency question. If the SNP say they'll adopt the Euro they'll probably lose the referendum. If they choose to stick with the pound or create a new currency then the reserves required will be massive. Here's a talk by economist Ronald MacDonald (really
). His credentials are as follows: Professor MacDonald is Research Professor in Macroeconomics and International Finance at the Adam Smith Business School; he has acted as an advisor on currency and exchange rate issues to the European Commission, IMF, World Bank, European Central Bank and a number of other central banks. He was previously Bonar Macfie Chair of Economics and Adam Smith Chair of Political Economy at the University of Glasgow and Professor of International Finance at the University of Strathclyde.
The numbers he gives are very scary indeed and he also talks about other things that would happen such as a flight of capital etc. Note that this speech is from 2014, before the collapse in oil prices and even he underestimates the deficit by suggesting it could be between 5-7% (it's almost 10%). Anyway, check it out from 7:00 onwards
I'm not 100% sure I've fully answered your question as it was a little broad but if there's any specifics you think I've missed let me know.
With regards to the fiscal subsidy changing, you're right it could change but the signs are it's going to grow. The main, but not only, reason for he £9bn figure is the collapse in oil prices. Now there may be a recovery in that area but in terms of the tax take it won't recover to anywhere near what it was, oil is a declining resource, as you can see from the graph below (despite the small bounce at the end)
The large oil companies are moving out and it tends to be smaller companies looking to squeeze out any further possible profit in what is the costliest area on Earth to extract this resource. Oil is actually currently costing us money due to tax breaks for the oil companies. The other thing to add to this that people may not realise is that oil is about to become a burden due to decommisioning and that much of this will be paid by the government through tax reflief. Here's a couple of reports giving figures that start at £24bn of costs
https://www.ft.com/content/9b1d17d0-...b-680c49b4b4c0
http://www.bbc.co.uk/news/uk-scotlan...iness-38048562
So we know that the gap won't be closed by some recovery in oil and massive boost in production. So why do I think the deficit subsidy will increase? Well Scotland (and Wales and NI) receives funding based on public spending in England. As it stands the UK economy as a whole is growing 3 times as fast as Scotland's so the gap in revenue will be widening at a time when public expenditure is increasing. This is why next year Scotland's spending will go up by so much (just over £1bn), it's due to the UK economy doing surprisingly well.
https://www.ft.com/content/022aeeb2-...c-be108f1c1dce
As for the impact on income and revenues I'd mainly covered that in my previous post. The country would have to go through a severe austerity program that we haven't seen in our lifetime and we have very recent examples of the impact austerity (on a far smaller scale) has. Jobs are lost, wages are depressed, businesses close down etc.
Finally, with regards to the potential to increase revenues post independence, what exactly would these be that are outwith the powers of the Scottish government at the current time? They have tax raising and tax setting powers (but fail to use most of them after screaming for them). No doubt the SNP Growth Commision will soon report findings that will make vague claims about how they will grow the economy further but if that was possible they would be doing it now.
I'll quickly mention one other thing, the currency question. If the SNP say they'll adopt the Euro they'll probably lose the referendum. If they choose to stick with the pound or create a new currency then the reserves required will be massive. Here's a talk by economist Ronald MacDonald (really
). His credentials are as follows: Professor MacDonald is Research Professor in Macroeconomics and International Finance at the Adam Smith Business School; he has acted as an advisor on currency and exchange rate issues to the European Commission, IMF, World Bank, European Central Bank and a number of other central banks. He was previously Bonar Macfie Chair of Economics and Adam Smith Chair of Political Economy at the University of Glasgow and Professor of International Finance at the University of Strathclyde.The numbers he gives are very scary indeed and he also talks about other things that would happen such as a flight of capital etc. Note that this speech is from 2014, before the collapse in oil prices and even he underestimates the deficit by suggesting it could be between 5-7% (it's almost 10%). Anyway, check it out from 7:00 onwards
I'm not 100% sure I've fully answered your question as it was a little broad but if there's any specifics you think I've missed let me know.
Link doesn't work but judging by his credentials I'm likely not going to be convinced that this man has the people's interests at heart... it does sound a little like project fear. But as I said, in the absence of any statistical information to provide a counter to this, I'll leave it there.
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