Economy, Jobs and Fair Work Committee - 19 September 2017 Full Transcript

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Fair Work committee may I remind all those present to turn off any electrical

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devices or at least the sound so that it doesn't interfere with today's proceedings

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first of all item 1 is a decision by the committee to take items 3 and 4 and private are we agreed to do so thank you

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and I have apologies from Gordon MacDonald who's unavoidably detained elsewhere and may join us later in the

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meeting now we are commencing our

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economic data inquiry and we have five guests today

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Richard Marsh Margaret Cuthbert John McClaren Professor Richard Murphy and

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Professor Katya Montana so I'll ask them to introduce themselves shortly and the remit for inquiry is to

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examine the accuracy utility and comprehensibility of Scottish economic statistics to consider what data is

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required for effective delivery and scrutiny of policy and perhaps most importantly we would like to after

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looking at this issue recommend where any improvements might be made so we'll

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go to our roundtable session and the idea is that hopefully discussion will

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flow freely but not too freely and if anyone wishes to come in if they could

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just indicate by raising their hand so that I can bring them into the discussion at that point but we'll start

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perhaps with each of our guests just introducing themselves and very briefly stating their organization and the focus

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of their work I'll start with to my left with Richard Marsh and then we'll move her in the table so from Richard to

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Margaret and so forth so perhaps first of all Richard Marsh thank you very much my name is Richard Marsh I'm the

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economics director of a small independent consultancy based in Cocoa D and I've been working on economic data

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in Scotland for nearly 20 years

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after its customers I worked for no one not even my husband and and I started

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off like em at in a big business I see I and then watan as a lecturer but for

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many years then worked as a consultant but in recent years and I mean that for the last 15 I worked in major issues on

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the Scottish economy but may I see is completely independent people on PFI on

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Scottish water on Jerris but major issues to do with Scotland thank you hex

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civil servant the Treasury under Scottish government briefly sparked

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under Donald Dewar and Anna McLeish and then working for CPR at Glasgow University and fiscal fear Scotland

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defunct currently mainly working in Scottish trends website Richard Murphy

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I'm professor of international political economy at City University of London as you will tell I'm not Scottish I wrote a

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blog earlier this year on Jers and as a result I seem to have become engaged in

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this debate I'm a chartered accountant by original training and I probably am unusual in

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being both an economist and an accountant and bring both perspectives to this debate

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I'm Katya Montana I'm a professor of economics at the University of Aberdeen my area of research is mainly

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international economics and I've been working with teams across Europe on

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recently in particular on the effects of globalization labor markets and competitiveness thank you and I should

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say that the the sound desk will deal with the microphones you don't need to press any buttons on the desk in front

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of you and could I start with perhaps the question what is the the one thing

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that each of our witnesses would consider the key point in improving

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Scottish data which one of our witnesses would like to come in first on that

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Margaret Cuthbert to my mind actually we're very lucky with the statistics and

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professional staff that we have here my big problem is that in searching for

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data it's a political reason why I can't get the data

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I know clickers really to examine that we've come from dependency or a province

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of the United Kingdom through devolution which was accepted by everyone and we

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got our own Parliament I don't think we have made enough of the political and

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independence to a certain extent that that gave in looking after our economy

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and in collecting the type of data that is needed to run an economy and that goes all the way through from

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agriculture fisheries to Tercel transport you name it we need more

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discussion of these matters and it's political matters that need to be discussed because our statisticians

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cannot provide the data unless they have the purse to do so and that includes for

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example in exports where our survey can

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go out to a very large number of thousands they get a fifth of the

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answers back and they cannot force people to answer the questionnaire and

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on that we beasts part of our export

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statistics who else would like to come in professor Murphy I'd like to agree with

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Margaret to be totally honest I think the interest I always have in data is how decision useful is it and the data

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that exists appears to not be decision useful it was designed a long time ago for a different environment and has been

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modified since and quite clearly has been modified with good intent nobody questions that in the slightest but it

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ends up not being of much use to anybody in Scotland whether in the political domain or not to actually decide

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what decisions have been made who was responsible for them were they successful and what should now change as

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a consequence and that's what the data should do for people but it isn't doing that and it needs to be redesigned to

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achieve that goal and I would entirely agree as well that the problem is that the data to make this information

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decision useful does not exist I've concentrated heavily on tax because that is the area where I have most expertise

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but quite simply at the present point of time the UK v80 system the UK payroll PA

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ye system the UK personal tax system and in particular the UK corporation tax system as well as UK company data does

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not provide information that lets Scottish information be separately identified on a reliable basis as a

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consequence we end up with the situation where so much that is looked at is inherently unreliable and can't be used

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to form decisions someone else wish to come in Richard Marsh just in danger for

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the first time we're having all the economists agree I would like to put myself fully behind both those statements to say we know that the

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Office for National Statistics is moving away from large-scale surveys to making more use of this administrative data

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that Professor Richard mere Fitz just talked about so if the v80 the payer of the corporation facts isn't properly

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identifying the Scottish part of businesses and individual activities we're going to be in a very awkward

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position the one thing I would probably say would like to look at is what we've

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not yet had in Scotland is starting from a position with a blank sheet of paper for the last 20 years we've always taken

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the existing figures and statistics we produced and saying how can they be supplemented how they can be amended how

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can they be improved no-one's really asked the fundamental question saying starting from scratch what would you

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measure to help us make good decisions about how to grow Scotland's economy to

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do that I would suggest we need to have a more independent team of statisticians

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based in Scotland who can be innovative to can create you can look at

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next generation of statistics that need to be produced thank you John McClinton

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yep I'll change the subject little by large I agree with what's been said so

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far but to bring it back to a slightly more basic level and to the economy I

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think the first thing we need to finish off is it's got a full set of national accounts but the minute national

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accounts are published but a lot of it is derived or residuals and they're very

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low on the balance of payments very little investment these are key areas for the economy as a whole and if you want to then model the economy which

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you'll need to do with with the new powers and to finish off those national

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accounts will require more resources because the balance of payments including foreign investments to and

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from Scotland is very complicated so more resources in terms of of money in

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terms of get good surveys but also in terms of staffing or people interpreting the data and then once you've got the

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national accounts in police then you can start in the basics in place then you can start to add other things whether it

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be in the environment or wider measures but I think that is the the initially the key area to to concentrate that's

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where the much the push he's been put in so far and I think we should extend our patients finished thank you and

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professor Montana yeah I would endorse what has been said I would also add however that there are there is an

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enormous wealth of data which already exists and which which are not able to access as well as we could particularly

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the microeconomic level that exists it underpins aggregate statistics but

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researchers cannot access them and and I think that therefore if you think

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strategically in terms of how to go about improving the data situation in Scotland I think in the long term yes

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all which has been said in terms of greater autonomy and or Scottish government and collection of new data is

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important but it's also important in the shorter term relatively I think

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cost-effective in in relatively cost-effective manners to try to improve what exists and and

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accessibility to what exists is a key issue thank you and I think John Mason

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had it was actually on that point and it was what my record said which was it were not collecting the data I mean is

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that the problem were not norman's collecting the data or somebody's collecting it and we can't see it that's

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a very good point and there's an awful lot of data collected in Scotland the way in which

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we have virtually been forced down the road of for example public procurement

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and y'all know the history of public procurement and the PFI system has meant

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that we've ended up with non-departmental public bodies being in

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charge of large parts for example public procurement they themselves have either

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produced tremendous Colossus which give figures and I tell you from experience

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of many years you cannot get beyond the glossy figure and the only thing I

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cannot get the basis on which with the phone die might be told there was a survey carried out but I cannot find the

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detail of the surface and for some day who once was called innovate attentive by a Scottish government official M

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obviously I do like to find the detail now this become even worse with the

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Scottish features just to establish tops and where the Scottish features just is

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non-departmental public body and is subject to Freedom of Information the hops are not so how do you find that the

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information as I've said before we don't have some information we don't have any

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information really on imports how can we run the country as we hope to do in the

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future no matter which political persuasion yar if we do not have this basic types of data I think you're right

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in two points some data isn't collected we don't have the post to do it and some

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data through the system that has been introduced M of nd PBS and their

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associates we cannot get the data and so if I see finally Freedom of Information Act shallots are stoned as you probably

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know and that previously it was 25 years or 20 years now it's 15 if you're

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putting up schools in Edinburgh and it's 15 years before some deal it myself can actually get their contracts to see

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what's happening in construction the buildings may be falling down before you get there and a child killed before you

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get the information from yes it was a

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follow-up on the asks for additional data across the table and it's interesting to see so much consensus

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amongst economists I think we all agree that there is need for more data and better data but I think we also need to

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prioritize given limited resource in in this area with all areas so with the

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fiscal framework and now with us could I ask our guest what would be the the bare minimum do you think in terms of data

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statistics and resource we need to effectively implement the fiscal framework not just implemented but but

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model around it and understands the impact it will have on Scottish economy and the scholarship public finances what

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would be their the bare minimum asked to to be ready for the fiscal framework

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Richard Marsh that's quite a big ask

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what I would say is the the thing that struck me from the Scottish economic

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statistics plan that was produced to think a couple of weeks ago said that we

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have 11 full-time staff working on national accounts for Scotland producing

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our GDP investment pic and so on in the bean review he highlighted that New

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Zealand has 60 full-time equivalent of staff work on the national accounts the UK has around a hundred and seventy so I

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suppose it's difficult to sort of provide a sense of the resource needed but certainly even compared to countries

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of comparable size Scotland's national accounts team is is

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small and this is the point I think I've raised my submission that they're kind

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of perhaps unfairly calling them statistical scavengers because they're basically trying to pick the bones of

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what are essentially UK datasets could I just make a small point on I think what

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John Mason was talking about earlier as well there's a difference between the

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macroeconomic indicators that I think Margaret and song was just talking about think what's our liabilities what's a

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couple investments so on and then it's the Micro data and that is almost criminally underused we have a vast set

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of data covering most businesses in Scotland saying what their turnover is how many people they're employing how

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quickly they're growing we can link various sets of data together to say

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have these companies being supported by the enterprise agencies if they were did they grow more quickly than ones that

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weren't have they been quite marked by the tourism industry what happened to their productivity do they add more

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value those kind of things are largely a question of finding a way to press

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buttons on a computer now that but the thing that kind of surprised me from the

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submissions if you look at the submissions from Slade you ask them local authorities across Scotland what

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do you want from economic data they said increased localized data a few other

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things in publication of sub indicators they're asking more local data to publish it more quickly to include

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smaller businesses and provide more detail to me that reads they actually

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don't know what they want they're not really telling you we need the following things we've just had a review of

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business rates in which we could have pulled from that data set how much a

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whole range of different types of businesses are actually paying in rates compared to how much profits they're

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making broken down by small towns industrial estates how have you chose to

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do it and we didn't do it and the issue is it's not an unreasonable position for

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slate to take actually think they don't know what's possible as we have the Scottish government statisticians

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sat on this vast reservoir of data that could be used to a huge range of policy

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applications and the people that could use it largely not fully understanding

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quite reasonably what it can do and we've got to try and have a meeting of minds there somewhere but are you saying

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that partly that's because there's not the staff I mean I think you've heard - pushing buttons on computers but if you

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don't have enough people to push the buttons you can't do it is that what you're saying or is it the odd good does

