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.

Subscribe to MoneyWeek

Become a smarter, better informed investor with MoneyWeek.

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.

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.

Advertisement - Article continues below

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.




Beyond the Brexit talk, the British economy isn’t doing too badly

The political Brexit pantomime aside, Britain is in pretty good shape. With near-record employment, strong wage growth and modest inflation, there is …
17 Oct 2019
UK Economy

How the coronavirus pandemic is killing cash

Covid-19 is making a huge difference to the way we live, work and do business. One of its less obvious effects, says Merryn Somerset Webb, is to accel…
31 Mar 2020
Investment strategy

The MoneyWeek Podcast - Your questions answered

Merryn and John tackle some of the questions sent in by readers - including what they expect to happen to house prices; how much are dividends likely …
30 Mar 2020
UK Economy

It’s not all doom and gloom

In some ways at least, there’s never been a better time to launch a start-up, says Matthew Lynn. The government should help.
29 Mar 2020

Most Popular


What does the coronavirus crisis mean for UK house prices?

With the whole country in lockdown, the UK property market is closed for business. John Stepek looks at what that means for UK house prices, housebuil…
27 Mar 2020

Coronavirus: what it means for your mortgage or your rent

Ruth Jackson-Kirby looks at all the key questions for owners, renters and landlords affected by the coronavirus crisis.
29 Mar 2020
Small business

Furlough: what does it mean and how does it affect me?

Many companies have “furloughed” employees after they have shut down because of the coronavirus. But what does furlough mean and how does the scheme w…
30 Mar 2020

Buy stocks for the long term, but buy very carefully

After the wild ride of the last couple of weeks, equities are no longer expensive. But if you do decide to buy, be very, very careful indeed, says Mer…
30 Mar 2020