Monday, 18 August 2014

Thoughts on the Scottish Independence Debate

Warning: This post is very long and somewhat wonky.

I realise that I'm quite a bit behind here, but I only had the time to watch the debate last weekend and then had to find the time to write all this down during the last week.

General thoughts:
I found Alex Salmond to be relatively weak, particularly on the issue of a formal currency union with the rest of the UK.  He was evasive of questions that obviously made him uncomfortable.  He quoted Darling out of context and several times referred to obscure documents rather than answer questions directly.  I find the case for independence to be lacking, particularly of any really good, practical reasons for why we should want to be independent.

Alistair Darling's performance was perhaps slightly stronger, although he missed a few tricks.  His best moments were when he quipped to Alex Salmond that "I didn't vote for you." and with his observation that a formal currency union between Scotland and the rest of the UK would require agreement on both sides.  I think Darling was needlessly evasive when questioned by Salmond on whether he thought that Scotland could be a successful independent country, probably out of fear of how it would look of how he might be later quoted out of context (judging by this debate, most likely by Salmond himself).

Opening Statements:
Alex Salmond opened by citing figures of 49 out of 71 Commonwealth countries and 12 out of the 28 EU countries are the same size or smaller than Scotland [pop. 5.3 million]; presumably by way of example that there are plenty of successful small countries and that therefore Scotland could be as well.  The 49 out of 71 Commonwealth countries figure is disingenuous, since not all 71 of these 'countries' are independent states - for example England, Scotland, Wales, Northern Ireland, Gibraltar, the Falkland Islands, St. Helena. and the Cayman Islands to name but a few which are not.  There are 53 independent states in the Commonwealth, 31 of which are smaller than Scotland, one - Singapore [pop: 5.4 million] is about the same size and another one - Sierra Leone [pop: 5.8 million] is not much bigger.  I'm absolutely baffled as to why Salmond would present these figures like this, since the reality doesn't weaken the point he was making anyway.  The 12 out of 28 EU countries figure is perfectly reasonable; there are 9 EU countries smaller than Scotland and 3 of roughly the same size: Slovakia, Finland and Denmark.

He mentions the large number of food banks in Glasgow and rhetorically asks how there can be people reliant on them in this prosperous country [Scotland].  The implication presumably that it is due to failings on the part of the UK government in Westminster.

He then alludes to the Trident nuclear weapons at Faslane and states that £100,000 million (i.e. £100 billion) is planned to be spent on them "over the next generation", of which £8 billion is "Scotland's money" (by which he means is the equivalent paid in tax by the people of Scotland in order to cover this expense).  This is a drop in the ocean compared to other government expenditure, something I've already covered in another post here.

He mentions that for more than half of his life Scotland has been governed by parties that "we" didn't elect at Westminster and that these parties have given us the "Poll Tax" and the "Bedroom Tax" (which of course is not a tax).

Salmond ends his opening statement by stating that: "No-one, absolutely no-one will do a better job of running Scotland than the people who live and work in Scotland." this is a very reasonable point taken in isolation, but it strikes me as somewhat ideologically inconsistent to support Scottish independence on this basis whilst simultaneously expressing a desire for an independent Scotland to remain within the EU.  He's essentially taken polar opposite positions regarding the UK and the EU.

Alistair Darling's opening statement contained exactly what you would have expected it to, he stated that he was proud of Scotland and wants it to prosper, but doesn't believe independence is the best thing to do and cited the strength of the UK.  He advocated a "best of both Worlds" approach.

Economic Prosperity & Social Justice:
The debate began with the themes of economic prosperity and social justice, which were bizarrely lumped together.  Economic prosperity is self-explanatory enough, but the definition of "social justice" is more difficult to nail down and I suspect many people understand it to encompass various different things.  The reason I find it odd that these two things are lumped together is that certain things which some people would consider part of the definition of "social justice" I view as being at odds with economic prosperity.

Darling claimed that as part of the UK, Scotland enjoys unimpeded access to a much bigger market.  This would be a good point were it not for the existence of the EU, which provides the same benefit across all 28 member states.  He also observed that Scotland enjoys additional security as part of a bigger country.