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it go beyond that what I would say it's possibly an issue that you would need

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some extra staff I think if you're going to create a lot more data you would need more staff but I would say as a culture

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issue here in that can answer the

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question if your job is to produce a set

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of data describing turnover for 10 standard defined industries and that

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product has been produced in the last 10 years I wonder who's going to thank you

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for saying we produced a fantastic new way of cutting this seven different ways which so really interesting things about

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Scotland's economy right I'd like to bring in Richard Murphy a bare minimum

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would be to first of all agree what the accounting framework is because as I've

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outlined I don't believe that what we had Scotland has at present is adequate

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just become his account report on one basis

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an expenditure is accounted for on another basis and the consequence is that expenditure is always going to be

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higher in proportion to income injures and it should be in a properly balanced accruals accounting system because in an

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accrual accounting system you have to undertake both on the same basis and that is not the case in jurors at

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present and therefore right now the accounting framework is simply incorrect um I've also suggested and I agree which

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on a pattern that I think that there is a demand here for a full set of national accounts but that would also of course

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include a proper estimation of what the liabilities of Scotland are as well not

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just imports and exports and so on but also what are the assets and liabilities because you actually need to have a

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framework against which you're measuring improvement or not and without that you actually haven't got an accounting system and that is absent as well at

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present so there is a very real need to go right back to this the start point

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that Richard Marcia referred to that would be a first bare minimum the second

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I am persuaded that although there are major problems as Margaret covered as

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explained with regard to getting data with regard to expenditure expenditure is probably better at least within

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Scotland not for Scotland but within Scotland better recorded than any other part of the existing data even if it is

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difficult to get at where as the income side of the equation is very difficult

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to pretend that it's properly recorded I was at another hearing in this Parliament earlier this year where we

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were discussing taxation and devolved taxation powers and what is very clear is that there are inherent conflicts of

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interest inside many of those devolved taxation powers that are contradictory

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make it exceptionally difficult for anyone in Scotland to decide how to use the power because for example tax say

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income taxation on earned income is devolved and income taxation on unearned income is not and it is incredibly easy

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for a tax payer to read describe their income from being earned to unearned and

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therefore avoid the powers so that does have to be if those devolve powers are

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to be properly you much better information on taxation and that does require a new agreement

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between the Scottish Government and HMRC not revenue Scotland but HMRC because

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this is a UK as a whole decision to identify in particular where v80

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destination the point of delivery of services is not the point of supplied at the point of delivery because that's

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what is important for v80 and it's not recorded but also with regard to corporation tax

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for example who owns Scottish companies companies that appear to be Scottish and how to apportion income between the two

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and this is an area I've worked on for 15 years and been told persistently it's not possible but now we are reaching

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international agreements on things like country by country reporting to apportion income between states if we

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can now agree how to do that in broad principle within Europe we must be able to agree how to do it in broad principle

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within the UK it just requires the political willing to actually produce the underlying data to achieve that goal

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and it's not that difficult to do I

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guess the answer the question goes what are you going to use the data for so

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currently we're quite well despite a lot of data versus other regions of the UK

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if you don't mind my expressing it in those terms of them but we'd honestly use it for very much academics they

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rarely use the Scottish data I mean some will and the micro data's pretty slightly different but in terms of GDP

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data national account data because it's not in their interest because it doesn't

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do much good in terms of their career it's not really used in the public debate I mean I put out something every

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time that quarterly GDP figures come out and really if ever is anybody interested

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or is anything picked up in the papers and this goes through to a point I made in my paper about the media aren't

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particularly incident by myself we'd say the Parliament isn't particularly interested in comparison to other Parliament's in the economy so if you're

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not actually going to use it for much you're kind of wasting your money if you if you want to put it into that apart from of the minute know with you

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with the extra pose you'll need to forecast so that means you you'll need a decent model which again goes that back

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to distant national accounts but even in that model you could spend models are

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very expensive to run and you could spend quite a lot of time and money in that model and get results that are

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guaranteed to be wrong how wrong is an issue but the OPR has an awful lot of

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money and is always wrong and he's been very badly wrong for a number of years now all Scottish models currently are

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not as extensive as developed as that will be ours ones so if they were better

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that pure happenstance so again you're not going to get thanked for building a

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complex model that's quite expensive when it continually comes out with stuff that proves to be wrong which was a

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point that Jeremy Paxman puts at the head of the OPR in a famous interview so

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it's a difficult question to answer because there isn't you're not guaranteed to get something that is deaf

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there isn't necessarily going to help you a lot the only thing I would say about the mortal is that yes the model

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will be a variable quality and be wrong

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most of the time and we'll never get big ups and downs but who would not try and

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model what their public finances are going to be you are flying blind if you don't do that in the same way a company

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wouldn't we it doesn't know where it's gonna sail but it's going to make a prediction or a forecaster for it it

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hopes to sail and then adjust as time goes on and that's what you do with mortals I think I'm going to take

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another couple of supplementaries from committee members and then perhaps bring the our other two guests in on on this

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question from Dean Locker first of all Gillian Martin and then Richard Leonard so we're about to embark in this

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Parliament this week and probably for many months to come on a big tax debate on income Scottish rate of income tax

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this these gaps in this data this is ojen absolutely urgent and I want to

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know your thoughts on the the issues around the lack of information we get on taxes that are reserved and

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obviously that includes corporation tax but and how that lack of information

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around Scottish corporation tax in race the Scotland

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VAT base in Scotland is going to impact on the tax debate around the Scottish net rate of income tax given the gaps

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that we have right and perhaps Richard Leonard's question then will bring our

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guests in on on these issues to reflect on something which both Richard Murphy

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said and I know John McClaren includes in his written submission and and

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Margaret Cooper also talks as well about business registration I'm interested in a couple of areas around this first of

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all to what extent do we really capture all businesses that operate in Scotland

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versus businesses that are registered in Scotland versus businesses that

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registered in the rest of the UK versus businesses that are registered overseas you know I wonder how thorough going the

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collection of data is in all of those areas because we know that from statistics how reliable they are we

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shall see but around about a third of the turnover of the GVA in the Scottish

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economy he's overseas owned which is why I think John McClaren makes the point in his paper that we're moving to us to a

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calculation now of gross gross national income rather than just gross domestic product in order to try to understand

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the extent to which there is leakage from the Scottish economy so I don't know I don't know whether you could

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perhaps give us your thoughts on that new development and also where we stand

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and how reliable do you think we are with the collection of data based upon

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country of ownership herbs Margaret Cuthbert and then Katya Montana well

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that is actually a lot of work going on right now in statistics in the Scottish Government on businesses and they're

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working with awareness on that and that's good on just know I quite appreciate the position right now is

28:06

very difficult for example in the tables that we get the the ones that say businesses with no

28:13

employees they can sit and think about that for long enough what exactly does

28:19

it mean a business with no employees and yet it might be in there as we have it a

28:24

growth in the number of businesses well we also have as you've rightly said the

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problem of other companies from other countries who are ruining our assets

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this becomes extremely difficult when for example we've got these new hops set

28:43

up and each one of them has a private company in there it turns out for some of them that private company was only

28:51

established a couple of months before they got the contract to be part of the

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team of the hubs and being part that team is really important because if you're a big M construction company and

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you're in that group and that's sure you get quite a lot of the business and when

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you look at that company that's just been established Scottish company registered in Scotland you find all of

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the directors on the street and Lombard Street in London so we're wide open to

29:23

big big problems which are really not statistical and that need other types of

29:30

input which we've not got and there's an important point and on the way through

29:36

so hopefully that table I mean I'm getting carried away there are other things I want you to vote other rooms so

29:43

leave that peace you welcome back to that thank you and I can't even tell ya

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I think that the issue of the ownership is is a big one because the Scottish

29:55

government supplements the annual business survey by commissioning - what

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is it call now dun & bradstreet to provide information about the company

30:09

which are foreign owned but we don't get hold of the we cannot put our hands on those data I mean the data the

30:16

information is is produced at the industry level but we don't have information at the firm level so where

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as the annual business sir that can be accessed to the sit through the ons secure lab the Scottish data

30:28

cannot so I you know III disagree

30:34

slightly with what John McLaren said earlier that academics are not do not have an interest in in doing work on

30:40

Scotland I mean regional disparities for example in productivity are very central to economic research but it's very

30:46

difficult to get hold of the data to analyze this as far as cotton is concerned and the data does exist so

30:52

accessibility is a key issue as well as the the ability to link the different

30:57

datasets and and and this is I go back to what I said earlier not all of the

31:04

intervention which is required is necessarily very costly I'm not a statistician so I don't know exactly how

31:12

many buttons need to be pressed but certainly it it I don't envisage it to

31:17

be very difficult to you know link link think link things up at the source

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upstream in other countries the data the different data sets are all linked up as

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I say upstream and in in the UK it is you know the individual researcher who has to make the effort to link the map

31:37

and apart from the margin of error which clearly increases but we may have three

31:44

different people in Scotland doing the same thing so there is a huge duplication of effort and and in essence

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you know waste of public money because we are we are doing things more than

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once just are we in a situation where

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the data exists or is it a question of definition so for example we'll come on to Richard Murphy but he commented about

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companies now you've got obviously you've got Scottish registered companies English registered companies they can

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operate in England Scotland and abroad you can have English an example an

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English registered company but owns property or land in Scotland which is then rented out all sorts of questions

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about how that income is defined as being Scottish for taxation purposes or not arise so is it that the

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information is not available in a data form that economists can use or is it

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the question of the definition which may go into political questions already referred to about how that income should

32:54

be defined as whether Scottish or English or in what way and if one thinks an international level big companies

33:01

like Google and so forth and where they pay tax or how much tax they pay what

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exactly is the I know about the issue for I think there are certainly discrepancies between data sets about

33:14

methodological definitions as well as sample size so that is probably where

33:21

also some cultural change is required not only in addressing issues of accessibility but also there is a

33:27

difference between accessibility and ease of use so you can access sometimes the data sets but then when you try to

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put them together they don't match in terms of definition in terms of sample size and time coverage and so on so

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there definitely are issues in Scotland with respect to all of those dimensions

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but all I'm saying is that making an effort in trying to overcome the accessibility and the link ability she

33:53

will also bring to the fore that type of of constraints and and and it you know

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there are there is an infrastructure in place in the UK about data collection which and I go back to something that

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Richard Murphy said earlier I mean it is I think very possible to and should be

34:12

very desirable to try to work more closely with do ons and HMRC and so on

34:18

to make sure that the the UK data collection as a better reflection of the

34:25

Scottish sample thank you and Richard

34:31

Murphy you wanted to come I do because I think these two questions are directly related to each other

34:37

the question on income tax somebody asked me to write about this yesterday and the poor I would repeat basically

34:43

what I said in April here in this room

34:48

the question on income tax in Scotland is one of how effective is a rate rise

34:53

going to be more than anything else and the answer is it may well not be very

34:58

effective because it is so easy for people to incorporate what otherwise looks like an employment turn it into a

35:04

company it will have an employee I expect it won't have no employees but it will probably have one who will be type

35:11

aid a tiny salary will then be paid a dividend to cover the rest of the remuneration and that will be subject to

35:18

UK wide income tax rates not Scottish income tax rates and so tax avoidance will go on it is as simple and

