21 June 2008

GERS

What? No, I'm not really interested. The GERS conclusions depend upon the difference between two very large estimates (income and expenditure) which, as any statistician will tell you, is always a bit iffy. And then there are the (always heroic) assumptions which underlie the calculations.

To take a simple example on the income side of the equation. Scotland has two of the largest banks in Europe (although they are not now as big as they were last year). Each pays vast quantities of tax to the UK exchequer. It would be 'unfair' to attribute all that tax as exchequer income from Scotland, as a much greater proportion of bank profits is earned in England. (Leave aside the profits earned abroad.) So how does the GERS exercise allocate that Exchequer income from banks' tax between Scotland and England? There are no absolute means of producing a correct answer - even the banks themselves do not know how much of their profits are earned in different parts of the UK. So GERS has to make assumptions. Are they reasonable assumptions? Probably. But alternative - and equally reasonable - assumptions could come up with an entirely different answer, which in turn might affect the overall outcome.

So, is GERS worthless? Certainly not. But let us not pretend that it is anything more than a rough corrective to long-held political prejudices.

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