Tuesday, 26 August 2014

Confident no more?

First Minister's economic advisers continued to discuss currency Plan Bs months after Salmond declared Unionist veto on pound was "bluff", new minutes show



Unnoticed amid the recent rows over a potential currency "Plan B" was the publication last week of the latest minutes from Alex Salmond's Fiscal Commission Working Group (FCWG).

These date from 26 May 2014, but are nevertheless intriguing.

They show that, long after the First Minister had dismissed the Unionist threat to veto a currency union as mere bluff and bluster, his advisers remained busy discussing alternatives.

The minutes state (my emphasis in bold):

The Working Group discussed and reviewed the evidence underpinning their recommendations for a formal monetary union in their First Report.
Following on from their last meeting, there was a continued discussion of currency options in the context of the stated position of UK Ministers and the advice of HMT.

The Working Group also considered the economic assessment of currency unions set out by the Governor of the Bank of  England.

Members discussed the options available to Scotland post-independence and the importance of a stable transition.
The opinion of the Working Group remains that retaining Sterling as part of a formal monetary union is the best option for both the UK and Scotland.

The reference to "transition" was pounced on by Better Together when Salmond used the same phrase last week. Transition to what? they asked.

May's meeting seems to differ from the one which preceeded it on 6 March. 

Back in March, three weeks after George Osborne came to Edinburgh to announce his veto plan, the minutes recorded a confidence that it simply wouldn't happen.

They said: 


Members discussed the currency options outlined in the first report given recent developments and concluded that their economic assessment and central recommendation still held. 
They also discussed the other viable currency and monetary models available for Scotland post-independence.
Members emphasised how they believe that it would be in the interests of the rest of the UK for Scotland to retain stability as part of a formal monetary union. 
In the event of a vote for independence, agreements will be reached which are in the best interests of both Scotland and the rest of the UK. 
Other currency options would be less advantageous for the rest of the UK but viable for Scotland and Members concluded that they are confident that this will ensure an agreement on a shared currency.
As part of their discussions the Working Group covered the potential role of a Scottish Monetary Institute in a formal monetary union. 

But there was no reference to continued confidence in May's minutes, just a repeat of the FCWG's position that a formal currency union would be the best option.

("The opinion of the Working Group remains that retaining Sterling as part of a formal monetary union is the best option for both the UK and Scotland.")

Then again, if they were just as confident, why would they still be discussing Plan Bs?



Monday, 21 July 2014

A few rivets short of a flagship

It may be the recess at Holyrood, but questions about the SNP government's promise to "transform" childcare policy under independence rumble on.

A few months ago ministers refused a freedom of information request I had lodged about the basic arithmetic behind their headline-grabbing plan.

You might remember that back in January, ministers published an economic analysis of the impact of a theoretical 6% rise in the female workforce, which they said could eventually raise £700m in extra taxes to help pay for childcare.

Strikingly, the analysis failed to spell out how many years it would take before a 6% rise would yield £700m extra in tax (assuming it ever happened), and hence how much the policy would cost to deliver.

Some top vagueness from the SG analysis (my emphasis)

Instead, there were vague descriptions of output and tax revenue rising "in the long run" and "over a number of years".

Holyrood's impartial information centre later pointed out that when the SNP government talks about "the long-term", it can mean 20 years or more.

So under FoI, I asked to see the full, unedited results of the modelling exercise, in the hope of seeing the short- and medium-term numbers.

Ministers refused, saying it would be "premature" to disclose it, and so I appealed to the Scottish Information Commissioner, Rosemary Agnew.

Ministers made their submissions to the Commissioner on June 16.

Agnew has now ruled on the matter.

Sadly from my perspective, she has sided with the government, and said that ministers were entitled to withhold the modelling work I was after.

The main thrust of it is that, although the SNP's White Paper set out the "high level" direction on childcare, the nuts and bolts of the policy remain "in development", and so material which "relates" to it can be withheld.

However, the Commissioner's decision also contains some fascinating insights.

For a start, it confirms that ministers have modelled far more on childcare than they have been willing to share with voters, and that the policy is still only part-cooked.

"The Ministers stated that the withheld information comprised the modelled impact of changes in economic output and tax revenues under different scenarios of increased female participation in the labour market," the Commissioner's decision says (my emphasis in bold).

"The Ministers argued that the withheld information comprised part of the evidence base provided to assist them in developing their policy on childcare in the event of independence.

"They argued that although the strategic policy direction had been set out in Scotland’s Future, detailed policy design work continued and the details of the policy were yet to be set out.

"The Ministers submitted that the information was created as part of an ongoing process of developing their position on childcare and that the formulation of the policy remains in development."

And here's where it gets really interesting.

Ministers admit they have modelled but have also withheld the short- and medium-term numbers.

In other words, they have withheld modelling on the crucial period covering the introduction of the policy, perhaps the first 10 or 15 years, when it would not yet be self-financing, and when the net burden on taxpayers could be hundreds of millions of pounds a year.

Informative material, surely? I'd say so. But ministers say it would only confuse the poor punters.

"The Ministers stated that the modelling results presented in the published report Childcare and Labour Market Participation – Economic Analysis provide a high-level summary of the impact of increases in labour market participation on economic output and tax revenues in the long-term.