35:25

straightforward as that Scotland cannot enforce its own will with regard to its own income tax rate when it is so easy for income to leave the Scottish tax

35:32

system and the question I was asked was will there be massive capital flight out of Scotland to avoid a Scottish tax rate

35:38

and my answer was straightforwardly no there doesn't need to be because you can turn it into capital within Scotland did

35:44

not pay tax on it so it doesn't need to fly anywhere the tax system let's that happen domestically and at that point

35:50

this debate becomes you know not meaningless of course there are loads of employees in Scotland but there is going

35:56

to be a lot of tension as a result of that but this also spills over into this

36:02

question of do we know about Scottish businesses there is a very interesting statistic which companies house based in

36:09

Cardiff produce every year because that is where the Scottish company register is actually run and it says there have

36:17

been no prosecutions under Scottish law with regard to breaches of company law

36:24

since 2008 now I don't know why there been no prosecutions under Scottish law

36:29

with regard to breaches in company law since 2008 but they appear to say they don't know of any does that mean that

36:35

Scottish law does not exist with regard to the application of company law now I don't know it probably doesn't why

36:41

because we don't have any company registration in the UK anymore must be clear the company registrar in

36:46

UK receives information but it does not check its quality there are apparently

36:53

four people reviewing the accounts of nearly 4 million companies to make sure

36:59

that they have some truth and accuracy I will tell you that the only piece of information that is checked on the form

37:04

sent to Companies House is the postcode so long as you put an accurate postcode on then your form will be filed

37:11

everything else is just inconsequential they do like the balance sheet of a set of accounts to balance but given the not

37:17

every company that manages that and they get away with it that's how weak the data is we don't know who owns the companies the new

37:24

regulation on beneficial ownership is entirely voluntary you can get around it by simply saying there isn't anybody who

37:30

controls this company and nobody checks at all there is no data on source and

37:35

destination of revenues and 90% of small companies don't have to file accounts which profit and loss account anyway

37:41

bluntly we are living in the Wild West when it comes to all the wild north if

37:46

you like when it comes to company registration and data from Companies House if you want to have a point to

37:53

start half a Scottish company registry that actually enforces beneficial ownership rules which requires that full

38:00

accounts be put on public record which reduces the risk and actually says that you're meaningfully prosecute people

38:05

when they don't fulfill their obligations to either file accounts will pay their tax but at the moment so many

38:11

people get around their obligations by registering your company it's ridiculous it's just license fraud but surely is

38:17

that not dealt with by directors disqualification actions which of course there have been in Scotland since 2008

38:24

Oh quite regularly do they not they say they're not taking place under Scottish

38:30

law I don't know why they say they're not taking place under Scottish law well what is not under Scottish law they say

38:38

there are no they do not know of actions under Scottish law perhaps they're using English law to prosecute in Scotland I genuinely don't know why they make this

38:44

weird claim the point is though let's not worry too much about that particular issue the point is this is a uk-wide

38:50

issue there are around 5,000 prosecutions a year for failure to comply the Companies House regulations I

38:56

don't dispute that of the of the prosecution's over Haffer dropped when somebody turns up

39:02

with a document which is the reason for the prosecution in other words if you haven't filed your accounts but then

39:08

offer them to the court the prosecution is dropped that reduces to two and a half thousand but four hundred thousand

39:14

companies a year in the UK as a whole not for Scotland but in the UK as a whole but proportionally I suspect the

39:20

data is the same for Scotland disappear without trace that means they are literally struck off the register

39:27

because they don't meet their legal obligations so in other words they don't

39:32

have to pay their tax because they simply disappear and very few of these cases have pursued less than 1% of

39:39

pursued well it's so easy to get around your tax obligations as a result you're not in a position to tell us how many

39:44

directors have been subject to disqualification proceedings in Scotland and I don't notice I speak of Scotland

39:51

but it'll be a lady in relation to failing to file documentation or

39:58

accounts you wouldn't be able to tell us that would you I would be very surprised at this more than 200 a year so there

40:05

might be that there might be right but it's a tiny proportion is the number of companies in Scotland yet Scottish

40:12

government says 345 thousand businesses in Scotland yeah well just let me to stop you though but if you don't know

40:17

the numbers I mean we don't know the proportion of companies we don't know what is being done in terms of government enforcement in Scotland one

40:24

we'd have to look at the actual statistics of what actions are being brought before the courts and so forth

40:30

and so on but if you're not in a position to comment on that are you I'm saying to you that there isn't the data

40:36

available in any way there isn't a system to make that data meaningful because there isn't a proper regulatory

40:42

system to ensure that there is compliance in the first place okay no I mean that that's a different question

40:47

there may not be data accessible to someone like yourself but that's why I can't answer your question well that's

40:53

fair enough but one cannot then or you cannot make assertions about there not being prosecutions or whatever type of

41:00

court actions be I was quoting characters house they say there are no prosecutions under Scottish law yeah

41:05

okay well perhaps we can move on I think Richard Marsh wanted to add comment and

41:12

I think the Whiteman then wanted to come in with a question very quick point not wanting

41:19

to do down anything was just spoken about but I think the point is that

41:24

businesses are messy and they're difficult to measure almost in the same way just like I get my toddler ready for

41:32

her nursery in the morning businesses can make it very difficult for you to measure them they don't stay in place they move about and they change and

41:38

occasionally go out of their way to make your life very difficult the point that Richard landed was was making he said a

41:44

third of the economy is foreign owned you mean the the business economy

41:51

there's a big issue with trying to measure the public sector in Scotland

41:56

and we shouldn't lose sight of that but actually we really to know how productive our public services are in

42:03

Scotland and the only point I suppose is a cat organic kind of agree with with

42:09

most the points that that you've made I actually think it's great when you have messy datasets colliding together that

42:17

actually don't make sense because if they did I would be equally as suspicious of them so the ideal world is

42:26

to actually take these datasets that probably weren't made for linking together but to actually put a bit of

42:31

time and effort in to try and say they're consistent messages coming out of this - Gillian Martin your point

42:37

about how can we measure these things properly if we come to kind of like if we appreciate this is difficult to do but

42:43

what's the best method to do it I was always amused by trying to measure

42:50

corporation tax in Scotland and we always said well what's the value of our economy what proportion of that is

42:57

roughly profits the operating surplus and we'll take a pro-rata of what the UK

43:03

is doing hugely blunt but you can say okay well it's probably it's probably

43:08

not a million miles away but it's probably wet finger in the air about there could we get any more data from

43:13

the treasure in HMRC no absolutely not impossible 2014 suddenly we get a beautiful piece

43:22

of research linking all the administrative data and cooperate in tax records with businesses

43:27

identified two Scottish to actually get a far better measure of cooperation tax

43:33

paid so Gordon I think that's the point I was making terms terms of the culture it's when there's pressure there's a

43:39

need to actually think of a better way to do things methods are quite often found thank you

43:47

no sorry John McClaren then Andy Whiteman I think Margaret Cuthbert wanted to come in perhaps after Andy's

43:53

point yeah John McClane just done did when the taxes that we have earned and

43:59

perhaps the corporation tax that there would be interesting I mean the three big taxes are income tax national insurance v80 those by far outweigh all

44:07

the other taxes in terms of songs but it's the debate in the minute in

44:12

Scotland is about perhaps moving the additional rate up or down the cylinder it doesn't give you much very much extra

44:18

money so unless you use the remove the basic rates and also that interestingly before the Laffer car of was used by

44:27

Alex Salmond to say that cutting corporation tax might be a good idea to get more people in but that was

44:33

obviously originally applied to the income tax so the studies that the

44:39

Scottish government should do should be looking at both sides they should be saying if you cut income tax without actually bring more people in but by

44:46

being extra competitive I'm not saying that's the right thing to do but I mean that's what the study should be doing from from all sites because they don't

44:53

have corporation tax powers at the minute probably leave that open a minute but it is becoming it is quite a

44:58

difficult issue because you've then got to say well what in the current modern day are going to be the behavioral

45:05

impacts to those changes which is probably unknown but you can be guessed our best can I finish my pointing in and

45:13

the other thing is going back to Rich's point I mean we don't really need to

45:18

have gni modified Jeep DP or whatever as a region even with some taxes devolved

45:27

if we don't want to if you had Phil Phil independent sort of fiscal independence it would be important don't need it but

45:34

what it is important or interesting for it is is in terms of getting the right Paul

45:40

even with if you stay a partially developed region within the UK because

45:45

for example how do you improve Scottish ownership how do you how do you make these things that are currently an issue

45:51

better and you want you won't understand that until you have a fuller understanding the economy which is why

45:56

the Irish economy looks at these about three or four different measures and just to just recently introduced a new

46:04

modified gni measure because the old two measures suggested that in 2015 our

46:10

economy in real terms had grown by 25 percent which is clearly absurd so they

46:17

had to introduce a new measure which only goes back a few years but but Scotland it is a is in a similar

46:22

situation part of the cause of oil partly because foreign ownership that it's very difficult to actually really

46:27

understand what is going on with the Scottish economy and therefore how wealthy and prosperous it is and how

46:33

it's grown to bring Andy white my name in case he has a point that's I'm going

46:39

to be superseded if we carry on and this very interesting discussion thank you wanting to move the

46:45

conversation on a little bit I'm I was interested in Richard Marcia's comment about starting with a blank sheet of paper and this is an opportunity because

46:52

we're at an important time in terms of public finances and tax payers in this Parliament and the intertwining between

46:59

the interrelationship between tax powers and how they're used and the performance

47:04

of the economy I noted in a number of witnesses statements I thank heaven for giving a lot of very very useful written evidence that there was there seemed to

47:12

be support for making the Scottish statistical collection a more

47:18

independent project with an independent authority and possibly with more powers

47:23

I was a bit disappointed to read Scottish enterprises evidence that said the Scottish economic data are reliable

47:28

as far as we were are aware and if there are any inaccuracies for whatever reason they're likely to be small it's our

47:34

chief economic development agency for the central center of Scotland so I just

47:41

witness is would agree that we need to move in a direction that gives us a more independent statistical authority with

47:47

greater powers to compel the acquisition of data and I note for example whatever one thinks of the argument between the

47:52

chair of and Boris Johnson that the chair of the ONS felt able to speak out when he

48:00

rightly or wrongly felt that statistics were being misused we couldn't do that in Scotland because there is nobody of

48:06

that nature commenting at least and Scottish statistics I'm sure the chair of the UN s would speak out if he felt that any members of the Scottish

48:11

government were misusing UK and when S collected statistics so I wonder what your view about independence and greater

48:17

powers for us to STATS in Scotland I also start with Margaret comfort just very happy to answer than

48:25

that one we actually did have much more independence on the chief statistician

48:31

speaking out in Scotland prior to devolution at that particular

48:37

time he or she could go with also he mind you could always go directly to the

48:43

head of war ENS and stand up for the quality of statistics that went with

48:51

devolution and I cannot think of any example where the chief statistician has

48:57

been able to stand up and see we're not doing that and in fact we have seen recently even that the accounts

49:04

Commissioner given M if that was true that was in the papers but actually if

49:12

we had one M and E we might actually have it a proper answer to your hall of

49:17

government accounts question which you asked last year um and you asked could we have full of government accounts and

49:23

the answer came back which was completely messed up we do not have whole of government accounts we could

