Implications of Scottish Independence

[Rolfe]

Ladbrokes of course is reporting the markets view of the final vote, as you can bet on whether the final Yes vote will be higher or lower than 44%. This course has no direct relation to current opinion polls.

Sorry, I misunderstood your post.

As I understand it, people have been betting on all sorts of under/over figures. I imagine the further you go from their projected outcome, the better odds you'll get.

How much is the market distorted by the different restrictions on the size of possible bets, I wonder? Obviously they're prepared to take larger bets on a No vote, because these will be lower payouts if they win.

Allegedly someone put £100,000 or something like that on No, way back when the odds you could get on No were pathetic. Nobody understood why, because even if the punter wins he'll get less than he would have got if he'd just invested the money for the same time.

Of course, bets on Yes have been restricted, with a lot of people saying online that the bookies wouldn't take the size of bet they wanted to place.

Rolfe.

 

[MikeG]

That includes oil (geographically allocated), and it was not the case in 2013 even with oil (source).

Moreover most sensible assessments of fiscal sustainability exclude oil due to (i) its volatility/uncertainty and (ii) its projected decline looking forward (Chart 4.1 page 106). The Scottish Government is a lot more optimistic with its oil revenue forecast than the OBR (Chart 4 page 5)--perhaps we should split the difference.

In any case the Scottish Government's own independence white paper states the intention to divert oil/gas revenue into a sovereign wealth fund (like Norway, Sweden), although it states that this could not be afforded until 2017-18 (page 305). Including oil revenue forecasts in the total and simultaneously promising to ring-fence them is having one's cake and eating it to an extent.

Anyway without oil, the gap between revenue and spending in Scotland is larger than the UK, and always has been (source) (Both regions have a negative gap). It is all very well to say "Well we won't have to tax/spend the way 'Westminster' did in the future" but this begs the question of exactly how Scotland will tax more or spend less--and that is the direction in which things are likely to have to move. "We'll decide by ourselves" might not be a sufficiently comforting manifesto.

One thing is for sure--Scotland seems to have wished to preserve a number of relatively regressive transfer systems that benefit the rich at the expense of the poor by more than would be the case if they were not in place (and they have been scaled back or removed in England)--such as universal subsidisation of higher education, of prescriptions, of elderly care, of sight tests. These are bizarre priorities for any left of centre government IMO.

I do find it really interesting that this, the most informed and referenced post in the thread for months, has been ignored by the Scots Nats. I'm going to assume, in the absence of any counter-argument, that they accept it in its entirety, and thus that the economic case for independence isn't quite what they have been claiming all along.

 

[LondonJohn]

I do find it really interesting that this, the most informed and referenced post in the thread for months, has been ignored by the Scots Nats. I'm going to assume, in the absence of any counter-argument, that they accept it in its entirety, and thus that the economic case for independence isn't quite what they have been claiming all along.

I rather tend to think that either a) they don't understand it well enough to rebut it, or b) they are still so hopelessly blinkered by the whole "the oil and gas are OURS, ALL OURS!" mentality that no amount of cogent economic analysis will ever get through.....

 

[Craig B]

I do find it really interesting that this, the most informed and referenced post in the thread for months, has been ignored by the Scots Nats. I'm going to assume, in the absence of any counter-argument, that they accept it in its entirety, and thus that the economic case for independence isn't quite what they have been claiming all along.

I think it is excessive to make assumptions of that kind. The Scot Nats may well in fact not agree with you on all points and therefore accept themselves to be making false claims.

 

[LondonJohn]

ETA There's LondonJohn for example, with a counter theory that the Scot Nats are incapable of understanding the ideas you support. In fact two counter theories; that they are incapable of understanding it even enough to be able to rebut it, and that they are "blinkered" too, evidently by greed at the prospect of getting their hands on the oil.

So I hope to see you argue the merits of these rival theories. LJ starts with an advantage, that he's got two theories to your one; but in awarding points I will take that into account.

It's all very well dancing around the issue, and referring nebulously to the "Scots Nats", but Mike G was asking why the participants on this thread have not made any comment on Francesca's post.

And since you might be counted as one of those who are a) a vociferous "Yes" supporter, and b) a believer in the underlying economic rationale of a "Yes" vote, then it's reasonable to suppose that you might be one of those contributors to this thread who would respond to Francesca's post. As yet, you have not done so (which is of course your prerogative). Mike G (and I) is merely wondering why that is. Why is it?

 

[Francesca R]

Perhaps there was some confusion over the different methods of stating odds?

