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26 April 2013

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Confused

Maybe I'm misunderstanding the chart, but how do the £19 billion oil profits and remittances after tax mentioned automatically come under the Gains to UK after Independence? Does the £19 billion not make up all foreign profits from oil - so not all of it would go to the UK, but to the US, France etc.

Angus McLellan

I am having some problems following this.

I suppose the first question would be what sort of 'balance of payments' does that £13 billion number represent? My understanding of its origins is that it comes from SNAP's GDP estimates. I've never graced an economics lecture with my presence, but as near as I can tell it represents (in IMF-speak) the 'current account' component. Is that correct?

On the assumption that I have that right, I believe that the two adjustments for profits & remittances are the 'financial account' component of the calculation.

What I don't see is any consideration that the 'trade' between Scotland and rUK in 'services' in the form of shared government services would end. If the table were only using large numbers I could understand the omission, but since you've included a £700m adjustment, I am wondering why you made no estimate for this element. Are 'public goods' - defence, foreign affairs, etc - not normally considered services when it comes to 'balance of trade' calculations?

Brian Ashcroft

The £19 billion currently leaves the UK and so wouldn't benefit the UK's BOP in an indy Scotland which continued to use sterling

David Comerford

Can you provide a source for the 37.6 figure? The boost to Scottish GDP in GERS from a geographic share of north sea is about 25. But I assume this is only profits and taxes and so the wages are already in the onshore Scottish gdp?

PS Pretty annoyed that you've posted this: I'm writing something similar!

Brian Ashcroft

The 37.6 is simply 94% of £40 billion, that the Scottish government, 'Yes' campaign and Oil and Gas UK as contribution of North Sea oil and gas exports. However, I believe this is actually too high and is just simply an export of oil and gas figure, which may include in-transit imports and exports of oil and gas that will cancel. UKCS oil and gas production is, therefore, probably lower than £40, possibly about £35 billion - taking price and production info for - 2011, which, of course, would lower the contribution to UK BOP further. But for the moment I thought I'd stick with the Scottish government figure. I am focusing on the exports of UKSC production so different from GDP. In 2011 the GVA from UKCS was £26bn according the ONS Regional accounts, around 10% was labour compensation leaving about £24 billion of profits. I take it tax is deducted to get this figure.

Confused

"The £19 billion currently leaves the UK and so wouldn't benefit the UK's BOP in an indy Scotland which continued to use sterling" why is it included in total gross gain though?

Brian Ashcroft

Because the Scottish government and 'yes' campaign have included it as a gain if an Indy Scotland stays with sterling when it is not because it is lost anyway.

Dick Winchester

"Oil profits and remittances after tax to non UK residents @70%" ...

1. Where did the £19bn figure come from?
2. What does the 70% refer to?

Brian Ashcroft

The 70% is a guesstimate of the extent of external entitlement to income generated in the North Sea. Reflects high degree of foreign ownership.

Dick Winchester

Which if correct gives us an idea of the size of the negative impact of the UK Govt's laissez faire attitude to ownership. It would be interesting to compare that 70% figure with Norway and indeed the USA.

That apart, I assume you're already taking into account corporation and other taxes that would have been paid in the UK?

Brian Ashcroft

Yes, the calculation is done after taking off tax-see first line of 'Gain' section in the table.

Angus McLellan

To raise another concern how much confidence can we really place in the division of trade between rUK and rotW?

This is quite critical to your calculation above, and yet for all that these numbers are quite widely quoted, the data on which they are based seems to be of particularly low quality. This report - http://www.scotland.gov.uk/Publications/2007/07/18083820/8 - would concern me greatly had I commissioned the series of Global Connections surveys. Although it dates from 2007, a link to it is still included in the qualifications and caveats which accompanied the 2011 report earlier in the year. Between the data quality, errors related to 'trade' with UKCS, and the rest of the problems discussed in Ms Munn's tale of woe, I would be asking for my money back.

I suppose we should look on the bright side. We have learned something this week, even if it is negative knowledge. The Treasury, for all the limitless resources and shed-loads of data which are in theory at their disposal, do not seem to have produced much in the way of new information. Contempt, sloth, too busy fiddling with year-end spending to meet the deficit target? Who knows. But it does tell us that the Treasury don't have super-secret data at their fingertips ready to deploy whenever needed. How disappointing is that for conspiracy theorists?

Brian Ashcroft

The data that we use are mainly Scottish government data and on trade the best there is currently is the Global Connections Survey.

Andy

Surely there will be more beneficial uses of the £ in Scotland for balance of payments than just oil, gas and whisky. What about tourism for example?

Jim

Are the figures in HM Government Report of March 2013 "Industrial Strategy: government and industry in partnership UK Oil and Gas Business and Government Action" wrong?

The HM figures and your figures do not seem to stack. Is this due to the £19 billion figure for remittances sent abroad?

"The UK Oil and Gas industry .......Boosts the balance of payments by almost £50 billion a year, according to industry estimates, by reducing oil and gas imports, and by exporting goods around the world" (page 7)

Craig

Sterlingisation is discussed in greater detail http://www.bubblews.com/news/2333011-sterlingisation with it a likely first step on the long road to an independent central bank.

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