49:31

have them but somehow other people are stalling is this because the liabilities

49:36

of Scotland would be shown if we had them and this all adds up to have we got

49:42

the proper system in place to make sure that we are no longer a colony but

49:49

actually moving forward as this Parliament xbase to be doing and its

49:54

master just actress's a lot of politics besides your criticism of the academic world as well in the 1970s when I

50:02

produced the first paper in a war on public expenditure in Scotland I was

50:09

told at that time bro this gotted head of the Scottish under pop of economic research that in fact that was a

50:15

parochial thing that was not carried in Scottish journals I see no difference

50:20

today other than the fleece revived under and in fact there is a freezer of Ireland of use that people as one of the

50:27

first economic reports we have to change not only the effect of committees like

50:34

this but our academic world it's appalling what M John was able to tell us today

50:42

about lack of interest why are we being for any contribution to them if they're

50:48

not actually producing decent stuff on the Scottish economy which is helping groups like you did you want to expand

50:57

on the point of it why since devolution you say that hasn't been possible I mean I don't think thank you

51:05

we seem still to have a mindset that we are collecting the data that is fitting

51:14

into a larger group I give you examples on that on agriculture you know we're

51:24

not going to have any comment whatsoever on the agricultural statistics for five years here we are facing breaks it sit

51:33

in the papers we probably didn't survive a Supra supermarkets probably win survive for four days if things stopped

51:40

and as far as they like a cultural statistics school it's just a series of data and it's meaningless to most of us

51:48

may be true as far as we go fishing if

51:54

you go into fisheries and you ask about it can quarters be changed from one

52:00

group to another you'll get a series of chats telling you oh no you can't move

52:06

the quarters but actually you can sale the ships and the ships have the quarters so your lambasted with

52:14

information which at the end of the day is difficult to understand no I give you

52:21

all a lovely thing to do over next week try it yourselves and see how many hours

52:26

you spend on it and how much brandy you need at the end of the day so we have we

52:33

do have a big problem but actually I think a lot of you if I know you some of you into me through I think it'd

52:39

actually be quite interested in what taxes could Scotland actually put in

52:44

place there are not these ones as John defined and take up most of Earth

52:51

taxation but in fact don't necessary have to strip in society hopalong tax I

53:00

mean that's just one of them many one of the many but I'm sure you can all think of other ones why are we still sticking

53:07

to a taxation system that it's maybe not appropriate to Scotia economy or

53:13

Scottish society right well thank you I think that's starting to strain the questions of politics and what we might

53:20

do is I think we're trying to focus on what the statistics and data that we have at the minute are Richard Marsh you

53:28

wanted to commend it and may I ask do you think that these statistical teaming Scotland has been less independent since

53:34

devolution well I suppose it's I think I echo what Margaret says it hasn't been

53:41

independent since devolution in terms of what's happened it's really the pressure

53:48

that's been placed on Scotland's are the independence the effect of Independence of the Office for National Statistics

53:55

what what I'd say is we've got a Scottish fiscal commission and we have

54:02

the National Accounts team and they've both got around eleven people working for them the National Accounts team is

54:07

by far the most important team in Scotland without producing that core

54:13

economic data we could not forecast we would have nothing to work from one of those teams is independent and well

54:19

resourced the other is not we have to think carefully have we've got the priorities right in terms of thing I do

54:26

you want when you you you mentioned the forints Kotori and the the six authority the the

54:35

example I kind of I kind of give was was jurors was produced last year on the

54:43

24th of August and it's a national study was public ation it's a kite mark publication produced by the government

54:48

so we near the data was coming out of months in advance the day before a

54:53

previously unannounced paper on the cost of brags at the Scotland is produced

54:59

without any warning on the Tuesday I think it was the BBC's Brian Taylor

55:04

covered it to say is this politics or arithmetic and saying clearly the government is seeking to preempt the

55:11

results of jeers the next day that in itself is very worrying that you have a

55:18

producer of official and national statistics that the BBC's Brian Taylor

55:25

is suggesting could be seeking to preempt its own products whilst that's

55:31

worrying that there are two things the huge important that didn't happen unlike

55:36

the situation over the weekend the statistics regulator didn't say anything it wasn't called up as a potential

55:43

breach of the code of conduct and perhaps more importantly Scotland's chief statistician didn't say anything

55:50

so if you have an independent statistics body covering the UK saying they're

55:55

disappointed and surprised at someone confusing a grocer net figure the chief

56:02

statistician would suspect would be furious order as close to furious as a

56:07

statistician can get that someone's tried to priam it that someone within his own organization has sought to

56:15

preempt a kite mark publication but at

56:20

that moment at the moment the guy who's actually fooling effectively filling the role of the chief statistician and the

56:26

regulator at the same time is effectively the BBC's Brian Taylor and he's got a lot on his plate so we

56:31

shouldn't really be leaving this to to the media to kind of police and point out the role of the statistics you say

56:39

chief statistician you mean the Scottish chief it's a small distinction but very

56:45

important for the ONS the national statistician is independent of

56:50

government in Scotland the chief statistician is the Scottish Government's chief statistician and do

56:58

you think the chief statistician should have a different position or terms of

57:04

appointment even at present if we think of if we think of the situation I've

57:10

just described there are several instance all over those lines it's difficult to see how you can you can

57:17

foster that culture to say I want you to be innovative to think of new products

57:22

to actually be quite open and explaining what your statistics mean if you're not

57:29

independent of the government of the day so you think the chief statistician and Scotland should be independent of the

57:35

government of the day more independent I suppose or under format I find it hard to square I suppose you're no better

57:42

than art than I will the speed at which the Scottish fiscal commission was set up and constituted a non ministerial

57:49

Department and we've had 20 years of a National Accounts team who sit within

57:56

the civil service okay I think John Mason wanted to come in on this question

58:02

of the fury fury of statisticians I mean I don't agree I disagree sorry with a

58:07

what mr. Marsh is saying I'm just wondering about the cost I'm an accountant so suppose that's logical aim

58:14

I mean the Scottish fiscal commission was set up independently despite the government and certainly myself

58:19

disagreeing with that and I think one of the factors was cost I mean we have five

58:24

million people the UK's 50 million or England's 50 million aim we cannot

58:29

possibly copy everything they do in the way they do it at that expense when

58:36

there's a tenth of us so has there not going to be some kind of compromise to do things smaller and I would hope more

58:44

efficiently while like at the same time having this independence we can't

58:51

possibly copy what they're doing but we're trying out and this at the moment statistics in Scotland we

58:56

try and ape a great deal of what's done for the UK I think we should try and stop doing them in terms of the cost for

59:05

saying independent statistics body in Scotland really the main thing that we

59:11

need is for the head of Statistics profession in Scotland to be independent

59:17

of government and be able to say I think the most important things we should

59:22

measure of the following five things we've been measuring the follow of 40 things and really they don't matter very

59:27

much we can have a debate around the table today ever more have a view as to what they think should be measured for

59:33

Scotland's economy whether Jesus is fit for purpose or not fit for purpose it doesn't really matter what Richard

59:39

Murphy thinks or I think it actually matters what an independent statistician thinks and that's where you build trust

59:46

in the statistics I want to bring Jamie

59:51

Hal Co Johnson and then Richard Murphy since he's just been spoken off and to comment on this as well yeah thank you

59:57

community it just kind of rather ties in to that Margaret mentioned the public sector and the lack of perhaps

1:00:03

transparency in some of the contracts the NDP B's off so you've talked about chief statistician and their role I was

1:00:11

just wondering what the the Scottish Parliament or the Scottish Government can do now to make - I suppose make some

1:00:18

of that data more accessible more transparent what actions it could take and also what perhaps national or

1:00:25

regional examples there are that we should be or we could be looking to model ourselves on if say trying to kind

1:00:30

of mimic the the UK wider UK model isn't really suitable

1:00:39

well Margaret Cuthbert and then perhaps Richard I see on the exports and imports

1:00:48

um and quite a number of statistics I found actually that the Northern Ireland

1:00:53

office has cheaper system than we have

1:00:59

and has a more timely system so that's possibly something we should look at the

1:01:05

other interesting thing was that when they are looking at for example and public procurement they don't look at

1:01:12

value for money they look at value huge difference so there are things that we could learn

1:01:17

from a much smaller country and which is still part with the United Kingdom on

1:01:23

how they've managed it I don't know I haven't the time to investigate homeland or the results Richard Murphy I do a lot

1:01:34

of international comparisons in the work that I do around taxation and we often

1:01:40

use median States for review because median is more important than mean of

1:01:46

course in this area and on that basis Scotland is a median mid-sized state in

1:01:52

its own right five million is plenty enough to put your well up the order somewhere in the middle so you know Scotland isn't a

1:01:59

state a region of the UK however you view it duties small in international

1:02:05

terms yeah the British Virgin Islands is but Scotland most certainly isn't and on

1:02:11

some things the British Virgin Islands actually provide produced better data than Scotland which is quite shockingly true not many but some so and if you

1:02:20

look at a place like Jersey its national accounts are substantially better than those available for Scotland I mean much

1:02:27

as it grieves me to say so they've really got it right and if they can afford that with a hundred thousand people why can't Scotland with five

1:02:33

million so there is you'll see an issue here and actually it does come back to this issue of political will I am very

1:02:39

first of all let me make the point all data is subjective all data is political because what you choose to measure is

1:02:45

obviously a choice there is no such thing as objective data because what you

1:02:51

measure changes in we know that it will change performance it will change behavior so therefore I

1:02:57

am worried about the concept of independence just as much as I worry about the concept of independent central

1:03:02

bank's which actually normally aren't at all as we know in the case of the UK as

1:03:07

a whole because you only have to look at the banking Act in 1998 to see that the independent Bank of England is in fact subject to complete and direct control

1:03:14

by the Chancellor who can at any time suspend the governor of the Bank of England if they don't do what he wants

1:03:19

it's always been a he so far so therefore there isn't an independent Bank of England independent National

1:03:25

Statistical authorities will have the same problem there does at the very least have to be very sensible dialogue

1:03:32

between the government as to what it needs to make decisions and water statistical Authority once which it

1:03:39

thinks is important because they may have different priorities I wish to make that point very strongly because otherwise you'll end up with information

1:03:46

being produced for the wrong purposes again which doesn't suit the political purpose of a government but suits the political purpose of a director of a

1:03:52

National Statistical Authority and both will have whether they like it or not political purpose because we all do it

1:03:59

just as a matter of fact whether it's party political doesn't matter there will be political purpose to the decision so in the end of the day you

1:04:05

might as well be explicit and have a very clear role for government in it whilst that person must also have the

1:04:11

right to squeal and say I'm being put under too much pressure for a particular result thank you barely I wonder whether

1:04:21

we could move on to a substantive discussion about jazz and let me quote

1:04:26

back at you professor Murphy some of the things that you are on record is saying and perhaps get a view from the panel as

1:04:33

to whether they agree with it or not and I hope I'm quoting you correctly but you said that the jazz figures are

1:04:39

untrustworthy rigged by Westminster literally made up and nonsense and then

1:04:44

you go on to say no accountant could use the Jazz methodology without risking the allegation of professional misconduct I

1:04:52

wonder whether I could put it to the panel assuming I've quoted you correctly whether any of them agree