Probably only me mixing up the [implied probability of a yes vote majority] (which is around 30%) with the [current market in the referendum result] (which is about 44% Yes) (D'oh . . )

 

[MikeG]

......So I hope to see you argue the merits of these rival theories. LJ starts with an advantage, that he's got two theories to your one; but in awarding points I will take that into account......

I don't have any theories at all. I simply assume the null position: there has been no counter-argument to Francesca's post, therefore the Scots Nats in this thread, given that there has been plenty of time for them to respond and they've posted here on other stuff subsequently, have no counter-argument.

 

[Francesca R]

The whole of the UK "takes out more than it puts in", that is why there is a PSNCR (budget deficit). The issue usually hotly debated which of Scotland or XScotland is doing that to the greatest extent.

Excluding oil, the gap between what Scotland spends and raises (per head) is greater than the same gap for XScotland, and spending as a fraction of income per head is higher. Including oil, the reverse is usually the case. Not last year though.

 

[Craig B]

I don't have any theories at all. I simply assume the null position: there has been no counter-argument to Francesca's post, therefore the Scots Nats in this thread, given that there has been plenty of time for them to respond and they've posted here on other stuff subsequently, have no counter-argument.

No. Your words were more highly charged than that.

I'm going to assume, in the absence of any counter-argument, that they accept it in its entirety, and thus that the economic case for independence isn't quite what they have been claiming all along.

Thus you "simply assume" that they accept your view "in its entirety" and that they thus accept that the economic case is contrary to what they claim.

ETA And now butter wouldn't melt in LondonJohn's mouth either. Gone are the mental incapacity, the greed-induced blinkering, brainwashing, political indoctrination, or "something else" and instead we have merely a piteous

Mike G (and I) is merely wondering why that is. Why is it?

 

[Craig B]

Here's news of a defection from the No campaign. I don't know the person involved, so I have no idea how important the news is.

With less than 4 months to go till the referendum a disillusioned Better Together co-ordinator has defected to Labour for Independence and declared his support for a Yes vote on September 19th.

Gary Wilson, 53, was for 6 months the local Better Together co-ordinator within the Edinburgh East Labour Party.

http://www.labourforindy.com

 

[Architect]

You know, I'm not entirely convinced that bandying about "regressive" and "progressive" is as straightforward as some here suggest.

Let's take income tax. That's clearly progressive, inasmuch as there are increasing rates as salary increases. This is generally accepted as fair and reasonable.

National Insurance, on the other hand, varies. Whilst there is a lower earnings limit, there is also an upper earnings limit above which employees do not pay additional contributions. It is therefore essentially regressive. Nevertheless I do not see complaints about it in the same way as I see such criticism of, say, subsidised tuition fees.

Likewise VAT is essentially regressive, albeit that in the UK essential items may be zero rated (certain foodstuffs, childrens' clothes). Nevertheless, no matter how low one's income, you're getting taxed at 20% on your own shoes and clothes.

Presumably I need not mentioned alcohol and fuel duties, also clearly a form of indirect regressive taxation. The imposition of carbon taxes on fuel, or IPT on insurance, have an equally blanket application.

It is my view that implicit suggestions that, say, abolition of prescription charges or tuition fees are inherently inappropriate because they are regressive are overly simplistic.

As it happens, I am not entirely convinced that the abolition of prescription fees was strictly necessary inasmuch as there were already exemptions for low earners, children, and the elderly (the last two arguably on a regressive basis again) plus the option of so-called "season tickets" which provided an effective discount.

Student fees, however, seem to me to be fundamentally different. Scotland has, since the 19th century, had an emphasis on free education and primary, then secondary, and latterly higher level. There is, I would suggest, broad social support for a policy which provides free access to education from all sectors of the community.

One might sensibly argue that this unfairly benefits the middle classes, inasmuch as parents are more likely to be able to provide financial support towards normal living costs and therefore the children have a lower debt burden. Since I was, and remain, a supported of grants for the poorer sections of our community then I would suggest that as a solution.

I am also not opposed to the concept of a graduate tax, as long as that was made on a progressive basis such that those likely to great the greatest benefit (that means you, doctors/dentists/vets/accountants/lawyers) will ultimately pay the greatest amount. One would, however, have to take account of the risk that earnings would simply increase to preserve net income.

Ironically, of course, it was our friends the Tories who tried to replace a progressive property-based local taxation regime (i.e. rates) with a regressive scheme (i.e. the Poll Tax, albeit with some reductions for low earners). And of course they didn't do that because it favoured their middle-England, middle class voters or anything....

