Joined: Tue Oct 21, 2003 7:25 pm
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Location: Wayneistan
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 The Beauty of Statistics During the Scottish independence debate over the next two years I expect to hear several arguments being repeated over and over again. Now, off the top of my head, there are some statistics from both sides I take issue with and I wish to address.
Firstly, from Yes Scotland:
Scotland gets 9.3% of UK spending, but generates 9.6% of UK taxes. We generate over £1,000 more tax per person than the average across the UK. Over each of the last 6 years Scotland’s finances have been stronger than the UK. And over the past 30 years, we have had a relative surplus of £19 billion.
Apart from the fact that the above figures take a snapshot of one year (in other words over the last 30 years, say, there have been times where the opposite has happened), they are speculative at best for one very simple reason - they assume that 90+% of North Sea oil is allocated to Scotland. The figures also fluctuate depending on the North Sea revenues in a given year. I have touched on the legal problems before. Now the very simple but very important legal position is as follows: Scotland and England created the Acts of Union in 1707 to form Great Britain. It is Westminster that is sovereign. Not Scotland. Not England. The purpose of the Acts of Union was to create a new state, albeit with two separate jurisdictions within it. No border was set in 1707. It is up to Westminster to set this internal border as it likes through legislation. International law does not have, and never will have, the authority to determine the UK's internal boundaries.
No matter how much it may hurt them, the SNP cannot set the UK's borders - only the UK parliament can do that. At present there is no distinction between "Scottish" or "English" waters, they are British waters. And until such times as Scotland or England legally separate from the other they always will be. The SNP like to draw an east-west line through Berwick on Tweed, which puts the vast majority of North Sea oil in Scotland. But in 1999 Westminster changed the boundary to follow the Tweed in a north-easterly direction, putting closer to 50% of the reserves in Scotland. Now if Scotland voted to leave the UK in 2014 all it means is that the Scottish parliament has the right to start negotiations with Westminster about leaving the UK. The boundary would be part of those negotiations. Only after setting the boundary would international law apply for allocating revenues, not before.
I have it on good authority that Westminster could have a strong case for claiming up to half of the oil reserves. The remaining question would be what happens to the Orkney and Shetland islands if they decided to remain in the UK - something which the SNP MP Angus MacNeil has said would be accepted. If they decided to stay in the UK then they would be seen as detached islands of the UK mainland (so oil revenues from the Northern Isles would still flow to the UK Treasury), and another new boundary would need to be set.
As a consequence of all these issues, the SNP cannot guarantee in any shape or form that a separate Scottish state would have 90+% of North Sea oil. It would be legal matter which could eventually be referred to an international court. The statistic therefore loses its credibility.
And even assuming the SNP's vision of how North Sea oil would be divided up, Scotland has not been in a stronger fiscal position than the UK over the past 6 years:
Yes Scotland later go on to say:
North Sea oil will provide a safety net for the next 40 years.
But according to Oil & Gas UK, there may be only 17 years left at current production levels. In order to extract all the reserves companies will need to spend millions developing new techniques, and only then would oil last another 30-40 years.
And from Alex Salmond is the following claim:
An independent Scotland with access to all our nation's resources will be the sixth most prosperous nation in the OECD league table – compared with the UK's number 16 placing.
The above calculation is not done by the OECD but instead carried out by the SNP using OECD data for GDP per capita. Now assuming 90+% of North Sea oil, there is no doubt that Scotland’s position would improve considerably based on GDP per capita. However, what does this actually mean? Would separation result in Scots instantly becoming richer overnight? Well, no. Most North Sea operations are privately owned (e.g. BP) and so profits are likely to end up being remitted outside of Scotland. So in reality, this apparent 'boost' to GDP per capita would not feed through to raising the living standards of ordinary Scots. A more accurate way to measure wealth in these circumstances would be to use GNP or GNI. Both of these measures account for the output generated by a country’s firms, regardless of where they are based. Unfortunately no such statistics exist for the component nations of the UK, only for the UK as a whole.
