Beyond GERS goes Beyond Truth

Craig Dazell has a problem.

Whilst the author of Beyond GERS could plead ignorance of the facts whilst he wrote his badly researched essay he can’t do so now. He’s openly admitted that he’s read the critique by myself and Kevin Hague.

So what was his response? Did he take on the criticism and amend his conclusions or reframe his perspective in light of the corrections? No, of course not, this is a post-truth author. He just doubled down on his own flawed conclusions and believed that simply typing out the same points, whilst throwing in a few strawmen will justify his errors.

But he has a problem. In doing so he’s lost any ability to claim ignorance and moved firmly into the realms of deception.

His response to the blogs falls into a few points two of which are largely aimed at my critique on debt and pensions (the two areas I have professional qualifications in and have worked with for 20 years) I’ll deal with both in detail here:

4. We’d Be Defaulting on the UK’s Debt

Oh dear. This isnt a good start. Had Craig actually bothered to read the point being made he would know that the position is that if there is any defaulting it would be an independent Scotland defaulting to its debt agreement with rUK.

No one disputes that rUK would be guaranteeing the current UK's debt, however post-truth authors continue to ignore the fact that at the same time as the UK guaranteed its debt it also stated that a separate debt deal between an independent Scotland and rUK would be set up on independence. Therefore there is no question of an independent Scotland being able to default on the UK's debt, missing this sort of detail is just typical of Dazell's shoddy kind of attention to detail.

The stated objective of the Westminster government in the 2014 campaign was to have the rUK recognised as the “continuing” or, at least, the “successor” state to the United Kingdom (the difference is largely semantic. In the former, the UK would continue unchanged in law but with reduced territory and perhaps a change of name. In the latter, the UK would strictly cease to exist but rUK would inherit all of the rights and obligations of the former state) and for Scotland to be recognised as a “new” state (The link prior went so far as to claim that the 1707 Treaty of Union “extinguished” the country of Scotland as a legal entity despite the UK describing itself to the UN 2007 as being composed of “two countries [Scotland and England], one principality [Wales] and a province [Northern Ireland]“).

Here Dazell get's confused between a state and a country. You would hope that this basic sort of point would be apparent to him.

This state of affairs would carry with it significant advantages for rUK – notably, it would lessen any serious challenge towards their holding the UK’s permanent seat on the UN Security Council which was the case when Russia became the successor to the USSR – but carries with it many obligations also. The historical precedents are clearly laid out and extensively referenced in my paper Claiming Scotland’s Assets but readers should also consider G.F. Treverton’s book on the subject Dividing Divided States.

Essentially, where one country successfully claims “continuing” or “successor” status then it accepts that all of the mobile debts and assets of the former state belong solely to it (non-mobile assets like mineral rights, military bases and public buildings – including public companies and any mobile assets deemed essential to their running – are almost always split geographically). This means that a “continuing” rUK owns all of the UK’s debt in its own name. Scotland can no more default on them than can a former lodger default on your mortgage.
Absolutely. No one (mentioned here) is arguing otherwise. Dazell has set up a rather obvious strawman to deliberately avoid the point being made largely because he cant answer it. The UK has stated clearly that an independent Scotland shall have a separate debt agreement with rUK. This isn't something that is optional unless Dazell wants to explain how it would be possible for an Act of Independence to pass through Westminster without a debt agreement as part of it. Why would rUK MPs give Scotland a free pass on debt that it has helped to build up over 300 years?

One could argue this case, but it's not credible and certainly isn't credible for a group claiming to take a realistic approach to independence to argue it.

Now, if the side negotiating on behalf of the UK wishes to make the case that Scotland should take on a share of debts, perhaps by offering a share of assets to their value, then this is something that Scotland could consider, accept or refuse. There is a very good case to be made that Scotland doesn’t actually need or want a population share of the UK’s mobile assets.

Another attempt at a strawman on debt. The UK has stated that an independent Scotland would get a geographic share of UK assets (that's all the land and natural resources in Scotland) and a population share of our financial assets (gold and FX reserves) - which is about £2-3bn on a net liability basis, which I've already corrected Dazell on. Alongside this we get a population share of debt. That's about £130 billion of debt.

This isn't optional. This isn't something that a proto-independent Scottish government could refuse and then expect the Act of independence to pass through the UK Parliament.

We may need a few £billion worth of military equipment – assuming we can’t buy newer or more appropriate equipment elsewhere. We may need a couple of £billion (those stalwart supporters of independence, Scotland in Union, estimated not more than £1 billion) to set up essential government departments currently lacking – assuming we can’t borrow the money at better rates on the open market. We may need a couple tens of £billions to support our new currency and set up the investment banks we’ll need to start rebuilding our economy.
Where do these 'tens of billions' come to support our new currency? Does Dazell really believe that a new Scottish state could tap the debt market to borrow in debt denominated in the new currency to defend that new currency! He really does not understand how markets work.

