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Wednesday, 27 November 2013

Fishy numbers from Salmond and Sturgeon

Buried in the Scottish Parliament's White Paper is the purported justification for independence, or at least the calculations that say that Scotland is a viable independent state, or to put it in Salmond's terms, marginally better off outside the UK.

Sadly as we larn all too often, when a politician gives you facts, they are probably lying, and this case is no different.

Take the offshore oil tax revenues.  remarkably, Salmond and Sturgeon claim that 94% of the current tax revenues would accrue to Scotland if the revenues were divided on a geographic basis.  Which is quite remarkable because 22% of all offshore production and 51% of all gas production (public figures) are on the English side of the border.  That implies that oil production is something like 5 times as profitable as gas production., which it isn't, so something funny is going on.

By geographic basis, the SNP mean working out which oil and gas fields would lie on either side of the border and calculating the tax that would arise based on production of each field.  Which isn't quite right, because the corporation tax and PRT arising on each field is a bit more complicated than that because both cortation tax and PRT are taxes on profits, but computed on a different basis with a different set of rules on what is allowable and when, and PRT is deductible as an expense in corporation tax calculations.  The only person who really knows the answer about how much CT is paid and where is HMRC, who say that in in 2011/12 and 2012/13 the percentage paid in England was about 17% (corporation tax is largely paid on an estimation basis so the figures for this year are already known).

Now 17% is quite a lot more than 4%, which implies that the corporation tax from offshore oil and gas attributable to Scotland is some £1.3 billion less than the SNP calculation.

Then we come to the PRT, which runs at about £2 billion a year.  According to the SNP 94% of this is attributable to Scotland, although they give no justification.  In fact PRT was abolished for all oil and gas fields that came online after 16 March, so that most current oil fields, the notable exception being Forties, are not subject to PRT, although most of the gas fields are.  I happen to know for a fact how what a large percentage of the PRT receipts come from just one field because several years ago I worked on a PRT scam that was so effective that the Oil Taxation Office took only e weeks after the oil company's semi-annual PRT return went in to come up with some legislation to shut it down - but not before we put together a second deal.  So rather than the £80 billion or so of PRT attributable to England, I would say the figure is closer to £.800 million, which puts the total overstatement of offshore revenues at £2 billion.

Then we com to the amount of corporation tax attributable to Scotland, and here we simply have to look at the distortion created by the banks.  In the SNP report dated March 2013, the amount of corporation tax attributable to Scotland was over £3 billion, which is strange because in the HMRC report of last month only £2.6 billion would occur in an independent Scotland.  Even this is likely to be an overstatement because of the number of people working south of the border in banks that are Scottish registered companies.  The HMRC analysis allocates the UK profits of groups according to where the NI is paid, but the reality is that all the London based trading activity would fall to be taxed in the UK as a business carried on by a foreign company acting through a UK branch, and while the Scots would be free to tax the same income again, in all likelihood if they took on the UK tax rules, the UK tax would be creditable against Scottish tax, so that little Scottish tax would be paid on those profits.

All in all maybe a £2.5 billion overstatement of Scottish sourced revenues, so when the Scottish government says that they contribute 9.4% of public revenue and receive 9.3% of public spending, you can see that they are overstating the case.  If the more accurate figure is that they supply more like 8.9% of public revenue and receive 9.3% of public spending, then we have a picture that more closely resembles perception.

The trends are:
over 1998-2008 manufacturing exports from Scotland fell by 17% while they rose by 72% in the UK, 176% in Germany, 100% in France and 95% in the US.
in 2010 Scotland accounted for 6.6% of UK manufacturing employment, well below its population share of 8.8%.
85% of the 212,000 growth of employment in Scotland over 1995-2008 was in Health and Social Work, Education and Administration, Defence and Social Security

The reality is that while spending per capita in the rest of the UK is £10,800 per head, in Scotland the figure is £12,100 and in future if they want the same services at the same cost, the Scots are going to have to find an extra £1,300 for themselves. Up until now, the rest of the UK has been funding them, and  for one will be happy to see them go.  It is a zero sum game.  Their loss is our gain, and we might even be able to raise the average IQ of the country as a result.

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