I've noticed for a few months now that Business for Scotland are now trying to claim that Scotland shouldn't be responsible for UK debt because its historic contribution to Scottish debt.
That is, the author has done some calculations and came to some conclusions, but he's refusing to actually publish them. Believe me I've tried to get them, he refuses to answer questions or even post my questions in his comments section. It then got even worse at the start of this year when the author and I had a direct conversation. This is reproduced below and shows exactly how much of a charlatan he is.* But before I get to that it's worth stating clearly why I think they are wrong.
Richard Murphy has joined in the game as well. Having burnt his bridges with the nationalist community with his devastating critique of the SNP's currency policy, he was evidently keen to make amends with the nationalist community. I've been commenting in his blog and he's at least included the comments and replied to them (which shouldn't be mistaken for engaging with them because it's a horror show of deflection from him).
What better way to get back in with the nationalist community than to pretend Scots won't have to pay for debt. As I said I've been active on his comments section trying to extract his analysis from him, but he doesn't seem very interested in backing up his conclusions or data.
I gave him three critiques which I noted in his comments section, he deflected all of them.
"1 Political error
You cite yourself the UK Treasury announcement that rUK is taking on all UK debt, and the second clause to that statement that the Scottish Government will be taking on a debt agreement with the United Kingdom at the point of independence. You claim then that "the sum would not be due" which would be the case if the UK were negligent enough to pass an Act of Parliament creating a Free Scotland state which did not include a debt agreement.
So you can make your case that Scotland wouldn't have any debt but it would be based entirely on UDI (which it seems now you reject) or on the UK acting entirely against its own interest, in which case why not argue that the UK will not only agree no debt with Scotland but it will also agree a leaving gift of £1 million for every Scot. It sounds ridiculous, that's because like your case it is.
2 Data errors
The data which you have 'analysed' is entirely incomplete. It starts at 1980 and ends at 2014. You provide no explanation or justification for either despite the fact that up to date data is available and additional pre 1980s data can be created. The fact that the Scottish Government have not calculated beyond this date is telling in itself. So if you want a credible case can you explain why you can reach a conclusion based on the world starting in 1980 and ending in 2014?
3 Contradictory arguments
Your case is that Scotland would have credible case to argue that Scotland would not have to take a population share of debt due to your flawed analysis of history. However even for that flawed analysis to hold you would need to start with Scotland in 1980 inheriting a population share of UK debt. That's a self defeating argument because Scotland's share of UK debt in 1980 should also be based on historical balances. "
So I thought given the above the GMK conversation it would therefore be useful to detail the calculations which I've eluded to.
The 2020 debt model
Scotland starts in 1980 as an independent state. It takes a share of UK debt based on its historic debt at that time.
Then we look at SNAP/GERS for the net fiscal balance of Scotland in the UK. However now that Scotland has its own debt there is no need to pay for the UK debt costs, so these have to be extracted. This is simple enough as the UK debt interest payments are a matter of historical record and they are allocated in both GERS and SNAP as a population share.
This gives us a net fiscal balance for Scotland without debt. We now need to add in the cost of Scottish debt. For that we can use the debt allocation taken and multiply it by the 12 month UK gilt spot rate plus. haircut for the higher cost of debt which Scotland would face, as Scotland could not expect to borrow at UK rates. Additionally if Scotland was able to invest (say because its debt turned into a surplus then it can receive a (modelled) risk free return above RPI/CPI.
This then lets you project the Scottish fiscal position across a range of scenarios.
The key variables are the initial debt share, see below. 1 showing a population share (which Murphy and Business for Scotland must by definition reject as too small), a 2 times population share and a 3 times population share (in line with the current deficit and Scotland's contribution to the UK deficit when oil is not included).
The chart tells you everything you need to know.
1. Starting in 1980 is the best and ideal starting point for an Independent Scotland's finances.
2. No matter which position you are looking at Scotland's finances have been on a downward trend since 2000.
3 That downward trend has been sharp and hard since 2014 (when Murphy stops some of his analysis).
4 The analysis is VERY sensitive to that initial starting assumption of Scottish debt in 1980, the other assumptions about excess risk free return and haircuts are much more marginal).
Anyone doing this kind of model would spot point 4 very quickly.
This is a problem for Murphy or GMK. They either haven't done the work and don't want to show their workings (because it's self defeating) or he hasn't done the work and doesn't know.
Either way it's not a good look.
Let's just recall that by Murphy and Business for Scotland's own argument is a population share of debt for Scotland in 1980 would be inappropriate, it would have to be higher to reflect our higher contribution to UK pre 1980s historic debt without oil revenue.
Were Scotland to turn up at the negotiating table with a proposal to pay anything less than a population share of debt based on these grounds they would be laughed out of the room, by simply extending (or shortening) the date of your starting position you massively increase Scotland's debt liability.
A case based on a one off starting date of a 5 year window in a 300 year history is not a case, it's just a meme for those who like to crowdfund from the needy.
*Details of an messenger exchange between myself and Gordon Macintyre Kemp after I called him out on Facebook that his calculations were flawed. He then proceeded to private message me before blocking from my final response.
Gordon sent 21 February
Educate yourself and then maybe we will let you rejoin. Revealed: The ACCOUNTING TRICK that Hides Scotland's Wealth (2020) https://www.businessforscotland.com/revealed-the-accounting-trick-that-hides-scotlands-wealth/
You sent 21 February
I have. I’m eminently qualified in state debt valuation. You have posted to an article and book which cites your own private calculations which you refuse to publish.