After that, it really does start to become a stretch to consider what other assets we would actually need which would justify accepting over £130 billion worth of debt. Answers on a postcard on that one please.

The assets we would need would be the geographic assets of Scotland (say the north sea for instance), these are current UK assets. Dazell (quite deliberately) completely fails to understand this point. Once again on independence Scotland gets the physical and natural assets of Scotland and a population share of the financial assets and liabilities.

How a proto-Scottish Government forces the UK Parliament to accept something other than that I've yet to hear from any nationalist. Answers on a postcard on that one please.


5. rUK Won’t Pay Pensions to People in Scotland

The current rules regarding the UK state pension are quite clear.
Oh another bad start! He uses the terms 'current rules' on 'UK state pensions' but these are the discretionary practices employed by the UK (not actual rules) in the current environment. Post independence it's not remotely reasonable to say that those discretionary practices will apply. It would be like arguing that right now Scotland is in a currency union as part of the UK therefore we can simply project that under independence Scotland will remain part of that currency union, case closed.

If you meet the requirements for one, including paying up to 30 years worth of National Insurance, then you are entitled to a UK state pension when you retire.

You are entitled to a pension at the discretion of the UK government (oh and it's 35 years not 30). You need only look at the fact that your pension value changes depending on where you move to after retirement or that the government can change pension entitlement with an Act of Parliament as the WASPI campaigners highlight. The point that one does not have a legally enforceable right to a pension from the UK state has been established in law by the ECHR which clearly stated:

"The Court did not consider that it sufficed for the applicants to have paid National Insurance contributions in the United Kingdom to place them in a relevantly similar position to all other pensioners, regardless of their country of residence. Claiming the contrary would be based on a misconception of the relationship between National Insurance contributions and the State pension. Unlike private pension schemes, National Insurance contributions had no exclusive link to retirement pensions. Instead, they formed a part of the revenue which paid for a whole range of social security benefits, including incapacity benefits, maternity allowances, widow’s benefits, bereavement benefits and the National Health Service. The complex and interlocking system of the benefits and taxation systems made it impossible to isolate the payment of National Insurance contributions as a sufficient ground for equating the position of pensioners who received up- rating and those, like the applicants, who did not. "

Should you retire outside of the UK then, depending on which country you retire to, you may or may not receive an annual increment to that pension and changes to things like exchange rate and purchasing power may erode or enhance the value of that pension but the basic premise is laid out.
Yes the basic premise is laid out. The UK can pay pensions as it sees fit and at its discretion.

In the absence of an agreement to the contrary, if someone has reached their 30 years contribution before I-Day or has even already retired then they can expect their full UK pension.

This is another attempt to try to warp the debate and if you don't pay attention you miss it. It also shows that this is not ignorance on the part of Dazell but a deliberate attempt to mislead.

Firstly there can be no established practice in respect of rUK pensions to an independent Scotland as neither practice exists. Therefore to argue that there would not be any agreement to the contrary is like saying there would be no debt agreement on independence. Yes it's possible to make the case but it's not remotely reasonable to do so.

You might as well be arguing that the UK will simply give a new Scottish state a bung of £100BN just because they are being nice.

There may be a case here if there was a legally enforceable right to a pension from the rUK state. But there isnt. That's already been established in law.

If, for example, they end up paying 25 years UK NI and then 5 years of Scottish NI (or equivalent) then they can expect both governments to pay according to those shares.

If someone lives their entire working life in an independent Scotland then the full share of that pension lies with Scotland. By this logic, at the point of independence, the full component of pension liabilities would fall on rUK as, at that point, no Scottish NI would have been paid.

Having established that this is not the case in law or rights we can now move on to the practical reasons why this isn't the case in practice either. Pensions are welfare payments and transfer payments. People paying NI contributions now (from around the UK) pay pensions for existing UK pensioners (no matter where they live).

By this logic post independence we can expect rUK taxpayers to pay for rUK pensioners (no matter where they live) and iScotland taxpayers to pay for iScotland pensioners (no matter where they live).

Pensioners will be designated as an rUK pensioner or an iScottish pensioner at the point of independence based on the residence at that time.

There are of course other ways of managing these liabilities. It would for instance be possible to argue that pension payments would be based on the past contribution record with each country accepting its proportional share of these liabilities.

However the trouble is that would mean an independent Scottish government paying for pensions in rUK in respect of those liabilities that arose under the UK (of which Scotland was a part). So taking Dazell's example:

Someone in the UK paying 25 years of NI and then 5 years of rUK NI would expect the rUK to pay for their 5 years of rUK pension and the Scottish Government to pay a population share of the 25 years of a UK pension (remember Scotland was part of the UK state when this liability was built up).

Now Dazell and the Common Weal can argue for this position if they want but the liabilities do not change overall and we end up with an administrative nightmare of cross border pension payments for pensioners who will have no electoral control over the government funding part of their pension.