 

[Francesca R]

As it happens, I am not entirely convinced that the abolition of prescription fees was strictly necessary

Me neither.

Student fees, however, seem to me to be fundamentally different. Scotland has, since the 19th century, had an emphasis on free education and primary, then secondary, and latterly higher level. There is, I would suggest, broad social support for a policy which provides free access to education from all sectors of the community.

Support is or was pretty high in England as well, but that doesn't alter the assessment that it transfers benefits up the income scale rather than down it.

One might sensibly argue that this unfairly benefits the middle classes, inasmuch as parents are more likely to be able to provide financial support towards normal living costs and therefore the children have a lower debt burden. Since I was, and remain, a supported of grants for the poorer sections of our community then I would suggest that as a solution.

It [no fees] benefits graduates, particularly those who end up earning a lot more due to their qualification. But graduates as a whole have lifetime earnings substantially higher than non graduates, and the gap is (IIRC) growing (skills/knowledge-based economy and all that). It is pretty unambiguous where the benefit is concentrated. Taking the funding from the same demographic is less regressive than taking it from everyone else as well.

I am also not opposed to the concept of a graduate tax, as long as that was made on a progressive basis such that those likely to great the greatest benefit (that means you, doctors/dentists/vets/accountants/lawyers) will ultimately pay the greatest amount. One would, however, have to take account of the risk that earnings would simply increase to preserve net income.

A graduate tax is economically very similar to (underwritten) loans/fees. It preserves the "mirage" that higher ed is free to a slightly greater extent maybe. But it is a bit inconsistent to be fine with graduate tax but not with loans/fees.

Ironically, of course, it was our friends the Tories who tried to replace a progressive property-based local taxation regime (i.e. rates) with a regressive scheme (i.e. the Poll Tax, albeit with some reductions for low earners). And of course they didn't do that because it favoured their middle-England, middle class voters or anything....

I don't see why that's ironic--the Tories typically try to shrink the tax/benefit system and also to make it less progressive as well. The irony is that progressive fans object to the changes in England that just happen to have made the state more progressive (removal of child benefit for upper-income-tax earners is another of those)

 

[Craig B]

Another piece of bad news for the Better Together campaign. Really bad news, if true. Alleged Sunday Herald exclusive:

Orange order hope to stage big pro-union rally in Edinburgh on eve of referendum

http://inagist.com/all/465245441748385793/ Mmm. I wonder if they'll get pissed, boke on the pavement, and shout obscenities outside Catholic churches.

 

[Undesired Walrus]

You know things are going badly for your campaign when looking at the polls you look around and blame the BBC of bias . The BBC seems to be pro-government one year, vehemently anti-government the next, left wing, right wing, pro war, anti war, pro Israel, pro Palestine and so on. It's a testament to its continued impartiality that it is attacked on all sides.

The reality of the situation is that the Scottish people will vote 'No' this year, and those who are Pro 'independence' are going to have to perhaps realise that the Scottish people are adults who have minds of their own and not swayed by BBC 'propaganda'. For a group of people who seemingly want to show the world that the Scottish are capable of standing on their own two feet, it's somewhat paradoxical that they run down their people by stating that they can be brainwashed by Gordon Brewer.

 

[Architect]

Me neither.

I cannot help but notice that you did not pick up on my points regarding a number of other regressifve funding regimes, such as national insurance, which do not seem to bear the same level of implicit disapproval from you as, say, higher education funding.

It [no fees] benefits graduates, particularly those who end up earning a lot more due to their qualification. But graduates as a whole have lifetime earnings substantially higher than non graduates, and the gap is (IIRC) growing (skills/knowledge-based economy and all that). It is pretty unambiguous where the benefit is concentrated. Taking the funding from the same demographic is less regressive than taking it from everyone else as well.

Overly simplistic.

The current wage in Scotland for a time-served stonemason (notably a banker/carver) is around £25-30k pa before overtime. A good craftsman, or one working on cladding, can hit £35k before overtime. This is comparable to a degree-qualified architect with 10-15 years experience. A fourth-year apprentice will enjoy a salary comparable to, if not higher than, an RIBA part I qualified year-out student in Scotland.

During their apprenticeship, trainees will receive college tuition - typically on a weekly day-release basis. This is partly paid for by the employer, but also by our government(s) through higher education funding and tax breaks during training.