Gordon sent 21 February
If you are eminently qualified do the work yourself - The Scotsman hired a leading economist to debunk the Claims once and they reported back that my claims were highly conservative. If an economist does original work then they can quote their own calculations. My book Scotland the Brief has more than 400 sources quoted. Where work has not perviously been done we have done our won calculation and in six years no one has refuted them. Please try. Until you have demonstrated the discipline and competence to do the research your opinion is worthless.
You sent 21 February
Yes I’ve read your book. I just mentioned that I had. It also cited your own private calculations, that you once again refuse to publish. I have done the calculations (*Graph above was enclosed*) and accounted for your fundamental contradiction and have shown why your figures are a fallacy. But it’s simple Gordon, just publish your calculations, surely you understand to cite ‘private calculations’ as a source is not a source but a blank assertion. So unlike you I’ve done the calculations, published them and cited all my sources and methodology. You claiming no one has refuted your calculations that you refuse to publish is beyond ridiculous. If you want to be taken seriously publish them and your model. If not just carry on as you are with zero credibility and publishing Trumpian propaganda that includes these private calculations and blatantly lying to pensioners.
Gordon sent 21 February
If you want me to take your figurers seriously share them with me and i will tell you where you went wrong. You appear to me to be just another troll in fantasy land the language you use eminently qualified issue egotistical and different to the langue that would be used by anyone that actually was - so go on send me your calculations and list your qualifications.
Gordon sent 21 February
Oh and how much wealthier did your calculations show Scotland would have been had it been independent?
You sent 21 February
Gordon You are asking for my figures when whilst simultaneously refusing to publish your own. How can you claim I’m a troll in fantasy land when I’ve been asking YOU for your private calculations. Surely you see the ridiculous position you have painted yourself into. Why won’t you publish. I’m a chartered insurer qualified in politics economics, investment asset and debt analysis and valuation. My qualifications are well known.
My calculations show we’d be worse off under independence, a very basic level of discipline would be to simply do a sensitivity analysis on your calculations. That’s one of the many reasons why your data is fundamentally flawed and doesn’t support your conclusions. We’re you actually skilled in this subject matter you would know this.
Gordon sent 21 February
The graph you shared shows Scotland in surplus for many years up till 2008. What happened to that money? Was it a) reinvested back in the Scottish economy, as you are eminently qualified perhaps you could democrat what size and what revenues Scotland economy would be/have right now had Scotland been an independent nation and reinvested those surpluses. 2) If they were not reinvested but just held till they were needed to pay down future deficits (deficits that would have happened if Scotland had reinvested the money / not being paying for debt that was accrued outside Scotland whilst Scotland was in surplus). where were they held - in a bank maybe? Well then you have to do the compound interest rate calculations and add that to the Scottish surpluses. You graph relies on the reader to believe that those surpluses disappeared into thin air and that is how I know you are not eminently qualified as a first year economic student wouldn't make that mistake. And final Scotland economy has always produced more then the UK on a per head basis and so your claim that a population percentage share of the UK debt prior to the historical Scottish accounts data start point is also false. Whats are your qualifications again?
You sent 21 February
Gordon, the numbers are cumulative and model that Scotland gains on from investment on the surplus, they are therefore showing a cumulative surplus becoming a cumulative deficit. As the headings show. If you’d actually looked and studied this you would have known, but your literally just thrown back a reply without thinking. It wasn’t 2008 in which things changed, you need to look at the change in direction on the cumulative surplus and deficit. But once again it’s good to see you haven’t paid attention at all, that’s the sort of mistake a first year student would make. You’ve also made an interesting claim that Scotland has ALWAYS produced more per head than the UK? Has it? What’s that based on? Seeing as it doesn’t right now it’s a demonstrably false claim, seeing as without oil that’s not been the case in the recent past, so why in history before oil would Scotland have produced more tax per head? Furthermore when you look at the data from pre oil days why does it not show what you claim? I’ve already stated my qualifications Gordon, they are considerably greater than yours in this area.
Gordon sent 21 February
RE and model that Scotland gains on from investment on the surplus, they are therefore showing a cumulative surplus - No they don't show any gains from investment on those surpluses - you are out of your depth. Just someone who knows enough to repeat propaganda and not enough to do basic economic calculations. Your argument just crumbled when you told that lie - your almost religious devotion to the failed UK system has made your opinion fact resistant. I have spent enough time on your tolling. You haven't listed any qualifications at a ll you are just a fantasist.
You sent 21 February
I'm not sure you understand this model at all. This is a cumulative model, and therefore it shows a cumulative surplus that is then drawn down as Scotland moves into deficit as a result of the actual day to day deficit exceeding the investment gains on the surplus. This then starts to decay the surplus and eventually turns that into a cumulative debt stock. None of this is particularly difficult and had you modelled the data properly you would know this and could see it. Indeed if you would just publish your calculations I could quickly point out the flaw in your own dataset, although it's blindingly obvious where that is to me. The rest is just emotional rubbish and deflection, surely you are better than this, try to actually debate the numbers, this is a straight closed conversation, there is no audience to play to so why you are doing this sort of social media trolling I have no idea.
I'm not sure you understand this model at all. This is a cumulative model, and therefore it shows a cumulative surplus that is then drawn down as Scotland moves into deficit as a result of the actual day to day deficit exceeding the investment gains on the surplus. This then starts to decay the surplus and eventually turns that into a cumulative debt stock. None of this is particularly difficult and had you modelled the data properly you would know this and could see it. Indeed if you would just publish your calculations I could quickly point out the flaw in your own dataset, although it's blindingly obvious where that is to me. The rest is just emotional rubbish and deflection, surely you are better than this, try to actually debate the numbers, this is a straight closed conversation, there is no audience to play to so why you are doing this sort of social media trolling I have no idea.
Gordon blocks.
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