1:05:00

oh I'll take silences no agreement at all Oh silence is not golden in this case

1:05:07

Margaret cares well in fact as I wrote in my piece for

1:05:13

this I objected strongly to the word that Jairus was used as crap and I don't

1:05:18

know if Richard Marsh Murphy so big you

1:05:26

think when you come anyway I don't know

1:05:32

if you have done as much work as Jim cut but myself and going through line by line every bit of jairs when we first

1:05:38

got it under freedom of information since those days I know there's been tremendous work done on it by the

1:05:45

statisticians almost every bit of data has some bit of estimation in it an

1:05:51

estimate is what while if it's got a small deviation and either side and I

1:05:59

would see that tremendous work has been done to try and reduce the uncertainty

1:06:05

over some of these statistics now there is a group which has been meeting on

1:06:11

chairs just keeps changing its

1:06:16

composition to some extent as we go on that groups meeting and as successfully

1:06:23

considering changes to it there are some things I wouldn't necessarily us but we

1:06:29

cannot run an economy where the main taxes etc are from another em would you

1:06:38

come another to a government in a sense and not have estimation I can assure you

1:06:46

over the years the Department of Trade HMRC and flevit have certainly all

1:06:52

cooperated with me fantastically the question then - professor Murphy

1:06:59

because your contention is that tax revenues generated if I've understood you correctly from spending outside

1:07:06

Scotland should be attributed back to jazz now if I've got that right is it

1:07:11

the case that this would be the only set of national accounts where that would happen in or can you point to others

1:07:17

where this is routinely done well the question there is of course most national accounts prepared for nations

1:07:23

and we're talking at the moment about Scotland not as in that sense a nation we are talking about it as a part of the

1:07:30

UK because it is constitutionally a part of the UK at present but it does obviously have its own Parliament which

1:07:36

needs data my point was very straightforward with regard to accounting you can't have one basis for

1:07:43

recognising income at another through recognising expenditure one which is only income in Scotland and the other

1:07:50

which is expenditure for Scotland which includes expenditure therefore incurred outside Scotland which does generate tax

1:07:57

revenue which is excluded from consideration on the income side and then take one off the other because that simply apples and oranges accounting

1:08:04

they're not the same thing if an accountant was to do that I stand by the contention I made I think they would be

1:08:09

guilty of professional misconduct and I would expect them to be pulled up before their professional body and told that you are preparing consistent accounts

1:08:16

prepared on accordance with a consistent accounting basis and that's what's required so I completely stand by that

1:08:22

the suggestion is made there are no other areas that produce national

1:08:29

accounts in that way and the way you've just described I mean I'm looking to try

1:08:34

and be helpful is is there you know somewhere I can go see this what you described well any country very

1:08:43

obviously is expenditure which can be incurred outside a country I mean the point has been made to me for example

1:08:49

that in the UK as a whole we spend money on overseas aid under that spending

1:08:56

takes place outside the UK and that tax may be paid on that in another country

1:09:02

and I would accept that point and that has been said that therefore that is the same as the Scottish situation of having

1:09:09

spending tribute to Scotland one which tax is not paid no it isn't because that is paid by

1:09:17

the UK government deciding to spend that money overseas therefore under the central government direction of control

1:09:22

whereas the point about or the point I'm making about Jers is that the

1:09:27

expenditure which is allocated to Scotland is not under the control of the Scottish Government and therefore if this is meant to indicate the activity

1:09:35

within Scotland which is under the control of Scotland it doesn't so they are totally inconsistent so I don't know

1:09:42

of another example of that sort in other words that it's helpful to know because I think you know if you're making that

1:09:48

suggestion of how to do things then clearly we would want to look at other examples and there are none I can't think of one okay and and neither could

1:09:55

i but in you know fairness you're you're the professional realm I'm trying really hard to struggle to answer that and I

1:10:00

genuinely can't think of one and you you then go on to say and I just want to explore this because I think this is

1:10:05

hugely important for us to stand understand you then go on to say that the net benefit flow is very heavily

1:10:10

from Scotland to the rest of UK and the likely under statement of Scottish Revenue resulting from this flawed

1:10:17

approach to national income accounting is likely to be very significant have you got an order of magnitude for what

1:10:23

is very significant well how much money are we talking about again one of the

1:10:30

suggestions that came out from the discussion in the Fraser Islander was involved in this was that this would give rise to a restatement if my basis

1:10:37

of accounting was used and I can't remember precisely the number your colleague mentioned but we're talking about a couple of percentage points or

1:10:43

so of the states at Scottish deficit maybe but again we're using some

1:10:48

estimates here and very rough-and-ready stuff which is done on the basis of blogging not on the basis of you know doing a lot of deep searching and I'm

1:10:55

not pretending I have but the point here and I'm not pretending I have done that deep searching but the point here is

1:11:00

that actually even if you do the deep searching I'm gonna go back to Margaret's point here actually I mean I

1:11:05

know you didn't like the use of language but I mean I'm afraid to say I sometimes use language to put something onto a political agenda it's you know I've been

1:11:12

involved with trying to put deeply unsexy issues onto the political agenda for a long time yet tax wasn't discussed

1:11:18

when I first started talking about it tax havens weren't discussed and nor is national income accounting something which is norm

1:11:23

picked up but when you use some sorts of language which puts it in newspapers more like as far as I'm concerned if it

1:11:29

grates discussion it's worthwhile but the point is if we haven't got underlying data to prepare these estimates I can't be sure can I just say

1:11:35

you don't need to use that language to make this interesting to me I'm already there can I can I ask you because Fraser

1:11:42

a bounder did in fact look at the assumptions and and notions that you

1:11:48

raised and I quote from them changing assumptions about how much spending is allocated for Scotland or spent in

1:11:55

Scotland in jazz will change the net fiscal position but any revisions are relatively small so I actually rather

1:12:02

than being very significant they are actually quite marginal would you not agree that that's the correct

1:12:08

interpretation of the Frazer of Allender position no I wouldn't and for a number

1:12:13

of reasons one is that for example we don't know flows in and out of Scotland something that has been consistently

1:12:18

said we don't truly know what the income flows in and out of Scotland and I think if we don't know those we might well be misstating what Scottish income is

1:12:24

anyway I mean so we don't actually know some of the basis on which these estimates should take place we don't

1:12:30

also know what the multiplier effect is of some of this expenditure which is being incurred outside Scotland might be

1:12:35

and I raise the point as well that we're not just looking about the impact all for the expenditures at their first

1:12:41

stage of measurement but that actually in economic terms you actually have a consequence of that spending which could

1:12:47

be greater than the initial spend that is a fiscal multiplier attached to these that was not taken into account as far

1:12:53

as I know in those figures I am not disputing at the end of the day that the Jers methodology is going to show that

1:13:00

there is a deficit for Scotland let me be clear about that that's not what I'm saying I'm saying the methodology there is does

1:13:05

not work at a theoretical level and therefore we need to go back to start again I'm basically suggesting as

1:13:12

Richard Marsh has done but we should go back to a plane to piece of paper and start from there and if we did we

1:13:18

wouldn't end up with Jers is my point I think the what I'm trying to do is

1:13:23

understand your position and look for evidence of it what I'm hearing from you is that there is no evidence that what

1:13:30

you're doing is is you know asserting in in the absence of numbers a particular position I'm saying and I as far as I

1:13:37

can here is this been agreed by Fraser falender there would be a restatement of the figures if my position was correct

1:13:43

they said this would undoubtedly change the numbers they've said it would be small what is open to question I'm

1:13:49

saying it would be bigger than they say because they haven't taken a physical multiplier into account but they're saying it would not be dramatic and I'm

1:13:56

saying it may be bigger than they're saying would it change overall I don't know but I'm also saying just as a whole

1:14:02

is incorrectly prepared and therefore is not the basis for comparison for the future well I'm trying to understand is

1:14:08

the basis the evidential basis of you saying it's going to be very significant when we've had Frazer of Allender saying

1:14:15

it's gonna be very small when the whole of this issue appears to be that

1:14:20

Scotland is in a major fiscal deficit position and the data can't be certain

1:14:25

to support that particularly when we don't know what imports and exports from Scotland are and therefore that figure might be heavily misstated and actually

1:14:32

I am looking at data at the moment on Scottish imports and exports which show that the data for Scotland looks to be so dramatically out of line with the

1:14:39

norm that there's something obviously wrong with it then I think that we aren't position where we can say that

1:14:44

state it could be seriously misstated but do we know precisely no I accept that point I'm telling you said it time

1:14:51

and again we haven't got the data to be sure about that but nor have you got the data to be sure you're right either

1:14:56

is my retort I may be wrong so made other people be well they're guests into

1:15:03

the discussion and before we do that Richard Murphy are you seriously saying that the I think it's not a colony

1:15:10

nowadays it's a British overseas territory the British Virgin Islands population 28,000 plus has better statistics than

1:15:17

Scotland I I think there will be some statistics they produce not many that would be better than Scotland I think in

1:15:23

the case of Jersey many of the statistics will be substantially better than Scotland in particular Jersey does produce quite reliable accounts which

1:15:29

show who is responsible for what it does have gni data which is reasonably reliable and I think that actually it

1:15:37

would be worth looking at and if that island can produce better data which is more decision useful probably than that

1:15:43

which is available to many Scottish politicians I think it's something that needs to be thought about seriously right so it's something we'd have to

1:15:49

look at the specifics of John McClaren and then country Montana just a brief

1:15:55

point if you're looking at Scottish exports and imports then you know more than I do because there are no Scottish

1:16:00

imports data there's a there's an imputed residual in the quarterly National Accounts but that's a that's a

1:16:07

huge problem because it's like well if anything is wrong international accounts it ends up in imports so it's a highly

1:16:15

questionable figure and if you look at the figures even for exports there are two main measures for exports and quite

1:16:24

often year by year one will go up and one will be done which doesn't fill you full of hope that they're particularly

1:16:30

accurate but that's a slight move away from Jerez I mean I want to say on

1:16:35

chairs is that I think the point that you have is is is of interest I'm not

1:16:41

sure that would change that as you say it wouldn't change the overall result I mean Jerez is a bit of a dead end these days

1:16:47

and that we know what it's going to see I really wouldn't want to put an awful lot more time and effort and money into expanding it perhaps a little bit but

1:16:55

the money could be better far better spent elsewhere and and

1:17:01

that's where that's what she goes to and I think if we can try and get away from simply much of this is to do with

1:17:09

finance rather than the economy and I think it's if you concentrate on the

1:17:15

economy and then go to the to go to the fiscal issues that are relevant to that but but a lot of the time we were seem

1:17:21

to be I'm proud perhaps because jerez dominates the the debate where is when

1:17:28

the quarterly national accounts are published it gets no coverage whatsoever let's go if I can just make the

1:17:33

opportunity go back to the point that under waichman talking about before if there's something in this data whether

1:17:39

it be chair something else that the statisticians aren't happy about I mean how often do you hear the head

1:17:45

statistician in in the UK speak out very rarely or OB are very rarely it's

1:17:51

actually exposed by the media and by think tanks where there's a ifs or the Financial Times that's what we really

1:17:58

lack in Scotland in terms of getting through holding figures to account

1:18:04

holding the public the government okay ministers to account that there isn't the analysis

1:18:11

being done by these independent bodies you can hunt you can create an independent statistician if you want

