Why you can't remotely rely on Richard Murphy


Richard Murphy had a bad introduction to Scottish politics. He blundered into GERS in a blog and Twitter and rapidly had to backtrack on his assertions about it. Since then he's been on a mission to dig himself out of the hole, that rarely works in my experience. 


His latest attempt was an article in the National, and if it was an attempt to leap out of the hole then he's currently lying in a heap at the bottom nursing a sore ankle.

If you have arrived here it may well be because you have decided to cite this article by Murphy as a counter-point to GERS. I'm sorry but you are going to be disappointed.


To be valid a counter-point in a debate needs to say something of substance, as you'll soon see the article doesn't actually do that and in fact ties itself up in knots.  

Let me put it this way if you were looking to cite Richard Murphy and his National article you have just turned up to a gun fight armed with a plastic spoon.


HAD a meeting with a number of the SNP’s MPs about a year ago to discuss economics, money, tax and independence, all of which are issues to which I have given some thought. Summarising what I said is easy: that the SNP had run a great referendum campaign in 2014 barring issues relating to the currency, tax and the economy.

Humour, that's a good start.


I stand by that. And my message now is that if the Yes campaign wants to win next time, then this is where things have to change.

First, let’s start with the facts.


That would be refreshing for a change, I'm almost looking forward to this.

Or rather, let’s start with the fact there are almost no facts to discuss on the Scottish economy.

Oh dear…

As an economist, I’ll tell you that to assess Scotland’s economy you need to know about how much people have to spend in the country, how much is invested in Scotland, how much the Scottish Government spends, what the country’s exports and imports are, how much is saved, and the total tax paid in Scotland.


Agreed. All economists need data collated in a reliable way which provides a reasonable degree of confidence when it comes to these items. But I’m sure that’s what you are about to say…

Note that’s seven separate bits of data. And we only have reliable figures on some of what the government spends. 


Oh well. My hopes weren't high.

As for the rest, Revenue Scotland is still struggling to work out which people are tax resident in Scotland and it has no clue at all on what corporation tax, VAT or other taxes are due, precisely because no-one has to declare those taxes separately for Scotland.

No clue? For a article that started with “Facts” (I’m so disappointed he didn't put it in CAPS) the idea that we have “no clue” about these numbers is just plainly wrong. Absolutely GERS is an estimate but it’s an estimate with a high degree of confidence as clearly stated in the GERS methodology documentation. You have to wonder if Murphy has even bothered to read it before penning this article.

It’s the same with imports and exports: no-one knows what these are because there are no border posts at Carlisle, Berwick-on-Tweed or Stranraer. On investment and savings, we’re equally clueless.

“No one knows what they are”? Even if there were border posts in these areas we still wouldn't know all imports and exports to the level of exactitude that Murphy is demanding because a huge amount of our exports are services which wouldn't pass a border post in any meaningful sense. They would therefore have to be collated by survey. This is exactly what the Scottish Government does to collate its export data. Again it probably would have been helpful for Murphy to know that before typing. 



The message then is a simple one: when people say Scotland is in financial trouble, or running a deficit, or anything else, ask them how they know.


Because we are using data provided and calculated by the Scottish Government with a high degree of confidence.


If they say it’s the GERS (Government Expenditure and Revenue Scotland) report, tell them to read the home page for that report where it is quite candid about the fact that the data in it is estimated.


No one has ever said it wasn't estimated Richard. The idea that because something is estimated (and most government statistics are) makes it wrong is just naive. 


Economists and traders (economists backing their views with money) know this and trust this sort of methodology when it comes to statistics. For example the calculation of GDP by any statistical authority involves a level of survey and estimation. It's not like the government is counting up every penny and pence of economic activity to calculate it. Is Murphy really saying that unless we go through that process we will never know our GDP meaning any economic analysis is impossible?


It's like listening to an internet troll telling you that you cant trust opinion polls because they wont tell you the EXACT result of an election. That's all very true but they can tell us about public opinion with a high degree of confidence especially within a reasonable set of errors. 

Estimation within a confidence level is not the same as no knowledge which is what Murphy is trying to argue.  

If they retort that all financial data includes some estimates, feel free to agree, and then point out that does not usually mean that 25 of the 26 income figures in a set of accounts are estimates extrapolated from data for the UK as a whole and some consumer surveys.
Surely to make some sense Murphy would show us how those estimates are wrong, and why the published confidence levels by the Scottish Government are wrong? It’s interesting that all we've had so far is empty rhetoric with no foundation. 

And yet that is the case for GERS. Estimates may be a part of financial life but this is ridiculous: what this really says, yet again, is that there is no financial data for Scotland.


Again Estimate = no financial data. If Murphy can challenge the data why cant he show us why it’s wrong? 


For example when it comes to GERS I’ve pointed out that the levels of debt repayment are far too low and don't take account of the estimated higher level of debt servicing costs that Scotland would have on independence. That's a simple critique a set of statistics and a challenge to the assumptions. Its not difficult but it’s telling that Murphy hasn't offered one.

That leaves two questions to discuss. The first is why is this the case? Here, my answer is simple: as matter of fact what we measure is what we think is important.


He hasn't answered one question so far other than show he cant actually engage in a critique but let’s all move on.

If Scotland was, right now, to have the data it needed to manage its economy then Westminster would have to agree to its production. But the fact is that Westminster does not think it is important that Scotland has it own economic data, so it does not measure it.

