Independence: Economist attacks evidence in debate

Andrew Goudie. Picture: TSPL
Andrew Goudie. Picture: TSPL
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THE Scottish Government’s former chief economic adviser has called for a major change in the debate on independence and more powers, saying the case made by politicians at Holy­rood has too often been based on “cavalier assertions with little or no foundation”.

In a book published today, Prof Andrew Goudie says that answers on the big constitution questions facing Scotland so far have regularly suffered from a “paucity of evidence”.

SNP ministers have claimed in recent weeks that independence would free up billions to spend in Scotland, basing their arguments on current figures showing the country has a lower deficit than the UK.

But Prof Goudie warns such figures reveal “little, if anything” about the real long-term financial position likely to be faced by an independent Scotland.

Instead, he argues that the case for more financial powers at Holyrood and for independence should be based on a more rigorous basis, suggesting “six tests”, which might examine the long-term risks, opportunities and impact on the country’s competitiveness.

The book, Scotland’s Future, is a politically neutral examination of the economics of Scotland’s choice and has been serialised in The Scotsman over the past three weeks.

Leading economists and former civil servants have noted the constraints placed on an independent Scottish Government if, as the SNP wants, it decided to keep the pound.

Others have noted that independence could release the country’s “animal spirits”, but have also said the cost of financing its debts and deficit may be far higher than for the UK.

Prof Goudie, who has edited the book, was chief economic adviser to four first ministers before leaving the Scottish Government in 2011.

In his chapter, he notes that, while politicians in Edinburgh have regularly called for specific powers to be transferred from London to Edinburgh, “there has generally been far less emphasis placed on accurately identifying the potential value of those powers”.

And even when questions about the risks and benefits of these powers are raised, he adds, “the responses have typically suffered from a paucity of evidence to support specific propositions and, instead, have sadly often lapsed into cavalier assertions with little or no foundation”.

Prof Goudie warns that as constitutional change is about “transforming the economic system”, the current system’s performance is of limited value as a guide to how a future Scotland might perform.

“A reliance on past evidence or traditional economic techniques to ‘test’ whether new economic powers are a good or a bad thing is therefore potentially highly misleading: unless, that is, the change is anticipated to be relatively minor in its impact on the primary economic behaviours,” he writes.

He singles out the way the Government Expenditure and Revenue Scotland (GERS) publication has been used. The most recent report – which shows the country’s “balance sheet” – revealed that Scotland ran a deficit of 5 per cent in 2011-12, lower than the UK’s 7.9 per cent.

That prompted finance secretary John Swinney to claim last week that the lower deficit was worth £4.4bn to Scotland, which – if independent – could have been used to reduce debt, save money for future years and invest more in the economy.

However, Prof Goudie, who oversaw the GERS publication, says the figures are only useful in the “very short term” – and reveal very little about the long-term health of a nation with a different constitutional set-up.

Scottish Labour’s Richard Baker said last night: “It’s time for an honest discussion about what the Nationalists’ plan to break up Britain would mean for jobs, the economy and our public services.”

However, a spokesman for the Scottish Government said: “Completing the powers of the parliament is essential if we are to have the tools to properly tackle issues such as child poverty, to be able to scrap the bedroom tax, to incentivise key industries and to deliver more effective public services.

“GERS provides us with clear evidence of Scotland’s finances now … and demonstrates without doubt that Scotland more than pays her way in the UK, paying more tax per head over the last 30 years than the rest of the UK as a whole.”

Mr Swinney said: ““Of course, all of these forecasts are based on current UK government spending priorities. An independent Scotland will be able to make its own choices – for example on defence, where we have already indicated Scotland will be able to make savings while still spending more on defence in Scotland than currently is by the UK Government.”