"The results for individual years which detail the short and medium-term impacts have been withheld. 

"The Ministers considered that disclosure of the annual short- and medium-term results could be misleading. 

"They stated that the short- and medium-term results reflect a very specific labour market response, from which the long-term results are independent."

And my favourite phrase...

"The Ministers considered that disclosure of the information would give an unjustifiable impression that there is a level of certainty in the information.

A few rivets short of a flagship: ministers on withholding childcare information


The long and the short of it is that my FoI pursuit of this information has now hit a dead end.

Others may yet be more successful.

In the meantime, I leave you with this recent press release from the SNP demanding full disclosure and clarity from the UK government on another aspect of the referendum debate.

http://www.snp.org/media-centre/news/2014/jul/snp-write-information-commissioners-polls

SNP MSP Bruce Crawford said: "People in Scotland paid for these polls and they have a right to see the results in full.”


Thursday, 5 June 2014

Bonus balls?


THE £1000-a-scalp “independence bonus” touted by the Yes camp is under fresh scrutiny today.
It was calculated on the basis that by year 15 of independence, Scottish tax revenue would have risen by £5bn, or roughly £1000 per person.
Leaving aside the fact that that’s your money going to the government not the other way round, the bonus is predicated on a steady rise in workplace productivity.
A 0.3% annual rise for 15 years should yield £2.4bn, or almost half the bonus pot, according to the Scottish Government.
But the First Minister’s Council of Economic Advisers has just reported that productivity trends are “an area of uncertainty”.
So should Alex Salmond be so confident of a productivity rise?
The Scottish Government says only short-term productivity is uncertain and that independence would produce permanent long-term change.
But if it’s not possible to forecast short-term productivity change with certainty, how much reliance can you put on 15-year forecast, especially as long-term forecasts are notoriously harder to get right than short-term ones?
The opposition parties say something's amiss.
Here’s a longer version of the story in today’s Herald

EXCLUSIVE
Tom Gordon

THE workplace productivity behind Alex Salmond’s promise of a £1000 independence bonus for every Scot remains “an area of uncertainty”, his own economic experts have warned.

The assessment is contained in the latest annual report by the chair of the First Minister’s Council of Economic Advisers (CEA).

The Government last night said only short-term productivity was uncertain, whereas independence could produce permanent change, but opposition parties said Mr Salmond had been caught peddling “fantasy”. 

The First Minister said last week that higher productivity, higher employment and higher immigration after a Yes vote would result in an extra £5billion in tax revenues after 15 years, an “independence bonus” worth £1000 per person.
Almost half the £5bn increase was attributed to a 0.3% rise in annual productivity growth.
The SNP government stated: “A 0.3 percentage point increase in our long run productivity growth rate, which will narrow some of the gap with our competitors, could see tax revenues increase by £2.4bn a year by 2029-30.”
The government suggested productivity could be raised using “an industrial strategy to rebalance the economy and diversify Scotland’s industrial base”, better infrastructure, and a more efficient tax regime which helped Scottish businesses invest and innovate.
However the CEA chair’s report indicated productivity trends could not be taken for granted.
It said: “Looking ahead, in the short term, even as the recovery develops at an aggregate
level, specific or localised issues may still appear. Moreover, the outlook for the labour market and earnings, both in Scotland and the UK, depends on future productivity trends, which remain an area of uncertainty.”
From p43 of the CEA chair's second annual report
However it added the economic outlook was stronger than in early 2013, and the Scottish economy was expected to move beyond 2008 pre-recession levels of output during 2014.
The prospect of greater productivity was also cited defensively by SNP ministers this week when the Institute for Fiscal Studies said costly policies on childcare and pensions would require tax hikes or cuts under independence.
Labour finance spokesman Iain Gray said: “The SNP’s prospectus for a separate Scotland depends on a sudden, magical, and inexplicable increase in productivity following a yes vote.
“Every day we see independent analysts telling us these figures do not add up. Now even the First Minister’s own advisers are telling him a sudden leap in productivity is just fantasy.
“This report shows the scale of the challenge a separate Scotland would face in helping to bridge the gulf between SNP spending promises and revenue.
“There is no plan, no strategy, no vision and no idea about how to close the productivity gap.”
Conservative finance spokesman Gavin Brown added: “This is yet more evidence that the Scottish Government’s fiscal paper last week was based on extremely optimistic assumptions, vain hope and the crossing of fingers.
“What is particularly damaging about this conclusion is that it comes from the Scottish Government’s own trusted advisers.
“There can be no claims of a conspiracy here - when even they are telling the SNP to be more cautious, it’s time for the Yes camp to listen.”
A Scottish Government spokeswoman said: “The two references to productivity are different. The text quoted from the Chair’s Report relates to short-term changes in the Scottish and UK labour markets and its links to how productivity is adjusting in the light of the recession and recovery. The First Minister was referring to permanent improvements in Scotland’s productivity growth rate, which can be supported by access to the economic levers available under independence.
“With independence we will be able to take control of economic levers and have the powers to grow our own economy, including supporting increases in productivity rates. With the powers of independence we could generate over £5 billion a year of extra revenues within 15 years, without increasing taxes.”