1:18:17

well it's not it's not really gonna he or she because they've got there is a career move partly so it's it's these

1:18:25

other elements that I think that need to be brought in but as I say I think you I think we've think we've exhausted chairs

1:18:31

in terms of the good it's going to do Scotland in the scottish debate in terms when in terms of the economy country of

1:18:40

montana i won't comment on chairs because I don't feel I've got enough expertise to do so but I think it is

1:18:48

certainly true that one of the problem with the Scottish economic data is that it is not always possible to disentangle

1:18:54

them from the UK once once but one point I would like to make is that perhaps

1:19:01

there has to be a more nuanced distinction between micro and macro data because ultimately the macro data come

1:19:06

from aggregating upward Micro data and we don't have any data on impulse but

1:19:12

even the data on export which I think comes from the global connection survey now the global connection service has a

1:19:18

known return rate of about 70 percent so it is based on a fairly small sample of

1:19:24

firms and it is also biased unknown exporters so it doesn't capture for

1:19:30

example if there is a change in status of firms from non exporter to export so

1:19:37

I think you know to go back I think we need to have a I take all the points which have been made on on the national

1:19:44

accounts but I think we need to have a more holistic approach and try to see the micro and macro side of the data as

1:19:51

as being more interconnected and and and in this sense to go back to the earlier debate about whether there should be a

1:19:59

higher degree of independence of the Scottish statistical agency certainly in

1:20:05

the long term in the long term that would be important but I also think to go back to a point that Margaret made

1:20:12

earlier I wouldn't be too concerned about the Scottish data collection system feeding in

1:20:18

to a higher level because ultimately the major progresses which have been made in

1:20:23

recent years in in Europe and Beyond have been at an international level so it is very important to join up forces

1:20:30

coordinate collection follow follow you know uniform protocols to ensure

1:20:37

compatibility of data because a lot can be learned in terms of being able to compare you know the evidence which

1:20:44

comes out of regional or national data internationally thank you and Gil

1:20:50

Patterson John Mason wanted to enter the discussion on some of the points that have been joined yes yeah one of the

1:20:56

biggest things sticking out for me and Jairus is a fact that so much money billions of pounds of spent money is

1:21:04

raised and Scotland the tax is spent for Scotland and so as an empire in the

1:21:11

first instance the first one is that not money been spent somewhere else oh what the Scottish economy and then

1:21:18

the second bit is that that money is spent primarily in another part of the

1:21:23

UK so that's the second part the thought for me is this and this is a big politically I don't think join that we

1:21:31

can ignore hey Jess because it's used extensively a and when we are another

1:21:38

either to talk Scotland don't want to talk Scotland down and it's and I you

1:21:45

know if Liz Lange litter for instance published figures I and everybody were

1:21:51

already lining up the night before to say that Scotland is feeling so now it's just an indication plays around it

1:21:58

happened to be wrong it went in the other direction so it's a big big bullet political football but the third for me

1:22:05

is this as that thought for me is this that the places that benefit from this

1:22:13

Scottish expenditure are used to measure against Scotland in a political sense so

1:22:20

these are these are big big issues and you know looking at everybody's Retton

1:22:27

enters and this as nobody has said that the stats are

1:22:32

good no it's one set nobody has said what an absolute billion everybody's get

1:22:39

qualified all along and jazz is the same but so my question is you know where

1:22:45

does the information where is information to see what the actual the amount of money spent in the UK no not

1:22:53

overseas and the UK that's actually taken from Scotland and what impact has

1:22:59

that going Scotland's economy and what impact is that got and the place that we had been measured against where are the

1:23:06

stats you know what politicians should get that answer so important perhaps John the clown like to comment on that

1:23:13

since he's been mentioned and then we'll come to John Mason I mean I disagree

1:23:19

with virtually everything you said the and I'm not saying that as a political I

1:23:25

mean one three zijn I think we should punctures is because it is it too political and it does get these places

1:23:32

where it's good or it's bad it's not it's it's saying something about what would happen if Scotland based on the

1:23:38

current spending patterns and tax patterns if Scotland became fiscally independent that's all it's doing which

1:23:44

is not particularly interesting but the debt everybody who has looked at the figures agrees and has agreed for the

1:23:51

last number of years that Scotland would be in a deficit position versus relative

1:23:56

to the rest of the UK as with Wales eyes with Northern Ireland there is nobody who's produced any figures to say

1:24:02

anything else Scotland go relative the UK I think it go it's got washed and washed in the

1:24:09

last few years because of North Sea oil it's not a great mystery as to what's happening and it's not a great mystery

1:24:15

as to why more money is spent in Scotland than in other parts of the UK because gold is a third of the size of

1:24:20

the UK and has a network of violence so you'd expect more money to be spent pair hade a little bit is earned in terms of

1:24:28

tax per person which is because there's no because london basically has a impact

1:24:34

in terms of most of the high earners in london but other than that i don't there's any mysteries around

1:24:40

the Dayton jurors listen and then we'll

1:24:46

bring in Margaret cover oh I was gonna refer to her anyway so she recommended me but aim yeah we invited the great at

1:24:53

the beginning of the discussion of jurors aim and Myra Koch was saying there had been improvements and kind of

1:25:00

defended the position of there will always be estimates and we can meet the estimates better and that's the kind of technical area I'm interested in because

1:25:07

I think I started off fairly this morning thinking that we should move everything to admin data and use that

1:25:13

instead of like apportionment or estimates and you can correct me if a portion than our estimates are the same

1:25:19

thing or they're not quite the same thing and then professor Montana has been talking about microdata and I'm not

1:25:25

quite sure if that's the same as administrative data aim but this concept of should we move wholeheartedly to just

1:25:33

collecting every little company's details and adding them all up and yet I

1:25:38

think must a mr. Marsh you said that a lot of that is pretty messy or it's it's not very dependable um or do we just

1:25:46

accept that apportionment for v80 or some of these things is perfectly acceptable well it's not perfectly

1:25:58

acceptable and I'm actually very much in agreement with John the Klan that there

1:26:04

are other issues are of much more importance for us right now in a new job

1:26:11

in their economics jobs and fear about committee than Jerris and ideally should

1:26:16

be taking a bit more of a backseat I have carried Oh endless conversations

1:26:25

with various departments in England in the UK government on whether we can do

1:26:33

any better than what we're doing just now I can't see it without a tremendous amount of expenditure I know behalf of

1:26:40

setting up units and even at that we don't have the political power to get information from companies it doesn't

1:26:49

exist so I don't see how we can do anything else at the minute other than use UK

1:26:56

departments to get the information the HMRC seems to have moved from pretty

1:27:03

vague estimates because they've been forced to with income tax giving people an escort and at least they will shortly

1:27:08

have definite figures so could you could we just do that with everything do the same with that

1:27:13

do the same with cooperation tax do the same with everything or is it not as simple as that I don't think it's a theory as simple as

1:27:19

that actually because there's some of the things that Richard Murphy said where m and richard marsh we've we've

1:27:24

got it's a very dirty field business data and they are trying very hard in

1:27:31

awareness and in the scottish government to try and get more detailed and local

1:27:37

information it's a huge job and i don't know how long you would actually have to ask the statisticians observe and that

1:27:44

how it's progressing by the minute it's a job that's ongoing I don't know it'll

1:27:50

go thank you yes Micro data could be administrative

1:28:02

data Micro data is data collected for example at the level of the fair and in some case it is connected by a

1:28:08

questionnaire service or the in other case it's collected through vit return in that case it is administrative data

1:28:15

so it typically tends to be more reliable than if it is correct collected by a service and in fact there is recent

1:28:22

rich research which shows that data collected by within the same database

1:28:28

which is a privately produced database is less reliable in terms of the

1:28:36

information about whether firms are exporters or no than data which come from HMRC so you know ideally the more

1:28:46

the data is collected through vit return and so on the more reliabilities but it

1:28:53

is to mention another point that you made it is you know very important to

1:28:58

have as large a sample of the population of firms as possible because the reality

1:29:03

is that the majority of firms across Europe 90 and 98% of firms are small and

1:29:09

medium enterprises and and about 60 70 percent of those are very small so if

1:29:15

you leave them out to actually miss out a lot of economic activity within a country and and the distribution of

1:29:21

firms within industries is very important in enabling you know us to

1:29:28

understand the impact of policy for example so it's not you know if you can't focus on the average productivity

1:29:34

of an industry what matters is all the productivity distribution looks like and there is a huge variation across industries but also across regions and

1:29:42

countries there's a very recent paper experimental paper they call it by the ONS which looks at productivity

1:29:49

differences across regions and they show that it is not the composition of Industry which matters in determining

1:29:55

the productivity of a region it is the distribution of firms within industries so there is a lot of information which

1:30:02

is required in trying to understand for example the productivity puzzle which comes from firm level

1:30:07

data that's why it is important to get it as much as possible I think ash Denham wanted to come in at

1:30:14

this this point and if we're talking about decision useful day tax obviously as an economy committee you want to look

1:30:20

at you know the sort of data that might help us make more or better decisions and we notice the Scottish government at

1:30:25

the moment is judging its progress on what they're calling before I so I take it everybody's familiar of what they are

1:30:31

so are the existing stats that we have you know useful to judge whether the

1:30:36

Scottish government is making progress in those four areas or not Margaret

1:30:42

Cuthbert first of all yes I have a big problem with that kind of data that the

1:30:49

Scottish government really needs and some dimensions Scottish Enterprise already and the way through if you look

1:30:55

at any of these NDP bees and the information that is given is almost impossible to find out why they have

1:31:02

said we have helped let's see eighty-five percent of businesses what

1:31:07

does that mean and then disabled is it advice is it finance is it whatever and then how have

1:31:15

you monitored the success of that and how have you valuated the program at the

1:31:20

end of the day and if you want to spend half a week in my favourite cabinet good

1:31:28

luck to you and it's impossible to get the information I've mentioned the Scottish Enterprise they cannot even split up for

1:31:35

a Scottish development international how much they have actually spent on encouraging exports and how much

1:31:42

suspense on encouraging foreign direct investment committee has actually asked

1:31:50

them for that information they were told to with gape oh I'm sorry I don't have that just know you'll get it well we're

1:31:56

still waiting because I asked the have you got it and this is a year later we

1:32:01

still they still don't have it so there's a big big problem in trying to get this type of information that the

1:32:09

Scottish Government is happy to put forward whether it's helping businesses

1:32:15

or the other one is on skills with modern apprenticeships we're not getting

1:32:21

back the real data that's needed and again and I ask you to go and look at the report by skills on em modern

1:32:30

apprentices and sit there and think instead of watching 10 o'clock news what

1:32:36

they what you're actually getting from that and the questions that you yourself obviously would ask and then phone them

1:32:44

up and ask or write an email better the answers are not there we are living in

1:32:50

cloud cuckoo-land as far as the program goes gosh and then

1:32:57

Richard Murphy thank you very much I spent just a so address the question was

1:33:04

the four eyes that the Scottish government is is working towards I think

1:33:10

it wouldn't be entirely unfair to say we've decided to go down this road of a slightly different economic strategy

1:33:16

with the four eyes with perhaps the biggest change being tackling inequality

1:33:21

and what's happened is we've looked at what data we have and said how can we

1:33:26

best use that to measure progress against these four eyes rather than what

1:33:32

more do we need to do to better fill in the gaps I was at a business breakfast

1:33:37

lunch in which someone from Scottish Enterprise were stood up and they're asked about this dimension of inequality