And from Better Together (not on website but on their leaflets):
Scottish banks were bailed out with £470 billion from UK taxpayers.
It is not the actual statistic which is incorrect but rather what it implies. Taken alone, the sentence suggests that an independent Scotland would not have been able to bail out RBS and HBOS and would never have survived the banking crisis if it wasn't part of the UK. Although up for legal debate, Professor Hughes Hallett from St. Andrews University says that the cost of the bailout would have been shared depending on where the activities of the banks were located:
The real point here, and this is the real point, is by international convention, when banks which operate in more than one country get into these sorts of conditions, the bailout is shared in proportion to the area of activities of those banks, and therefore it's shared between several countries. In the case of the RBS, I'm not sure of the exact numbers, but roughly speaking 90% of its operations are in England and 10% are in Scotland, the result being, by that convention, therefore, that the rest of the UK would have to carry 90% of the liabilities of the RBS and Scotland 10%. And the precedent for this, if you want to go into the details, are the Fortis Bank and the Dexia Bank, which are two banks which were shared between France, Belgium and the Netherlands, at the same time were bailed out in proportion by France, Belgium and the Netherlands.
Of course, the downside of this approach is that rUK then becomes the main equity holder in the company. So when the bank returns to profitability there is nothing to stop rUK relocating RBS' headquarters from Edinburgh to Manchester and enjoy receiving future tax receipts. An independent Scotland would then have spent money on bailing out a foreign bank. But in any case, it is worth bearing this in mind if you hear the "an independent Scotland couldn't have bailed our RBS and HBOS" argument - rUK may have had an obligation to provide support in one way or another anyway.
But that’s the beauty of statistics, you can manipulate them to suit your argument.
UPDATE (25th March 2013): Through a contact I've managed to speak to a senior lawyer in London about what would have happened with RBS if Scotland were independent in 2008. I'm told there are no legal constraints here. In other words, there are no legal obligations on the British government to inject capital into failing private institutions and there is certainly no legal obligation on the British government to bail out a foreign bank, which is what RBS would have been.
It's difficult to say what would have happened, because of course many of RBS' operations are in England. But that does not imply the UK government would have bailed out what is, according to the SNP, their 'geographical share.' It is true that the UK government may have wanted to help by, for example, authorising the Bank of England to provide liquidity support, because a collapse of RBS would have had a damaging impact on the economy. This can actually been seen in the case of RBS, because it had a very large trading arm in the US and a lot of its losses originated there. As a result, the US Federal Reserve provided liquidity support to the bank when it needed it, although it is important to recognise that the US Federal Reserve was only happy to do this because it knew that the UK government would ultimately stand behind RBS if the worst came to the worst. Crucially, however, when it came to recapitalisation it was the UK government (i.e. the UK taxpayer) that was responsible. As Mervyn King said at the time, these banks are global in life but national in death.
If, on the other hand, the British government was so generous as to use taxpayers' money to recapitalise the bank (which would have been politically impossible to explain to the electorate) it would have only done so under certain conditions, and it would probably not have bailed out its 'geographical share' by most likely have insisted on a more equal split (e.g. 50/50). All that would have been subject to very intense and difficult negotiations. And as we see now in the eurozone these things can take a very long time to reach an agreement on. Importantly, however, RBS only had 3 hours to go before it ran out of money, so time was not on the government's side. So, if Scotland were independent in 2008 RBS would have collapsed. In other words, Better Together do indeed have a point here.
The key point to recognise is that the UK government did not need to seek external support to bailout RBS. It was able to do this with its own resources and was able to develop its own recapitalisation plan and set its own terms with the bank. It is a sign of the strength of the UK economy and highlights a key benefit of the United Kingdom: all component nations can pool their resources together and spread the risks that they face by standing as one in the world.
But of course, all of this is very hypothetical. If the SNP had had their way in 2008 Scotland would be using the euro as its currency, and things would altogether be a very different story.http://calumjc.blogspot.co.uk/2012/10/t ... stics.html
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Think of how stupid the average person is, and realize half of them are stupider than that.
George Carlin
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