At no point do I see you suggesting that apprentices in college education should pay for their tuition on the basis that, say, a time served joiner or slater or stonemason will receive more wages than a street sweeper or labourer. Or that educational tax breaks for employes should be removed.

A graduate tax is economically very similar to (underwritten) loans/fees. It preserves the "mirage" that higher ed is free to a slightly greater extent maybe. But it is a bit inconsistent to be fine with graduate tax but not with loans/fees.

Because a graduate tax can be progressive in a way which student loans are not. Whilst there is a lower earnings threshold and repayments are banded, these do not affect the level of outstanding debt but rather the repayment rate.

Is it appropriate, for example, that a doctor should be within the repayment regime as a primary school teacher?

You might argue, given your general support for free market economics, that the repayment for the former will be higher because the fees will be higher which, in turn, reflects the greater level of remuneration which might be expected later in life.

This, however, ignores the inevitable pressure which will come from the debtors for salary increases to fund the additional study costs. Some professions may be able to recoup this - healthcare, legal, and so on are obvious candidates - however I have yet to see a compelling argument as to how (say) teachers can exert sufficient pressure for salary increases or a discussion as to how this would be recoupted through local authority taxation. It is not a level playing field.

Independence would give Scotland the power to consider different funding options, for example through a more nuanced progressive income tax and national insurance regime which also reflects the higher salaries which are enjoyed by those who followed alternative subsidised educational pathways. Such a system would require checks and balances, if only to deal with the twin issues of EU students and iScot residents leaving the country after graduation, but these are far from insurmountable.

 

[Architect]

You know things are going badly for your campaign when looking at the polls you look around and blame the BBC of bias . The BBC seems to be pro-government one year, vehemently anti-government the next, left wing, right wing, pro war, anti war, pro Israel, pro Palestine and so on. It's a testament to its continued impartiality that it is attacked on all sides.

The reality of the situation is that the Scottish people will vote 'No' this year, and those who are Pro 'independence' are going to have to perhaps realise that the Scottish people are adults who have minds of their own and not swayed by BBC 'propaganda'. For a group of people who seemingly want to show the world that the Scottish are capable of standing on their own two feet, it's somewhat paradoxical that they run down their people by stating that they can be brainwashed by Gordon Brewer.

You know, there was a headline in the Telegraph yesterday to the effect that Christians had been told to vote against independence. On further reading it became apparent that this edict had been handed down by the Free Kirk, whose membership is so small as to be of little relevance, and was based on a perception by said body that the Scottish government would be more likely to pursue a secularist agenda.

The Mail, a far from worthy publication with more agendas that a Tory at election time, continues to rant and rave with some spectacularly poorly research articles on a wide range of pertinent issues.

The Guardian swings from side to side, but again tends towards excessive coverage of stories which support the Union without the kind of in-depth discussion which might be found in the (weekday) Herald. I deliberately exclude the Sunday Herald as it has publicly adopted a pro-Yes stance.

The Daily Record would blame Alex Salmond for a shower of rain, if they thought they could.

There is no requirement on the printed media to be even-handed but against this backdrop of unrelenting and often unfair criticism of the Yes campaign in the wider traditional media, I can see why Rolfe and Craig take objection to the Beeb when they devote a dispropportionately large amount of coverage to an allegedly grassroots organisation in the Borders which supports the Union. Business for Scotland does not, and never has, enjoyed the same level of media time.

I am, however, enjoying your implicit suggestion that propaganda has little effect. A great many governments and other political organisations across the World have spent a considerable amount of money over the last 100 years or so in an effort to sway the voting public, with various degrees of success.

This takes me back to my previously stated view on the vote, which I think will come out 40-45/55-60 for/against. It will be trumpeted as a victory by Unionists but will be no such thing: any situation where that kind of proportion of the public are ready to go to a divorce is sympotamitc of a divided country (or countries). Whatever the outcome, UK politics will never be the same again.

 

[Craig B]

It [no fees] benefits graduates, particularly those who end up earning a lot more due to their qualification. But graduates as a whole have lifetime earnings substantially higher than non graduates, and the gap is (IIRC) growing (skills/knowledge-based economy and all that). It is pretty unambiguous where the benefit is concentrated. Taking the funding from the same demographic is less regressive than taking it from everyone else as well.

I find this rather odd. The existence of fees inhibits poorer people from becoming graduates, because it inhibits them from going to university. They can't afford it, as it may be. Thus, fewer of them enter this higher earning bracket. The removal of fees causes the "demographic" to become more porous at the bottom. If it favours this "demographic", it favours above all the poorer people who would otherwise not be able to enter it.