It is for this practical reason that both sides agree on splitting pensions on independence by residence.

This should not be a controversial point as this was precisely the stance that the UK government itself took during indyref1 and is entirely consistent with the stance laid out above that rUK would act as the continuing state to the UK.

This is a bit of a giveaway by Dazell. Having read my blog (as he's commenting on it) he'll know that this wasnt the UK's position. The UK's position was entirely as I've stated and as Steve Webb (the DWP minister in charge of this area) stated:

“I would think the Scottish people would expect their Government to take on full responsibility for paying pensions to people in Scotland including where liabilities had arisen before independence. Similarly people in the rest of the UK would not be expecting to guarantee or underwrite the pensions of those living in what would then have become a separate country. The security and sustainability of pensions being paid to people in Scotland would, therefore, depend on the ability of Scottish tax payers to fund them.”
The fact that Dazell (and others) continue to ignore this official statement by the UK government on this matter is very telling.

At least one commentator has suggested that the UK could “change the law at the stroke of a pen” to block payment of extra-rUK pensions.
Another strawman. I certainly did say the part in quotes (it's true) but I didn't say the second part. Again Dazell is in such a pickle he has to make up the arguments now. My case is that the UK has discretion in how it pays pensions and at no point have I suggested that post independence the rUK would cease to pay for rUK pensioners abroad.

Note that is very different from saying rUK would pay for UK pensioners abroad. In this context UK pensioners no longer exist, you only have iScot pensioners and rUK pensioners and each state would be responsible for providing pensions for 'their' pensioners.

I guess they could. It’d be a “brave” move though. I doubt they’d be able to pass that bill over the howls of horror from all the other British emigrants currently drawing that pension.

I’d also love to hear their explanation to both rUK citizens who choose to move to Scotland at some point after independence

And it's here that Dazell exposes his inability to hold on to the detail. Let me be clear. If after independence an rUK pensioner were to move to Scotland then their rUK pension would continue to be paid by rUK - it would not fall to zero.

Dazell and others are trying to make the point that because rUK would pay for rUK pensioners then rUK would pay for UK pensioners. In other words in this context rUK is not UK.

They wouldn't, they have no need to financially, legally or electorally.

as well as to their core voting base of those British nationalists who would certainly seek to retain their UK citizenship post independence and may even reject the offer of taking Scottish citizenship to which they may be entitled.

Pension liability does not depend on citizenship, it's at the discretion of the providing government.

This was entirely known to the Scottish Government when they published their paper and with a little thought about the way voters on each side of the border would react you can see why.

Let’s say an independent Scottish Government decides to demand the rUK pays pensions to all those Scottish citizens who have paid into the UK system after independence.

The rUK government naturally refuse as both sides agreed on this before the referendum and have no intention of having their current and reduced electorate paying for the pensions of citizens of another state.

In these circumstances the Scottish Government is faced with a dilemma. Scottish pensioners will be thrown into poverty were this to come to pass. These pensioners wont be in a position to take out their wrath on the rUK government as they are no longer citizens of the rUK state and can't vote there. They can only vote in Scotland. So who will they take their wrath out on? The Scottish Government, who happen to be sitting on a huge windfall Dazell seems to thinks exits because they don’t think they need to pay pensions to existing Scots pensioners.

There is only one way this ends. The Scottish Government pays the pensions of Scottish citizens, including those in payment.

That’s why both sides agree, because in a democracy there is only one logical outcome.

It’s why the Scottish Government issued a paper saying that they would take full responsibility for all pensions, it’s why their budgets made full provision for paying all pensions, including those currently in payment. It wasn't prudence on the part of the Scottish Government. It was simply the reality of the world they were going to inherit. How you get around that reality? Answers on a postcard please.

That same commentator also suggested that, rather than a blanket ban on extra-rUK payments, the blockade could be limited solely to Scotland. I find it extremely difficult to suggest a way in which that this could be done which wouldn’t be seen as a blatantly discriminatory attack on pensioners based solely on place of residence.

“You can have your pension paid to you anywhere on the planet*”

*except Scotland

Again the strawman shows Dazell is unable to grasp the difference between rUK pays for rUK pensioners not UK pensioners.

I’m far from a legal authority but I’m fairly sure that one could be challenged in the courts.

Dazell is not a legal authority but as I've said it's already been established in law that NI contributions do not entitle one to a legally enforceable pension.

Now, if an agreement over pensions liability sharing IS reached then this may change and, being that it is entirely a political negotiation, it’s difficult to predict ahead of time what that agreement would look like.

It's not difficult, there is only one logical outcome from an electoral and logistical point of view. That is the outcome that both sides agree upon. In any case under any scenario a Scottish Government doesn't make a saving, it either (in terms of pensions built up before independence) pays for a population share of rUK and iScot pensions or it pays all iScot pensions on independence.

Neither scenario creates a windfall.

