The pointless numbers in the Scottish referendum debate

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.

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.