The best way of paying for this is progressive taxation. Consider this. A rich person, whether he or she goes to university or not, will (by reason of being rich anyway) pay substantial income tax. But a poorer person is much more likely to enter the wealthy "demographic" if he or she is able to receive higher education. But might not be able to go to university if fees are charged. Thus the easement of fees leaves rich people where they are, and makes poor ones better off. It therefore must tend to increase the amount of taxable income.

By the way, I think loans have a different dynamic from that of fees, so I think your expression "loans/fees" is insufficiently precise.

You will recall your earlier contention that

any universal benefit will result in relatively more transfers to the wealthy from the non-wealthy than will a benefit that tapers out with income/wealth.

which seems to me to imply that providing health care free to all at the point of use is in your opinion a regressive measure favouring the rich. Do you accept this implication of your statement? If you do not, why do you exclude it from your objection to "any universal benefit"?

A graduate tax is economically very similar to (underwritten) loans/fees. It preserves the "mirage" that higher ed is free to a slightly greater extent maybe. But it is a bit inconsistent to be fine with graduate tax but not with loans/fees.

I don't agree, and will happily state why; but I will let you answer my above question first, if you are now minded to do so.

 

[Francesca R]

At no point do I see you suggesting that apprentices in college education should pay for their tuition [ . . . ]

I believe you have just pointed out that they do. Or that their employer does which is similar (the employer's cost represents at least some of what would otherwise be higher remuneration), and in any case the contribution is not the taxpayer. Residual state support to higher ed remains at all levels even with GBP9,000 fees of course, consistent with the same for much vocational education. Ergo, your examples, which I suspect you picked out to be anomalous exceptions, rather serve to highlight the relatively poor fit of fully subsidised teaching fees for undergraduates.

(And even if they were proper exceptions, locating such contradictions and then using that finding as justification for throwing a policy out is flawed--that was the primary "argument" against the simplistic policy of removing kiddie benefit for 40% income taxpayers a couple of years back, and it was similarly invalid)

Because a graduate tax can be progressive in a way which student loans are not. Whilst there is a lower earnings threshold and repayments are banded, these do not affect the level of outstanding debt but rather the repayment rate.

Indeed, graduate tax can be designed as progressive as you like, such that it takes way more than the cost of tuition from very high earning grads. But if you like graduate tax because it is more progressive (than fees funded from general tax) that still jars with not liking loans/fees because they are also more progressive (than fees funded from general tax).

Independence would give Scotland the power to consider different funding options, for example through a more nuanced progressive income tax and national insurance regime which also reflects the higher salaries which are enjoyed by those who followed alternative subsidised educational pathways.

Well, yes it would. But present autonomy already gives Scotland the power to select a more or less progressive system of tertiary tuition funding and it has chosen one in the latter domain (relative to what has happened elsewhere in the UK)

 

[Strawberry]

As a long time lurker in this thread, I cannot really understand why there's any debate left. If the only argument against independence is that Scotland will be poorer, (whether that's true or false), is all that's left, then that's no argument at all.

Either Scotland wants self determination, or it doesn't. Voting no because it might make you richer is not a good argument against independence. In fact, its kind of a shameful argument for any country to make.

 

[Francesca R]

The existence of fees inhibits poorer people from becoming graduates, because it inhibits them from going to university.

This has been debated in a thread I linked a couple of pages back. Students do not pay fees up front, the provider of the loan does. The thing which has been identified as dissuading the poor (more than the rich) is debt aversion, which is not justified given the insurance features built in to the loan repayment mechanisms, but may still be the case. You can have the opinion that it is the job of general taxpayers to compensate for this debt aversion effect if you want. I have not seen another argument that stands up in respect of inhibiting poorer people from becoming graduates.

Thus the easement of fees leaves rich people where they are, and makes poor ones better off. It therefore must tend to increase the amount of taxable income.

Subsidising fees does not increase total taxable income unless more people gain degrees as a result. You will be aware that participation in higher education has expanded in the face of successively more of the cost of it being transferred to the beneficiaries. You could argue that there would be even more participation with zero fees, and that would seem plausible, but (i) there would also probably be considerably more "waste" (degrees in frivolous subjects that do not lead to higher income) and (ii) participation would very likely have to be rationed some other way.

[ . . . ] providing health care free to all at the point of use is in your opinion a regressive measure favouring the rich. Do you accept this implication of your statement?

Yes it is--relative to, say, requiring co-payment from richer people.