The pointless numbers in the Scottish referendum debate

Whether for or against Scottish independence, everyone is throwing statistics around like they mean something. But they don't.

The rows about Scottish independence yes or no are rather dragging on (six more "grinding months" to go, said one senior politician to me last week).

This week, a few more businesses have come out against it and a few more for it. But in an argument last week at an ICAS breakfast,and later at a lunch with a famous journalist up from London to take the temperature of the debate, the pointlessness of the whole conversation hit me anew.

As an ex-banker friend pointed out to me over dinner last week, (no one talks about anything but the vote in Edinburgh these days), most of the numbers we all use in our arguments have little or no accuracy to them.We talk about tax revenues in Scotland, about what the fiscal deficit in Scotland is and will be, what GDP is and what GDP per head is as though the numbers we use are real.

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But they aren't real.Take the numbers for individual tax revenue. They are no more than a proportional domestic average taken from the UK as a whole, and then adjusted for Scotland's age profile.

Then take corporate tax revenues: these, again, are guesswork. Corporations aren't required to define their tax liabilities in a geographically-defined way, so no one actually knows how much of the revenue or profit of a company operating in Scotland is Scottish and how much is not particularly given that it is mostly collected on the English side of the border.

The point is that none of the numbers we use in the debate are findings in themselves instead they are reflections of UK averages. That in turn means that the numbers we partly extrapolate from tax expenditures and revenues are also decidedly iffy.

As the Scottish government puts it, "the majority of public sector revenue payable by Scottish residents and enterprises is collected at the UK level. Generally it is not possible to identify separately the proportion of that revenue receivable from Scotland."* Silly, isn't it?

On the plus side, even if we did have accurate numbers for Scotland's real tax revenues and GDP today, they wouldn't help us much in forecasting what they might be in the years after independence. Because, on the individual side, we don't know how many highly-paid financiers will move to Berwick, and on the corporate side, we don't know how many firms will either move their headquarters or fiddle their revenues to the south.

Those who favour independence are always telling us that this is a vote that must be made on faith. They are more right than I think most of them really understand.

* You can find all the detail on the methodology used to guess the Scottish share of revenues here.

Merryn Somerset Webb

Merryn Somerset Webb started her career in Tokyo at public broadcaster NHK before becoming a Japanese equity broker at what was then Warburgs. She went on to work at SBC and UBS without moving from her desk in Kamiyacho (it was the age of mergers).

After five years in Japan she returned to work in the UK at Paribas. This soon became BNP Paribas. Again, no desk move was required. On leaving the City, Merryn helped The Week magazine with its City pages before becoming the launch editor of MoneyWeek in 2000 and taking on columns first in the Sunday Times and then in 2009 in the Financial Times

Twenty years on, MoneyWeek is the best-selling financial magazine in the UK. Merryn was its Editor in Chief until 2022. She is now a senior columnist at Bloomberg and host of the Merryn Talks Money podcast -  but still writes for Moneyweek monthly. 

Merryn is also is a non executive director of two investment trusts – BlackRock Throgmorton, and the Murray Income Investment Trust.