Common Weal will soon be producing our own suggestions about what a Scottish pension system may look like and how it would interact with the rest of the social security network. This may include some form of cash settlement from rUK to Scotland to compensate Scottish residents for the NI they’ve paid into the UK system over the years. More on that in good time.

Hopefully by then Dazell will have actually understood pensions, I'm looking forward to the cash settlement argument which I suspect will fundamentally misunderstand the bargaining position of Scotland on independence, the nature of pension liabilities and the concept of the NI fund.

It is true that the Scottish Government claimed in the Scotland’s Future White Paper that they would take up the pension liabilities. This was part of their stance that Scotland would share UK successor status with rUK and would share assets and debts.

No it was based on the practical, legal and democratic reality of independence and pension liabilities.

Remember that it was the No campaign which originally claimed that this wouldn’t be possible. If this has changed; if the pro-Union campaign wants now to seriously suggest asset and liability sharing. Time to make us a serious offer. We may even agree to it.

The UK did state asset and liability sharing, it's been stated since they guaranteed UK debt. I've pointed this out several times but Dazell continues to ignore it. It's easy to see why because soon as you look at the details, like so much of his work, it collapses.

I genuinely felt bad recently for using the "laser engineer" tag for Dazell. Far be it from me to imply that because he is unqualified in debt valuation or pensions that his own qualifications aren't relevant. I shouldn't have gone there and I'm sorry about that. However the trouble is Dazell continues to demonstrate that a little knowledge is a very dangerous thing, and as Ive shown here he's moved from a character for which deep down I had some sympathy for to one of downright deception and shoddy analysis.

Dazell may want to carry on issuing papers which don't actually reflect reality, that's his right, but he's simply demonstrating that he's now part of the Stu Campbell school of lie, double down on the lies and keep lying in the hope no one will notice. That's a shame it could have been so much better.

The regression of the Common Weal

Common Weal director Robin McAlpine came out fighting in defence of the woeful Beyond GERS report. He had to, the errors in the report the false assumptions and the downright shoddy work exposed within hours of the publication of the report has left his organisation's credibility in tatters. 

Sadly his response wasn't an attempt to justify their paper just a rather desperate attempt to play the man (me this in case) and a doubling down on a bluff that has already been called. Rather than accept the critique and attempt to develop their position, as some of his members did in the comments section of this blog, Robin has gone for regression rather than evolution. That’s a shame and one would expect more from him, so it’s all quite a let down. 

Craig Dazell - the author of Beyond GERS - also attempted to justify his shoddy work. I’ll deal with the relevant sections of his ‘rebuttal’ in a separate post. 


I won't go over the whole argument in the report – you can read a quick summary by report author Craig Dalzell here. What we sought to do was produce a proper report with verifiable references which anyone is free to explore.

And we proposed clear and understandable actions which could address the issue of the comparative fiscal situation in Scotland and England. You may very well not agree with them, but as always we wished to make it as clear as possible what they are so they can be debated.

Debatable is one thing, being beyond the realms of possibility is another. If you want to argue that it is debatable that rUK would provide and independent Scotland with a gift of say £100bn you are free to make that case, you are free to call it debatable, but it’s not credible Robin, it’s just not credible. 

That is why any attempt to show that an independent Scotland is as fiscally viable as the UK is such a threat – if all you've got is 'you can't afford it' then you really, really need it not to be challenged.

The trouble is you didn't attempt that, you attempted to be shifty, to try some dodges over debt, defence and pensions to pretend that it would all be OK with just a little bit of effort. 

That’s not the reality and anyone who has looked at it knows it. Furthermore its not that independence is not affordable, but I note the early strawman to attempt to frame this work as exactly that. However if you had spent only a few minutes reading the work Robin would see the case is that independence is not unaffordable but that it would create costs and a gap from the loss of the fiscal transfer that proponents need to honestly demonstrate that they can fill. Sadly Beyond GERS doesn't remotely do that. One is left begging the question, what is so wrong with the case for independence that you have to hide behind this kind of deception?

So as always we welcome that debate. It would just be nice if it was grounded in something a little more serious than the two blogs on which the whole unionist community seems to have relied for their response.

Perhaps it was because those two blogs were written by authors who are either qualified in investment analysis and pensions (that would be me) or one which demonstrates the rather elementary errors in the construction of your data. 

We propose that less should be spent on the military but that it should be spent in Scotland, defending Scotland. This means it is very easy to spend less overall but spend more in-country. Sure, we wouldn't be able to start wars all round the world, but a basic understanding of the profile of UK military expenditure in Scotland could have saved our blogger from missing the point.

Something that I agreed was entirely possible (if unpopular and unlikely in the Trump world of NATO) but conceded entirely that it was rational and fair for an organisation like the Common Weal to propose such cuts, however unpopular. 

The other blogger suggests that the UK could simply pass a law to remove pension entitlement from pensioners who retire in Scotland. At the moment anyone who has a track record of National Insurance Contributions has a right to a UK state pension, irrespective of where they retire. This applies to former citizens – such as pensioners in an independent Scotland who paid NICs their whole life.

