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.
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.
Is it fair to say that the pension discussion shouldn't focus on ex pat entitlement but rather foreign citizen entitlement? genuine question - if i'm a uk pensioner retired to US/Spain etc and become a citizen of that country would i lose the right (excuse me) to a UK pension.
ReplyDeleteInteresting one Neil. Pension entitlement is not first order related to citizenship, if you became a Spanish citizen you would still (I think be able to retain your British citizenship as wel). However you bring up an interesting question if you somehow gave up your British citizenship (which isn't that easy) would you lose your pension (even if you had a full NI record)? I honestly dont know as I've not studied the effects of removal of citizenship.
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