1:33:43

and inclusive growth and they said well we know what inclusive growth means it just means growth and half the half

1:33:52

rooms are all and the other half that was kind of well East has been honest and I actually think that's probably

1:33:57

where we are I mean in terms of what what what do you mean by inclusive growth and what kind of data should should would be picking up picking up on

1:34:05

there's a there's a thing I think John mentioned it and Margaret mentioned it earlier to say are we using the day the

1:34:11

data we've got all using it the right way if you look at the quarterly national accounts the thing that jumps out on you is taxation on individuals

1:34:21

has grown substantially over the last 20 years in Scotland taxation on businesses

1:34:27

has been virtually unchanged virtually unchanged now that isn't picked up at

1:34:32

all but that surely is a huge issue if we're going to raise the rate of v80 raised

1:34:37

income tax that same time cut corporation tax and at the same time say

1:34:42

we will tackle inclusive growth I think those that's the kind of data we

1:34:48

actually have ready to hand that we should be investigating a bit more and

1:34:53

Richard Murphy thank you for your question because it moves us on I will

1:35:01

slightly heart back to jurors there and answering the question slightly before

1:35:09

eyes make sense in a very real way who

1:35:14

wouldn't want investment improved international trading positions innovation inclusive growth minute sort

1:35:21

of you know invert the world and would you not want any of those no so therefore they must make sense mmm

1:35:27

they are a statement of what everybody would probably want they may not put four eyes on the front of it does this

1:35:34

help us does the data we've got help us well actually no in a very real way it

1:35:41

doesn't answer the question why there isn't inclusive growth now for example because um for example we don't know how

1:35:50

many assets there are in Scotland we haven't got a figure where I'm gonna balance sheet we don't know what is

1:35:57

happening we don't know whether there's a net investment or not because the accounts that are available are an

1:36:03

income and expenditure account prepared that's what Jers is and prepared on an inconsistent basis with no balance sheet

1:36:09

to prove that there has actually been a net improvement of deterioration in the

1:36:15

Scottish position nor do we know who actually has the liabilities it shows a deficit but we actually it isn't clear

1:36:21

who pays for that and there's an apportionment which of liabilities which

1:36:26

may be inappropriate so to make this work there needs to be a much better

1:36:33

awareness that to drive any form of growth to drive international investment

1:36:39

you've got to have measures of actually what is the capital accumulation that is taking place inside Scotland and not the

1:36:46

financial capital but the actual real tangible physical capital which is going to give rise to changes in productivity and vous

1:36:52

therefore the increase in wages which is obviously the driver which is underpinning that which is one of the

1:36:59

reasons why present Scottish X state expenditure per head is higher than it

1:37:04

is in the rest of the UK because average wages in Scotland are lower than in the rest of the UK which is also true of

1:37:10

Wales and Northern Ireland which is why it appears that so much of the UK deficit is attributable to the regional

1:37:16

governments rather than to England so without that information which is about

1:37:22

assets then you can't also and a proper balance sheet and who's funding that you

1:37:27

can't actually come up with an answer to these questions and you can't come up

1:37:33

with an answer that question until you know who's actually also funding that process and right now that is not clear

1:37:38

either because there isn't a Scottish liability side of the balance sheet either and in Scotland liable for the

1:37:45

debts that are recorded as a result of deficits being incurred because actually the Scottish government can't be liable

1:37:51

for those debts cuz he hasn't got the capacity to pay the debt it's not allowed to pay the debt so therefore you I'd go back to Jersey and say that's a

1:37:56

completely meaningless statement for a world that doesn't exist a Scotland that would be independent that does everything that the UK does now but

1:38:03

clearly wouldn't and which has a liability for something that it may not have incurred because who knows whether it would pick it up yeah it is just

1:38:10

make-believe the existing data so that's why you have to go back to this question and saying what you want if you were

1:38:15

going to get meaningful information you would want information on both asset growth and liabilities to fund that as

1:38:22

well as therefore this information and that goes back to the apportionment issue in the paper I discussed how to

1:38:29

apportion some aspects of tax which is an issue on which I've done a lot of work I created the idea of country by

1:38:34

country reporting which is now being used as the basis for potentially apportioning corporation tax liabilities

1:38:41

internationally as the basis of OECD recommendation it's now law in a hundred countries so you know I've been around

1:38:49

this area for some time and it is done on the basis of estimates let's be clear

1:38:55

about it because there isn't enough data to ever be certain you can apportion

1:39:00

core operation tax accurately over international boundaries so a basis of

1:39:06

estimation has been used and it's based upon where are the sales the only difficulty being is that Scotland

1:39:12

doesn't know how many sales it's gone why because there isn't reliable v80 data on sales in Scotland and its sales

1:39:20

to end consumers that matter here but it isn't there though that would also require reliable import data of course

1:39:26

as well and export data to count those sales out of consideration there isn't the data so with sufficient accuracy

1:39:32

maybe although I think we're getting close to it on the number of employees in Scotland I think that one is probably being resolved and the third indicator

1:39:39

is assets and that isn't there so in very real sense the data required to

1:39:44

fulfill the current Scottish economic policy which as I say makes sense because nobody would oppose those four

1:39:50

things in that sense there isn't the data to actually fulfill that promise

1:39:57

so yep let's start the whole thing from scratch again what is required to

1:40:02

actually make rational economic decisions in Scotland should be the question which is why I extended my

1:40:08

paper beyond the six pages I was allowed thank you and you won't want to come in on these

1:40:16

points before we move on to a question from Julian Martin thank you committee I want to ask actually ask a question of a

1:40:23

Productivity data okay thank you so one

1:40:30

of the one of the key bits of economic data that is talked about quite a lot is

1:40:36

its productivity and I just want to ask John clarin I mean in your paper you say

1:40:41

that this is tricky to collect and analyze and that in order to make lightful at comparisons whether country

1:40:47

a number of adjustments need to be made I strongly if you give us any sense on the record about how big a job that's

1:40:54

likely to be and whether we're in other words able to get better figures on

1:41:00

productivity to make political debate and economic choices more more

1:41:06

meaningful I mean it is a key measure because it's likely to

1:41:12

over over the longer term make the economy stronger and stronger however if

1:41:20

you're trying to compare the USA with France with Germany with with the UK

1:41:25

first of all you need to adjust for how long people are working for so it's not

1:41:33

just these adjustments include so it is

1:41:38

it per person is it per job is it per hour all these things will give you different results then it's what are

1:41:44

they working out are they in manufacturing are the in services of in public services all these things have

1:41:49

different productivities attached to them so the reason you are being less

1:41:55

productive maybe because you've got a shorter longer your working longer than

1:42:03

in other areas so for example France is quite short working hours United States has quite long working hours and France

1:42:10

is actually quite productive partly because it's got quite a shorter under squire large unemployed well I mean so

1:42:17

that means the people who are most productive are in work so it looks like they are actually quite productive so

1:42:22

one of the reasons that the productivity thing happened in the UK in the last downturn was North Sea oil has come down

1:42:30

a lot clearly hardly anybody who works in the osteo but they were making huge amounts of profits and all that this

1:42:36

unfortunately disappeared and also financial services which took a huge hit again not that many people working it

1:42:42

but a lot of a lot of money being attached to them so that that partly

1:42:47

explains so as I say that the the industry composition you'll then have

1:42:53

you can then put in skills levels and issues like that you need to adjust for

1:42:58

all those to try and get to a like-for-like but that but then again it's like well if you're adjusting for

1:43:04

those things should you adjust for them because actually the skills is important so it's the skills that you need to address in terms of policy but you've

1:43:10

probably but I've worked more in this area than IR verbs

1:43:16

you talked about labor productivity essentially and that's one dimension and

1:43:21

even they're an additional problem children mention his prices we don't have prices so we are an increasing

1:43:29

productivity could simply be a reflection of an increase in inflation and we don't know the other thing is

1:43:35

that most significant accrual measures would be factoring in other factors of production energy consumption

1:43:42

intermediates and and so total factor

1:43:48

productivity is a better measure but it is not it is not being calculated I mean the ONS is starting now they've written

1:43:55

and experimental paper in which came out in April 2017 again the major progress

1:44:02

in this area has been done at the European level the European Union is funding the map compete project which

1:44:07

brings together academics and and statistical offices of many countries

1:44:13

the UK unfortunately is not part of that and so there are big methodological

1:44:18

issues and there are big data requirements because when we talk about productivity I mean the metaphor I like

1:44:26

to give the students is like you know it's like peeling an onion you may even measure productivity

1:44:33

correctly but then what matters is what determines it so you can identify the

1:44:39

proximate causes but you need to be able to go to the ultimate cause is to know what in terms of economic policy you can

1:44:45

do about it and that requires information which comes from within the

1:44:50

blocks the black box of the firm you need information for example about management practices again doin s as

1:44:57

reacted to the world management survey which was produced by which has been

1:45:04

initiated by bloom and van green and was used to be a Dallas is now in Harvard

1:45:10

and I don't necessarily fully agree with the spirit ahead of the exercise

1:45:16

entirely because I think that environmental factors are important but what they do is to identify and quantify

1:45:23

elements of management practices which can then be used into total factor

1:45:28

productivity estimate because they think manage they look at management basically as a technology

1:45:33

okay now it may well be that ultimately at the end of peeling the onion what

1:45:38

you're at the core what you're left with are environmental factors such as agglomeration economies but it is

1:45:45

important to understand how and I go back to your point about behavioral responses you know how firms and

1:45:51

investors react I mean one of the the messages which which comes out of this

1:45:58

firm level view of the world is essentially that some of the macro factors that people think about like

1:46:04

unit labor cost array are less relevant than we like to think unique labor cost

1:46:09

is not a very good predictor of a country's ability to export and and in

1:46:15

fact it may well be the case as some have suggested that a low unit labor

1:46:21

cost which results from very high the regulation of labor markets for example very well be responsible for low

1:46:26

productivity because the it incentivizes firms to substitute labor for capital or

1:46:32

rather capital for labor ya know labor for capital so it is important and I go

1:46:39

back to the point I made the earlier it is important to you know to overcome this dichotomy between macro and micro

1:46:46

data because they are really very much connected and and in terms of understanding the ultimate causes of

1:46:53

productivity we need to be able to go into the black box of the firm Cindy

1:47:00

once you've undone wrapped the onion then you're left with four total

1:47:05

multi-factor productivity or total factor productivity which is actually nothing tangible it's it's

1:47:12

innovation it's these things that happen that make economy is very good but they you can actually and that's the

1:47:19

tantalizing thing of like well what countries are doing that well and it's like management practices its R&D being

1:47:26

used well it's working with universities but it just takes you to this sort of as I say intangible element that you've

1:47:33

then got to to to understand but you know this isn't easy if it was easy every country we'd be doing it and

1:47:39

growing quickly under not yeah but that is why international corporation and also a corporation with

1:47:44

academics is a sanction move on to a questioner from Julian Martin because

1:47:54

one of the gaps there's been identified quite a few of you around what goes on

1:48:00

in the household focus on the families um and I suppose that comes down to that

1:48:05

data you're talking about so we have a situation where government are making decisions around policies which on the