The other blogger, who would still be me, (see Robin, it’s so important to actually stay on top of the detail) actually pointed out that both the Scottish Government and the UK Government agree: the Scottish Government would take over responsibility of the payment of pensions of all Scots habitually resident in Scotland at the time of independence. The point of independence would involve the passing of a law (which would be the Act of independence - and the only way to achieve legal independence) which would split these responsibilities along the lines that both sides agree. 

Robin then goes on, like Criag Dazell to make the point that a track record of NI contributions under the current situation. Yes the current situation where an independent Scotland does not exist. He then reaches (and hopes no one notices) with “such as pensioners in an independent Scotland who paid NICs their whole life”. Sorry Robin but that doesn't apply. As the ECHR noted in the Carson case a track record of NICs does not entitle one to a right to have a pension from the UK state. 

The UK already discriminates on the amount of pension one receives based on where you retire to. There is absolutely no legal right to a pension from the UK state based on a NIC contribution - hence Steve Webb’s caution in using the word right in front of the Scottish Select Committee. 

A pension is a discretionary welfare benefit paid out of current taxation and a NIC contribution record may entitle you to a pension at the discretion of the UK government it does not provide for a legally enforceable right to one. If it did then Craig, Robin and Stu Campbell would all have a point. However it doesn’t, and they dont. 

But either he is proposing removing the pensions from former British citizens all over the world (which is certainly subject to challenge and the Daily Mail will be delighted) or he's suggesting that Scotland alone of all the world's nations is the one to which people who paid NICs couldn't retire. California, Australia, South Africa – all fine, you'll keep getting your pension. But not Scotland.

Another strawman and another rather obvious blunder. For instance if you retire to South Africa or Canada you don't receive the same pension from the UK as you receive when you retire to Australia. How can this be if you have all this legal entitlement to a pension? 

Simple the UK has compete discretion as to what it will pay to retirees depending on where they are located. 

This all misses the point and I only put it here to note that their concept of a legal right is not founded on anything. 

The point is that pensions are ‘earned’ from the entire UK. Their payments are funded from current taxes from English and Scottish voters paying in and transferring their payments directly to English and Scottish pensioners. There is no pot, there is no scheme. At the point of independence that system simply splits. Instead of UK taxpayers paying UK pensions, Scottish taxpayers pay Scottish pensions and rUK taxpayers pay for rUK pensions. In all cases that includes pensions in payment and not simply future pensioners. 

I realise the UK is lukewarm on the whole human rights thing, but I feel that the Supreme Court might have something to say about selective targeting of people's legal entitlement for purely political purposes.

Again the poor research and understanding shows through. Pensions are assumed to be a human right or a legal right. They aren’t. They are a discretionary welfare payment - if you don't believe me ask the WASPI campaigners, who you would think the Common Weal would know about. Also maybe refer to the Carson Case (2010) from the ECHR which set the issue beyond doubt:

"The Court did not consider that it sufficed for the applicants to have paid National Insurance contributions in the United Kingdom to place them in a relevantly similar position to all other pensioners, regardless of their country of residence. Claiming the contrary would be based on a misconception of the relationship between National Insurance contributions and the State pension. Unlike private pension schemes, National Insurance contributions had no exclusive link to retirement pensions. Instead, they formed a part of the revenue which paid for a whole range of social security benefits, including incapacity benefits, maternity allowances, widow’s benefits, bereavement benefits and the National Health Service. The complex and interlocking system of the benefits and taxation systems made it impossible to isolate the payment of National Insurance contributions as a sufficient ground for equating the position of pensioners who received up- rating and those, like the applicants, who did not. "


Then of course, if we're all allowed just to sign bits of legislation reneging on previous commitments, why would Scotland keep paying the UK for 'its share of debt' as unionists are convinced it has to? We're in a world where unionists think you can just sign away responsibilities with the wave of a magic pen, but only if you're not Scotland. This really is Hogwarts stuff.

It’s not reneging on previous commitments it’s a simple case of a welfare transfer payment rather than a funded scheme. This was entirely known to the Scottish Government when they published their paper and with a little thought you can see why. Let’s say an independent Scottish Government decides to demand the rUK pays pensions to all those Scottish citizens who have paid into the UK system after independence as Robin argues. 

The rUK government naturally refuse as both sides agreed on this before the referendum and have no intention of having their current and reduced electorate paying for the pensions of citizens of another state. 

In these circumstances the Scottish Government is faced with a dilemma. Scottish pensioners will be thrown into poverty were this to come to pass. These pensioners wont be in a position to take out their wrath on the rUK government as they are no longer citizens of the rUK state. They can only vote in Scotland. So who will they take their wrath out on? The Scottish Government, who happen to be sitting on a huge windfall because they don’t think they need to pay pensions to Scots. 

