I listened in to John Beattie at the BBC this afternoon and I gather Twitter tried to create a virtual spin room on the debate on GERS between Kevin Hague and Richard J Murphy.
As with his poor contribution in the National Murphy failed to turn up with any specific criticism of GERS. His argument once more was that it was an estimate and therefore "may" have been unreliable.
There was a fascinating section towards the end where Murphy showed that he was, frankly, "at it" and was only out to try and score some points for the furthest fringe of the nationalist movement.
When confronted with Beattie listing the conclusions of the Fiscal Commission Working Group, which was composed of a set of economists that Murphy admires and couldn't hold a candle to, Murphy started to stumble.
"They were looking at the data in a totally different way. All data is what, as an economist, what I would call a social construct... The issue is you have to construct the data to suit the purpose for which it is intended. They were looking at the data and adapting that data for the purpose in question and came to a different answer from what GERS was offering.
And it was entirely appropriate for them to do so. My point is that should be happening day in day out.... This data doesn't need to be be produced as a one off but consistently so Scotland has the data it needs to make the decisions that are relevant to the people of Scotland"
Quite an authoritative statement. Having blasted GERS and the underlying assumptions within GERS, Murphy then points to the fact that eminent economists use that data in a different way and re"construct" it to make it appropriate and useful. In doing so they came up with conclusions which were different from GERS.
So according to Murphy we should be following in the footsteps of the FCWG every year in respect of GERS and producing data their way day in day out.
Face first into the wall
The trouble is for Murphy. The Fiscal Commission cite GERS 19 times in their First Report. They use GERS (and the SNAP data for the period from 1980 to the start of GERS) to come to their conclusions. They give the green light to GERS as the "starting point for discussion on Scotland's fiscal position".
Furthermore the FCWG did not come to a different conclusion from GERS, they reinforced GERS!
As I said this just shows Murphy has zero credibility. Faced with his economic heroes using the data he gives it the thumbs up, faced with the Scottish Government using the very same data and coming to the same conclusions he gives it the thumbs down.
But does he have a point?
Perhaps realising that he's been rumbled Murphy recently tweeted out the following:
At first glance this seems a fair point. Don't we all want the best data for Scotland? If we can improve GERS don't we want to?
As an economist Murphy would be expected to understand the concept of diminishing returns. The cartoon version of which is as you throw more money at a problem it improves the position but after a while those improvements are very small and stop being worth the money.
The Scottish Government have placed considerable investment in GERS to get these statistics right and within a high degree of confidence. In my view that has been great value for money and especially since the SNP reformed GERS in conjunction with the Cuthberts in 2008. The Scottish Government could do more at greater costs but to what extent would it improve the accuracy of the data? Have we reached the point of diminishing returns on GERS?
Murphy seems to be arguing that GERS are in such a state that we need a radical increase in expenditure to improve the data. But what would that mean? Income tax is already collected separately (at considerable cost) should the same happen to NI and VAT? That would of course place a heavy burden on companies small and large. How about corporation tax should that be allocated on a local economic activity basis? That would greatly complicate the process of calculation and lead to a spectacular increase in accountancy and audit costs.
So that could all be done at some considerable cost to government and business but for what gain, slightly more accurate estimates?
Let's remember all government statistics are estimates (look at the continual revisions to past GDP for instance). So we are never talking about getting the actual data, just more accurate estimates.
Is it worth it?
So Murphy does have a point if GERS, and the data therein, if it is in such a poor state that we need a massive investment by the state and business to improve the confidence levels from +/- £570M out of £35BN.
Personally, right now I'm not sure what costs would be worth it to tell us whether the fiscal transfer is £8.5bn or £9.5bn. I guess Mr Murphy would like us to think that it is indeed worth such considerable cost.
Let's recall GERS was cited 19 times by economists with far greater credentials than Murphy could ever wish for, Murphy said that their use of the very same data was "entirely appropriate". He's all over the place.
Given Murphy's inconsistency on such a matter, one has to wonder why the nationalists are so excited about this. The answer, sadly for them, may be that he's the best they have.
Two things seem to have slipped your mind. One is that Murphy's argument concerns the quality of data available to the Scottish Government to run Scotland. At Westminster they have UK data, but Scottish data is an estimate of this. He is suggesting that Scottish data be collected. Is that too much to ask?
ReplyDeleteIn contrast Hague has argued that we can draw conclusions from GERS about an independent Scotland. The best example is the frequently heard argument that an independent Scotland would start with a "black hole" of 15 billion and the privations we would have to endure to fill this. There have been two criticisms of this argument, often expressed at the same time. One is to argue that the GERS data is dodgy, which is a substantial part of Murphy's argument (though his aim is better data for better decision making in Scotland) but also that with our own sovereignty tax and spend decisions would be different. This is recognised by inter alia the FAI and also by Deloitte. And just today it was said that "Nobody suggests that the GERS figures show what a future independent Scotland would look like.”- that was Kevin Hague, and it is the sort of thing that a few weeks ago he would have described as being typical of a GERS denier. If Murphy has done nothing else, he has forced Hague to recant on that matter. And don't imagine he will be allowed to forget it.
Thanks soccer dad, so what's wrong with the quality of data available? Murphy wasn't able to articulate that and indeed signed off on the very data you are complaining about when it was used by the Fiscal Commission Working Group. Are you able to tie up that particular contradiction?
DeleteEveryone I know (including Hague, Fraser Whyte and myself) consistently argue that GERS is only the starting point for a discussion on the fiscal position of an independent Scotland (that's the words used by the Fiscal Commission). The whole point of GERS is that it contains a fiscal transfer of £9bn which not available to an independent Scotland. Therefore by definition it cannot be a statement of the finances of an independent Scotland.
If you had actually read any of Hauge's work, or mine for that matter. Then you would know that there was no recanting in that interview, it was just the statement which we keep making and the question we keep asking. What would you change in an independent Scotland. If you are unable to answer that question you don't really have a case for independence, so perhaps have a think about it before wading into a debate you clearly don't understand.
As ever if Mr Murphy has a better idea on how to improve the methodology then he should submit his paper to the SG statisticians and the Government. If those ideas are incorporated he has a point.
ReplyDeleteExcellent commentary, thanks
ReplyDelete