1:48:13

surface of it may look expensive but could generate economic activity

1:48:20

enhanced free childcare for example would be would be one example a progressive policy or something that

1:48:27

encourages the living wage how can we measure what's what's missing in the

1:48:33

datasets that are available to us to be able to look at how those policies have

1:48:39

worked and how they've been able to stimulate the economy because there you can make the ache of the case for more

1:48:45

progressive policies because that's one of the difficulties for the government is disabled actually by giving families

1:48:51

enhanced childcare this is not a massive expense this is actually going to generate a lot more economic activity

1:49:01

professor Montana well I would say I would go back to a point I made earlier telling ability of data sets because

1:49:08

there are there is quite a lot of information about for example the you know the bhp s has got a lot of information the British household panel

1:49:14

Tate has got a lot of information about some of these issues and and I'm sure there are other data sets which don't

1:49:21

come to mind at the moment but the important thing is to be able to link them up because there may well be very

1:49:27

clear causal links between some of the aspects you mentioned and the productivity of the firms for example we

1:49:33

were trying to we have been thinking to to set up a project looking at the

1:49:40

impact of manager management practices on productivity but through the channel

1:49:46

of worker satisfaction good management practices I've got a lot to do with how

1:49:51

the workforces manage to be in the fair and we couldn't do it because we didn't have management data and

1:49:56

in fact we got in touch with van green and to see whether they were prepared to replicate their study in Scotland and

1:50:02

the a priori impression was that we wouldn't be able to have a significantly

1:50:08

large number of firms to make the sample significant now luckily doin s now I

1:50:14

started with with this management practices broad project and and maybe in

1:50:20

the near future it should be possible to do something like that but I mean what you say is very pertinent clearly there are links between different things and

1:50:27

that's why I say it's important well a kind of holistic view of these things because if you start peeling the onion

1:50:32

that the nice links which come out are endless and it's important to be able to

1:50:37

establish causality between the different tasks yes and I've got written

1:50:42

in our papers longitudinal data there's very limited data on a longitudinal basis of Scottish households

1:50:49

particularly in terms of issues like income wealth and spending and I'm interested to get feedback from the

1:50:54

panel on that john mcclane want to come in and perhaps Richard Murphy briefly

1:51:00

and also Margaret Cuthbert so perhaps John MacLean first I wanted to come in

1:51:05

in your previous point if you don't mind I think things like early years

1:51:12

intervention which is a lot of evidence behind it that it will be good for for

1:51:19

in terms of prosperity and sharing prosperity the trouble is and I've been

1:51:25

looking at this for quite a long time the trouble is fainted trying to find the money to put into because all the

1:51:32

money of the minute is being put into primary education or secondary education of tertiary education and because that's

1:51:39

politically and to be honest with a lot of the public that's that's where the money already goes and you got to fight

1:51:45

damn hard to take it off them to prove it somewhere else even though there's a huge amount of evidence I mean there is an issue about

1:51:51

implementation versus picking the right policy as perhaps we've seen recently has gotten in terms of education but but

1:51:58

these things can't be identified I think one way of potentially bringing it into

1:52:06

a higher profile and bringing it up with EP is something that is sorely concentrated on is to have as well as

1:52:13

GDP have another a wider measure which looks at it might sound more like social

1:52:18

things but things like health education environment wealth wealth distribution and things like that and how that as a

1:52:24

measure perhaps an annual measure it would be innovative so other countries could look at it but I also solve it

1:52:31

says it's not just about GDP it's about all these other things education early years which will eventually should

1:52:36

eventually improve GDP so if you can show that these other things are

1:52:42

improving that hopefully will eventually improve GDP you widen out the issue to just being about house GDP written trip

1:52:49

risen by 1 percent or 2 percent or 3 percent which is not really that interesting and it doesn't get you very

1:52:58

far but it's so it's like trying to get out without wider measure still keeping a focus on economics to some extent but

1:53:06

highlighting the elements that goes in to GDP rising rather than just the final

1:53:12

Elm in itself and I think there's a there's you know not many countries do it do it so I think there's a there's a quite a good opportunity for Scotland to

1:53:18

be in the forefront and in a door like that mmm good Murphy briefly please a brief

1:53:25

comment and I made it the mention before it's in my paper I've talked about a capital maintenance concept that means a balance sheet and an idea that you're

1:53:32

investing productivity is about the relative input of labour and capital some investment in early years maybe a

1:53:40

capital spend it is designed to create longer-term impacts in the current year in other words but the current system of

1:53:48

accounting just looks at income and spend and without any consideration as

1:53:53

to whether there may be a benefit over time but that because of that absence you can't make that sort of decision

1:54:01

because you can't say the benefit will be three years hence inside the accounting system there should be a

1:54:09

system where it is possible to recognize that spending now is for future benefit

1:54:15

and obviously that will be subjective there will be differences of opinion and

1:54:20

what does give rise to future benefit or not but unless you've got that you have the problem and that then also means that

1:54:26

you can actually look at current capital invested and I would just put it to you that at the moment

1:54:32

Scotland hasn't got the degree objective should have because it hasn't had the capital expenditure it's got we know that's true so you know some of the

1:54:38

apportionments are wrong because if we actually understood what is capital in Scotland would realize this far too did

1:54:43

love it and therefore would be in charge Scotland is being charged for capital it hasn't even got for example but unless

1:54:49

you have that extra dimension to decision-making you can't make informed decisions

1:54:56

well just briefly on that point that just made and for long enough the Peter

1:55:02

was there's another guy sitting beside me Jim covered and there for long enough

1:55:07

we have believed that jurors is too static and we do need to place it in

1:55:14

time and also it has to connect with other major statistics they're purchased

1:55:20

in Scotland and that's not happened but if I can on to your point of a family household money and I'd also like that

1:55:29

to include geography and we can see quite clearly in Scotland that some of

1:55:36

the cities do quite well but the areas are close to it like north their shirt are really doing very badly indeed no

1:55:44

there our statistics that we could be using pulling them together which would

1:55:49

give us a much much better picture or what's happening in Scotland rather than just looking at disability benefit overs

1:55:57

all the different things are called support that's given how children are doing at schools how many are getting

1:56:04

into higher education where no need to do what you to call a multivariate analysis and this to try and find out

1:56:10

how best to spend our money and how that money has been used in the past and whether it's been successful we actually

1:56:17

have the data we could be spending some big effort academics could be spending

1:56:25

some big effort on doing a study on that and it beast I think extremely useful

1:56:31

and help you with the issues and I agree very much with I was John rotten

1:56:37

you need to look at other aspects as well as children caboodle and these

1:56:44

social matters really matter for the economy Richard Marsh just to address Jillian's

1:56:55

question it's less a question about what economic data is available to evaluate

1:57:01

those policies and actually when you start looking the policy having a very clear idea how are you going to measure

1:57:06

it and looking at what's available I'm actually you might collect some new data whilst the policies being rolled out we

1:57:13

actually one of the biggest flaws we have in Scotland is not setting out how we're going to measure things once we

1:57:19

actually start rolling out a policy there was gonna mention Andy Whiteman here I think briefly but there was a

1:57:25

good paper I think produced by Andy on the the fringe and whether or not people

1:57:34

who renting out their flats should be paying tax now that might not have been

1:57:40

maybe it was some sort of highly trying to do research behind the scenes pushing the buttons but it was an elegant clever

1:57:46

really good piece of research I don't necessarily agree the conclusions but

1:57:51

actually the process you could almost say well why aren't we doing that for very large government programs so it's

1:57:58

it's less a question I suppose about what statistics available having the political will to say we have a genuine

1:58:04

interesting saying does this work and Dean lockhardt wanted to do a follow-up

1:58:11

there and then perhaps we'll come to John Mason for a last question no all

1:58:16

right well thank you just to wrap up on this need for more holistic measurements

1:58:22

Tom McLaren mentioned the index of social and economic well-being in his paper and I think there seems to be some

1:58:29

consensus that we don't just look at GDP we need to look at a broader scope of

1:58:34

measurements and the data seems to be there how can we take that one step further how can we further embed and

1:58:40

bring into the mainstream measures like the index for social and economic well-being so that we look at look at

1:58:47

policies in the round in terms of the impact on education as well as the economy I think

1:58:55

regular publisher publishing it

1:59:01

regularly and being behind it so that you as a government say we take this seriously so that when it is published

1:59:07

you have a press conference or whatever to say and we're going to do this though the other one of the things that came

1:59:12

out of the the one I published the other week was that Scottish the Scottish life expectancy remains outside of Eastern

1:59:20

Europe the worst in any we see well the washstand any developed OECD country as it has done for a number of years in

1:59:27

many ways that is the big thing that is the worst aspect of Scottish lifestyle

1:59:34

the Scottish social economics of environment and it hasn't improved over the last 10 20 years probably why is it

1:59:41

not improved because we're concentrating on the NHS and because the figure isn't really highlighted that much why is it

1:59:49

important to the economy well for if our life expectancy is poor and our healthy life expectancy is even pooter then it's

1:59:57

a that probably relates to poverty as well then these are the some of the issues which are explaining partly why

2:00:04

scope what could be done better to improve Scotland's growth rate by

2:00:09

improving health not through the NHS but through preventative measures nearly like that so although it doesn't seem

2:00:15

like the economy it is the economy but you have to give it a high profile and share hmm so it's kind of like it's not

2:00:22

the outcome which is GDP it's what the core things that are feeding into the outcome now clearly you can't have it's

2:00:28

difficult in areas like the environment which might want to include as well but it's not impossible and these things do

2:00:35

move quite move quite slowly whereas the economy moves up and down quite quickly life expectancy can move quite slowly

2:00:41

all in the last 10 years or so the Estonians have gained over four years of

2:00:46

life expectancy which is pretty good

2:00:52

do you mind if I add to that we've got to this I think what John said is absolutely right we've got to however

2:00:58

look at the whole of Scotland as well there are idiots and Scotland that really have just been left and the heart

2:01:06

pulled out of them so we've got to have a devising a policy we've actually got

2:01:12

to look at other aspects like transport on the way through which seems to relative to what has happened in the

2:01:20

south of Ireland but island itself read mr. bought with so our policies have to

2:01:27

be inclusive of their other aspects not

2:01:32

just health but em transport and good communications throughout Scotland so

2:01:40

that one society rather than bits have been left to die and a brief comment

2:01:47

from Richard Murphy and I think Katya Montana I wanted to come in as well

2:01:52

this goes right back to the core of redesigning the data if you're a company

2:01:58

you think you're maximizing profit you may not even that's what you think you're doing or you want growth or whatever you can choose your indicators

2:02:04

your key performance indicators which are going to be the drivers of your business and you create a measurement

2:02:10

system to provide data to say are you succeeding or not actually before even

2:02:15

redesigning the information system for Scotland you've got to decide what are the key performance indicators which are

2:02:21

actually going to be driving this and that is a political choice that's why I said all data is political because what

2:02:27

you choose to measure how you choose to measure it is a political choice from the beginning to the end and if you

2:02:32

don't choose the right kpi's then you're going to come up with data which doesn't suit the purpose thank you well if there

2:02:40

are no further questions from committee members then that is our time today so

2:02:45

thank you very much to all of our guests for coming in thank you very much we'll now move into private sessions so a lot

2:02:52

of five minutes for the gallery to clear thank you