There is only one way this ends. The Scottish Government pays the pensions of Scottish citizens, including those in payment. 

That’s why both sides agree, because in a democracy there is only one logical outcome. It’s why the Scottish Government issued a paper saying that they would take full responsibility for all pensions, it’s why their budgets made full provision for paying all pensions, including those currently in payment. It wasn't prudence on the part of the Scottish Government. It was simply the reality of the world they were going to inherit.

But now we have moved on to debt…

In any case, the whole thing is predicated on a repeated unionist misunderstanding of successor and continuing state. I actually ploughed my way through the Vienna Conventions on the division of nation states and Craig did a survey of international precedent for our previous paper on debts and assets.

Robin seems to have forgotten that in the case of debt Scotland will not be in a position to make such ridiculous demands such as we wont take debt. Legal independence flows only from an Act of Independence through the UK Parliament. To try to pretend that the UK Parliament will vote through a settlement that lets of an independent Scotland without a fair share of debts is beyond credible. Alas that’s the Common Weal’s position now. 

Basically, the rules are 'it's a share of everything or a share of nothing'. Either we both (Scotland and England) get proportionate access to everything (including institutions and currency) and are both considered successor states, or one country is designated as a new state and one the continuing state. In the latter case the new nation has no automatic right to out-of-country assets and institutions, but also no liability for debt.

A quite remarkable statement, seeing as the UK has already stated that on independence physical assets will be shared on a geographic basis (remember those north sea oil fields that Scotland always argue are ours) and financial assets on a population basis. That’s the Bank of England and UK Government gold and FX reserves. Which come to around £2-3bn on a net basis to Scotland. So along with all the geographic assets of Scotland the new government get some cash in the bank to build a new currency plus a population share of the debts of the UK. That’s about £120bn. 

The debt is the UK Government's debt. I'm weary of explaining that this is the law, whether unionists like it or not. If you take a mortgage out in your name and you share the payment of the mortgage with a lodger, you can't phone the bank and transfer half the legal liability of the mortgage on to the lodger if he or she moves out. What counts is who signed the contract – and it wasn't Scotland.

Yes Robin and I’m weary of explaining that in law Scotland only becomes independent following a UK Act of Parliament and for you to imagine that will not contain a debt servicing agreement in it then it truly is the stuff of very bad fiction. Scotland will sign the contract of independence and it will contain a commitment to debt. This isn't optional and trying to pretend it is just does a disservice to your readers. 

One of our bloggers claims that financing Scottish debt would be expensive because our borrowing rate would be higher than the UK's. Except we know this and have allowed for it – and we'd still save money because the UK debt was largely accrued at a time when UK borrowing rates were much higher. You'd think he'd understand this basic point.

I tried to stop my head from hitting the table at this point but I failed and I’m now nursing a rather sore bruise on my chin. Whenever someone who does not understand finance starts writing about a ‘basic point’ you can almost guarantee they are about to get it spectacularly wrong. This is one of those cases. 

Debt valuation takes account of the previous value of coupons (interest paid). This is a very basic point of financial valuation that anyone with a remote background in finance can tell you. 

For this section I’m going to cut a few corners but Robin et al clearly need this. 

Take a bond that pays nothing but annual coupons (interest) every year of £10. Let’s say the market values a bond that pays £10 a year every year forever at £100. It’s doing so because interest rates are at 10% right now. 

This is the old historic debt that Robin, Craig et al think there is a good dodge around. 

As UK interest rates have now fallen to 5% then surely now would be a great time to declare independence, issue our own bonds at 5.5% (because we’ve got our own higher rate that the Common Weal have allowed for) and buy out our UK share of debt. In doing so we swap old expensive 10% debt for cheap 5% debt. 

Surely this is the stuff of genius, if only the investment banks of this world had the Common Weal consulting for them! 

Sadly it’s not and the fact that it seemed to good to be true to the Common Weal should have been the clue that they have got it wrong. I’ve told Dazell several times that he’s made an error when it comes to debt valuation but he’s now so locked into this myth that he cant admit the error without losing face. I suspect Robin hasn't even worked it out. 

The problem is when interest rates fall from 10% to 5% the original bond is still paying out a coupon of £10 a year. The market then is not going to value it at £100, it’s going to value it at £200. That’s because bond markets react to changes in interest rates all the time.

You can have a bond at £100 paying £5 or a bond at £200 paying £10 a year (or if you like two £100 bonds each paying £5 a year). 

There is no free lunch. 

You learn that in Economics 101. Why didn't anyone at the Common Weal take that course? It would have saved us this embarrassment. 

The rest of the blog is a bit of a rant about income tax loopholes - all fair enough but I fail to see how closing them would not create behavioural effects as the Scottish Government have already stated. 

But with breathtaking hypocrisy we get this:

But this is not the debate. Instead we get Trump stuff, the statement of opinion as fact without engaging with any counterfactual ideas, without looking at history, without doing proper research.

