Bill Jamieson: Be careful what you wish for with radical overhaul of GERS

Crystal ball time: economic predictions are notoriously inaccurate. Picture: Getty Images
Crystal ball time: economic predictions are notoriously inaccurate. Picture: Getty Images
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Amid the verbal fisticuffs over Scotland’s spending and revenue figures last week, a compelling consensus is starting to emerge in two areas. The first is the primacy of economic policy after years of focus on constitutional issues. And the second is that the annual Government Expenditure and Revenue Scotland (GERS) ritual is due a radical overhaul.

This autumn looks set to see significant moves in these two areas. They have been preceded by hard-hitting reports – one from public finance experts brought together by Audit Scotland under the ungainly title of the tripartite Budget Process Review Group. This urged that Scotland’s budget process should be substantially revised in the wake of new financial powers. “An opportunity therefore exists,” it declared, “for cultural change and a new budget process that looks both forward and back in terms of parliamentary scrutiny.”

The second was a separate mammoth report – an essential first stop shop for policy wonks – published by Reform Scotland this summer on the state of the Scottish economy. This also called for better economic and budget data and greater attention to areas where economic performance can be improved.

Early next month the Scottish Parliament’s Economy and Fair Work Committee begins its call for evidence into the “accuracy, utility and comprehensibility” of Scottish economic statistics and consider what data is required for “effective delivery and scrutiny of policy”. The reliability of economic statistics used by the Scottish Government, media and others is set to come under the microscope.

It will hear views from independent experts on GERS and broader issues on how economic data can give a more accurate picture of why growth is lagging the overall UK level and how it can be improved. Oral evidence gathering process will begin in early September. The committee is also having a planning day the week after next in private and will hear from numerous economists.

Also in September, the Finance and Constitution Committee will be asked to ratify the recommendations from the tripartite Budget Process Review Group. Then the whole Parliament will be asked to vote on its incorporation into a new budget process in time for the next financial year.

Finally, the late autumn will see the first assessment by the new Scottish Fiscal Commission under Lady Susan Rice. Its work, closely modelled on the UK’s Office of Budget Responsibility, will seek to provide independent analysis of economic growth and public finance projections by the Scottish government.

From all of this, it seems clear we are approaching an inflection point in the scope and presentation of economic and public finance data in Scotland. The traditional set-piece annual GERS publication which has prevailed for 24 years looks set if not for the graveyard, then for major rejuvenation.

Arguably the most salient call for change to date has come from Audit Scotland’s review group. Its central recommendations are that the Scottish Government should publish each spring, a Medium-Term Financial Strategy for Scotland’s public finances, and each autumn, a Fiscal Framework Outturn Report, setting out data for Scottish tax revenues.

The unspoken aim behind this reform is to “de-politicise” publication of the GERS figures and bring an end to the party political spin that has long surrounded them. But different political interpretation of these is surely inevitable and can never be eradicated. In any event, the report also argued that “the present budget process delivers insufficient opportunity for Parliament and its committees to influence the Government’s budget formulation”. Parliament, it said, should instead move to an “all year round approach” to scrutiny, where committees seek to influence government plans in advance of the budget being published each autumn. That, surely, has to be a recipe for hyper party politics!

And a more fundamental question lies at the heart of all of this – the assumption that there is such a thing as perfect, always-reliable economic data and that superior predictions can be made about the future. The history of economic analysis and forecasting is riddled with examples of flawed assumptions and incorrect interpretation – witness the repeated failure to predict outcomes with accuracy more than one year ahead and a misunderstanding (at best) of events.

The raucous referendum campaign was made all the more fiery by chilling predictions of fiscal collapse (“Project Fear”). Most recently, dire predictions from the Treasury of a Brexit recession, falling house prices and a slumping stock market failed to materialise. All drew from the murky well of official statistics.

Could Scotland do better, even with independent bodies, high-minded “neutral” economists and a substantial increase in the volume of statistical data? Despite these existential questions – perhaps because of them – the pressure for GERS reform is set to intensify as Holyrood resumes this autumn. The quest for improvement is never-ending – even if the results themselves inevitably fall victim to the same process.

Policy focus should be on the legions of ‘economically inactive’

Greater focus on economic policy is now a given. And there has been some notably positive developments in recent days, despite the business hand-wringing over Brexit and the latest scare – migrant labour shortages.

Scottish bus manufacturer Alexander Dennis announced it is building 90 low-emission double-deckers for Mexico City. The group, which employs more than 1,000 staff at its base in Falkirk, secured the deal with a £44 million agreement by UK Export Finance.

Airline Jet2.com has announced 200 new jobs split between Edinburgh and Glasgow airports. Roles being advertised include pilots, cabin crew and ground operation staff.

And the Custom House site in the centre of Glasgow has been sold to a development and investment company for more than £1.75 million. The building and adjoining land has planning consent for a 209-room hotel.

Given the rise in the numbers of “economically inactive” in Scotland, now standing at 21 per cent of the working age population, policy focus here would be a useful first step.