Politically motivated economic theory

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In the early days of my career as a fund manager perhaps the most useful tip I received from a colleague was: “garbage in, garbage out”. In other words, a city analyst could make all sorts of recommendations to buy or sell a company’s shares based on mightily impressive methodologies, but if the underlying information fed in at the start was useless, then the entire process was useless – and likely to mislead. The phrase applies equally to the two reports from the Centre for Public Policy for Regions (CPPR) and the Institute of Fiscal Studies (IFS) on Scotland’s post-independence finances (your report, 29 October).

The basis of much of their analysis appears to be oil price forecasts taken from the Office for Budget Responsibility (OBR). These forecasts are markedly lower than those of the UK government’s own Department of Energy and Climate Change, the OECD, the Norwegian government and many others, including the oil industry itself.

One can only speculate as to why the OBR chooses to be so strikingly pessimistic, but there is an obvious political motive to do so in terms of playing down Scotland’s potential wealth. Even Better Together chairman Alistair Darling said in 2010 that “right from the start the Tories used the OBR not just as part of the government but as part of the Conservative Party”.

Yet Mr Darling now appears happy to exploit that same politicisation to which he once objected so strongly.

There are also wider questions about why the CPPR and IFS have chosen to base their analysis on oil price forecasts that are obvious statistical outliers and come from an allegedly politicised body with a poor track record in forecasting.

Could it be a case of “biased garbage in, biased garbage out”?

C Hegarty

Glenorchy Road

North Berwick

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