In the case of pensions and debt there is no factual basis to the Beyond GERS paper or Robin’s statement. It’s just an assertion of legal rights that don't exists for pensioners or optionality for debt that doesnt exist in a legal independent settlement and most embarrassingly of all it’s based on an elementary error when it comes to debt valuation that any 1st year student at university could have told them.

I have hardly been uncritical of the state of the independence movement. We are two years past the referendum and barely a jot of work has been done to revise the case. We've been through three GERS reports and the official response looked quite a lot like a rabbit caught in the headlights.

Sorry Robin if our eyes looked wide. That’s because we couldn't believe you would think you would get away with this sort of shoddy research. I remain of the opinion (especially after your humiliating inability to understand debt valuation) that you are spouting this sort of nonsense out of ignorance rather than a deliberate attempt to deceive. However the more you double down on this fiction the more one can only come to the conclusion that you have joined the 'independence at any cost' brigade, that first cost seems to be your integrity. 

Their lack of seriousness makes them weak. Their lack of debate about what they are for makes them vulnerable. So they cling to their one tool – a spreadsheet – for comfort. Just listen to them squeal if you try and take it from them.

Robin and Craig it all comes down to the same thing. It’s your lack of realism that makes you weak. Your inability to actually openly and honestly address the position of an independent Scotland betrays your own lack of confidence in the case for it. 

As for the comment of clinging to the tool of the spreadsheet that’s worthy of the Lord of the Flies, the spreadsheet is tool for analysis, for you to attack that in your final lines just shows how low you’ve become, in the Gove school of ‘had enough of experts’. 

I’m just listening to you squeal with delight as you burn the spreadsheets on the fire of ignorance. 

Well done Robin you have truly ruined your brand and joined Stu Campbell in the post-truth independence at any cost camp. 

A calculator to bridge the GERS Gap

GERS is increasingly associated with some really desperate memes from the nationalist community. These are designed to show that GERS doesn't really represent the state of Scottish finances. 

The biggest issue seems to be that because the Scottish Government doesn't control all spending then GERS is irrelevant. The idea seems to be that the £25bn worth of UK reserved spending contains a vast array spending which the Scottish Government would immediately cut on independence and helping us to close if not eliminate the deficit. 

Therefore I thought it would be useful to provide a simple tool using the GERS data to provide nationalists with an opportunity to show what they would cut from the UK reserved spending to bridge the loss of the fiscal transfer. 

You can find the google doc here. 



Just enter a percentage figures in the yellow cells to show how much of reserved spending you would cut and it will show you how much you have cut and (in red) how much you still have to find. 

Most users seem to go for defence, no surprises there. Recreation, culture and sport also seem to get a good battering whenever there is an opportunity to do so, but it's social protection that usually ends up getting plundered to make up the difference. I always wonder what specific cuts to welfare (mainly pensions) the user is thinking of? International services (mainly Foreign Aid) is also regularly in the firing line, which is quite an interesting envisioned switch of emphasis. 

Finally just a couple of points. I've greyed out and blocked off the debt, common services, EU transactions and Accounting adjustments, they are either not optional (debt, EU) or just an opportunity to pretend cuts will arise from mythical efficiency savings.

Hopefully then when I ask my usual question: 'OK what would you cut' I can at least now point to this page and ask nationalists to actually show me how they would make up the loss of the fiscal transfer. 

***
One technical note I've used the GERS Table 3.8 data to provide the UK reserved spending. This has the effect of over estimating reserved spending which means that the fiscal gap will be closed quicker and easier in the tool than in reality. However for the purposes of this exercise it does the job.  

GERS: Beyond a laser engineer

The Common Weal's paper which was set to breakdown GERS and offer a real plan for an independent Scotland was given a heck of a build up. Finally after years of asking - what would you change - we would get a well thought out answer. 

I have to admit, my hopes weren't high when I read that the author was going to be Craig Dalzell - who made a complete pigs ear of currency options for Scotland - unfortunately my low expectations weren't even remotely met by the paper. 

Rather than a considered attempt to show how the deficit can be met. We ended up with a paper littered with the greatest hits of the cybernat movement, many of which I've debunked in detail on this blog (more of that later). That's a real shame as the Common Weal at least makes no pretentions about its left wing stance on most issues, a stance that we know would be unpopular in a Scotland that just voted for tax cuts and austerity. 

This then could have been a paper which showed us how a progressive and left wing government could have resolved to lead Scotland to independence by sharing the pain of change as equitably as possible. 

Instead we got something that ducks the main issue and pretends there are simple solutions to the loss of the fiscal transfer. 

The savings
The main savings in the paper come from Defence, Debt and Pensions. There are (wisely) no savings for overseas spending and I'm dismissing out of hand the savings on "Other" expenditure largely because it references out spend for Crossrail (not in GERS) or HS2 (only 2% allocation to GERS) all covered off by Kevin Hague here. 