Or alternatively the Scottish Government could calculate this data or obtain it directly (as it does with exports). For example we have a FOI requests which shows that the Scottish Government has NEVER been denied a request for information from Westminster when it comes to the GERS calculations.

Again Murphy hasn't done his homework.

It sends along half-hearted estimates instead. And in the process it makes clear that it is contemptuous of the Scottish Parliament managing the Scottish economy, which is clearly not possible without data.


Westminster doesn't send along the estimates, this is really basic stuff and just shows that Murphy does not understand this subject matter. They are calculated and produced by the Scottish Government.

To be blunt, Westminster is saying as loudly and clearly as it can that Scotland quite literally does not count by refusing to measure what happens there. 


Westminster does it own data along with regional statistics within the UK, they just aren't very good. Which is why the Scottish Government does a bang up job of calculating them often directly from the source data used by all government departments (such as income tax).

So what can be done about this? I suggest three things. First, all with concern for Scotland need to demand proper data on its economy.

Scotland has proper data, which anyone remotely interested in the topic can tell you. If it wanted more “proper data” of a higher degree of confidence there is nothing stopping the Scottish Government getting this. 


We can only assume that they are confident in that data otherwise they would have invested more time and effort in getting it right. 

Given the huge review of GERS that the SNP undertook when they came to power and signed off by the Cuthberts the question as to what more the government can do to get this data to a higher degree of confidence would be enlightening. Sadly we have not had one here. 

That can start now. Secondly, it means that GERS has to be treated properly, with deep suspicion.

Murphy would have some credibility if he could show why we should treat the data with  deep suspicion if say for example he had shown why it low balls Scottish income tax, or VAT or Corporation tax, but he hasn’t. Most likely this is because he cant find a credible critique on a subject he is highly ill-informed on.

The chance that Scotland makes a deficit of the scale it suggests is remote. It is exceptionally unlikely that eight per cent of the population make 17 per cent of the UK deficit.

Why? This FACT has just been stated with no backing whatsoever? 


It’s credible that this is the case given that we have 8.5% of the population on around 33% of the landmass of the UK. Sparcity costs money in terms of public services as we all know and I’ve set out the reasons for that in this blog several times over. If Richard had done any kind of research he would know that such a statement is ridiculous.

Thirdly, move the debate on. Discuss what Scotland can do.

Great, at last let’s talk about what Scotland can do. Finally we can get a debate about all the things Scotland would do differently to make us better off after independence.

Put oil firmly in context, adding hydro, tidal and other energy into the mix at the same time. Talk about what Scotland could invest in if independent. Make clear that it would be England that would owe Scotland money if there was independence: that’s the real legacy of oil.

Why would England owe Scotland money? That can only be based on starting the world in 1980 and taking the GERS and SNAP data supplied by the Scottish Government which Murphy has just spent the vast majority of the article telling us is wrong!  The data is either reliable for conclusions or it is not?

Having answered that one perhaps Murphy can answer why the world only starts in 1980 and not 1888 with the Goschen formula (again see this blog).

Talk about how Scotland could draw in new business, from England where many want to live in a Europe-friendly country, and from around the world where an English speaking base near Europe is desperately attractive. 


So business is going to relocate from England to a “pro-Europe country” so pro-Europe that when it joins it wants all of the opt-outs of the UK and then some more (such as CFP), indeed it wants so many opt-outs that the SNP are now switching their support to EFTA from the EU. Again a familiarity with Scottish politics would have helped before putting finger to keyboard.

Tackle the big questions early, such as currency, tax and how social justice will be delivered by an equitable and well-funded tax system that ensures all cheats pay.

How about a free floating Scots Pound (the only credible option) which will mean that the costs of servicing mortgages and rents will go up or be volatile or most likely be both. How does that help social justice. Let’s also not forget that the SNP wont even increase the 45p rate for fear of capital flight, I guess tightening tax rules will really encourage that capital to stay. Frankly this is just abysmal.

This is where the economic debate needs to be, and it could be if GERS and all the nonsense that goes with it is dismissed as another example of Westminster’s contemptible attitude to all things Scottish, which is precisely what it looks like to me. Make the economic narrative Scottish in other words, which is precisely what GERS is not. That’s made in England.

The conclusion is laughable, Scottish data provided by the Scottish Government run by the SNP is made in England - yes he did end on that! 

The economic debate does not “need to be” this ill informed, empty and vacuous rantings from an “academic” who clearly does not understand the topic. Nor can he provide one, just one, example of where he believes the GERS confidence intervals to be wrong. That says nearly everything we need to know about this article. It’s just an attempt to provide those who desperately want to have some comeback to the fact that their economic case for independence lies in tatters. 

Sadly anyone citing his article has just shown themselves up as someone who either does not understand or is just so desperate for an answer that they will throw their lot in with a man so thoroughly embarrassed by his naivety on the subject that he is prepared to demonstrate his ignorance in the National.





Comments

  1. Brilliant fisking of an awful attention seeker.
    To be precise he's actually a successful attention seeker, but an awful member of the public, it's just easier to merge the descriptions.

    ReplyDelete
  2. There are many reasons why a shark-infested custard is yellow :-)

    Professor Murphaloon is in denial about most of them, perhaps.

    Enjoyed the piece.

    ReplyDelete

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