Defence
As I've already posted if I were a nationalist looking to deal with GERS I would start in defence. Firstly the paper effectively junks any notion of the UK being in NATO, which is perfectly fair for a left wing agenda but demonstrably not one that Scotland seems to want. It therefore uses the base comparison of neutral Ireland for defence spending. 

Alternatively the paper notes that Scottish NATO spending to could fall to the less than 2% of GDP target value for NATO. This is fair enough given few members outside the US and UK actually meet that target, but it does rather ignore the fact of the recent election in the US and the President-elect's statements on NATO members paying their way. 

In either case this would be a significant change with profound consequences for defence and local spending in Scotland. Just think of all the other military bases that would close in Scotland and the effect that would have on the local economies.

Strangely the paper seems to ignore the effect this would have in Scotland and attempts to look at the cuts as a stimulus to the local Scottish economy. This may be the case if the money saved was being spent in Scotland but the author forgets that the saving is to compensate for the loss of a fiscal transfer. Any saving therefore will only have a negative multiplier effect on the economy. 

Still, fair play on this point. If the case for independence rests on leaving NATO and slashing military spending in what is an increasingly uncertain world then so be it. I just dont see it as remotely palatable to the majority of Scots. 

Debt
Here's where things veer far away from the rational. Dalzell attempts to find billions of pounds in savings through Debt. He casually notes that: 

"This figure will almost certainly be reduced upon independence due to the nature of the division of assets and debts between separating states."

Which isnt remotely true. The figure will likely increase. 

Firstly the division of assets and liabilities is largely known to us. Both states receive their geographic fixed assets and a population share of the financial debts and liabilities on independence. 

The geographic fixed assets issue is beyond dispute on both sides, largely because Scotland has no intention of taking anything other than her geographic share of north sea oil. I would fully expect the UK to make a play for north sea oil in the event of independence negotiations (citing the investment they have put into the development of the fields) but I would expect this to fall away during negotiations. 

That then leaves the financial assets of which Dazell has form on not remotely understanding. On a net basis these would be around £2.5bn to Scotland (£11bn gross). These arent likely to be used to offset debt as they would be needed by the new Scottish state for its own reserves. 

However Dazell's premise that debt can somehow be significantly reduced by Scotland is just laughable. I've shown here how debt is not something that is optional for Scotland and we would be taking a population share of debt in a separate debt section of the Act that makes us independent. 

Furthermore as our credit rating would be worse than that of the UK then we would expect that debt agreement to charge a higher rate of interest than the UK is currently charged. This would have a significant upward pressure on our debt costs. 

Debt does not provide an opportunity for savings for an independent Scotland. Indeed unless, like Ireland, we are prepared to trade land for debt and then default on our remaining obligations then it will remain a significant burden on a new Scottish state and probably cost us more than GERS allocates. 

Pensions
It's difficult to emphasise the extent to which my eyes roll as soon as I hear the words pensions in the independence debate. Pensions are horribly complex and take years of study to really understand the legalities, the mechanics and the dynamics of them. 

You can guarantee when a politician gets involved in them they are going to get several things wrong. But in this case when a laser engineer tries to understand pensions he gets it all wrong. All of it. 

Dazell attempts the usual pension dodge as espoused by Stu Campbell in the biggest lie in his Wee Blue Book. The concept that the UK is legally bound to pay for all existing Scottish Pensioners on independence, therefore the costs of servicing these pensioners will not fall to Scotland. 

Firstly this is not the legal position. State Pensions can be changed at the stroke of an Act of Parliament at any time. One need only look at the WASPI campaign to see a stark example of that in practice. The legal position is that pensions are paid at the discretion of a state. Why then would the continuing UK use their reduced population's tax base to fund the pensions of the citizens of what would be a foreign state? The answer is simple they wouldn't, and what's more both the Scottish Government and the UK Government agree on this point. 

I've set all this out here. 

To try to claim £8bn in savings from this is entirely mythical. 

Revenue
I've no intention of going into the revenue section of the paper, because it simply talks of raising taxes. Of course that's no surprise and what one would expect from a left wing author and organisation. 

However I will point out that the paper seems to imply that it would be possible to raise taxes (especially on the rich) and see no behavioral effects, the sort of behavioral effects that made the SNP refuse to raise the higher rate to 50p. Indeed it looks to me like there is nothing new here and it's at best a case not proven, especially in the light of the Scottish electorate just voting for tax cuts skewed to the wealthiest in society. 

Conclusion
This was a great opportunity for the Common Weal to take the issue of GERS by the horns and show that there was a viable way to for a left wing Scottish administration to equitably transition the economy towards the sort of society they wanted in an independent Scotland. 

Instead it deliberately ducks the big problems and literally makes up facts and figures to try and pretend it's actually quite easy. It's not, it's not remotely easy. The trouble is I'm genuinely trying to work out is this ignorance or deception?