Alex Salmond stated he had a "vision for Scotland" which includes a prosperous country/economy and a 'just' society; at no point did he define what he meant by 'just'.  He referenced over 30,000 children in Scotland in poverty due to social security changes (he wasn't specific on what social security changes specifically).  He also mentioned the "bedroom tax" (a misnomer since IT IS NOT A TAX!) affecting 80,000 families in Scotland.  He didn't offer any discussion on how these issues would be any better/worse in an independent Scotland.

Salmond went on to cite a "risk assessment" by a "major accountancy company" completed "last week" which ranked Scottish independence as the 6th risk behind the UK leaving the Euro amongst other things.*  The whole point was rather incoherent - how do you compare such a diverse wide array of potential risks that may or may not affect a nation and rank them.  Even if you can do so, the 6th biggest risk is really high up the list of all possible risks (which is an infinitely long list).

Asked about the risk that the Union will keep pensioners poor Alistair Darling noted that being part of a bigger, stronger economy spreads the risk.

On Salmond's point that an independent Scotland would always get the government "it" voted for Darling quipped that he didn't vote for Alex Salmond.  As I mentioned here this was more than just a joke, it highlights an important fundamental truth about democracy.

Right at the end of the first part of the debate a gentleman in the audience asked Alex Salmond how ending peoples reliance on food banks is to be achieved in an independent Scotland, whether it is by encouraging people who are able to make a contribution or whether by raising taxes and paying out more in benefits.  Unfortunately ITV cut back to their "spin room" immediately after this excellent question was asked and they never returned to it for the rest of the debate, so Salmond got away without having to detail any specifics of his proposed means to this end.

Darling pointed out that a formal currency union between Scotland and the rest of the UK would require agreement on both sides.  Darling was very persistent in trying to get an answer out of Salmond on what is his plan B if an independent Scotland is unable to negotiate a formal currency union with the rest of the UK?  I found Salmond's response to be very weak, he repeatedly avoided the question stating only that a currency union was in Scotland's best interests and that he would therefore push for that.  When pressed on the issue he refused to give any clarity on any alternative arrangements.  A casual observer could easily take this as an admission of not having a plan B.

Salmond referenced the Fiscal Commission Working Group Report, which you can read in full online here.  Salmond referred to page 4 of the report, but that's just part of a Foreword, the actual bit we're interested in here is Chapter 7 (pp. 121) and the "Technical Annex - Assessment of Key Currency Options"

In a nutshell, the report sets out 5 potential options for currency in an independent Scotland:
  1. Formal monetary union with the UK
  2. Informal monetary union with the UK (sterlingisation)
  3. Join Euro
  4. Set-up new Scottish currency (floating exchange rate)
  5. Set-up new Scottish currency (fixed exchange rate)

Salmond quoted Darling speaking on Newsnight Scotland describing a currency union between an independent Scotland and the rest of the UK as "logical" and "desirable" for both countries.  This is selective quoting by Salmond who has cherry-picked these words specifically to make it look like Darling has either backtracked (Gasp! Someone changing their mind? - How awful!) or is being disingenuous now.  In fact, if you watch the clip you'll see Darling has been remarkably consistent in his views on a potential currency union - he states that it makes sense within the context of political union (and points out that this is what we have now!).  Watch the clip here and get the full context of his comments for yourselves.

Salmond then quoted David Cameron saying that Scotland could be a successful independent country and pressed Alistair Darling on whether he agreed with this statement.   I think Darling was needlessly evasive of this question.  I think Salmond was probably correct when he stated that Darling probably does agree with the statement, but just doesn't want to say so for fear of how it will look (or possibly for fear of how it will later be quoted out of context by Salmond).  I think this was a waste of an opportunity for Darling, he could have said something along the lines of:

"Yes, I do, but I think that Scotland can be even more successful as part of the UK."

Or, he could have asked Salmond to clarify exactly what he meant by "successful"?  There are all sorts of different criteria by which we could reasonably measure success.

Audience Questions:
Alistair Darling pointed out that public spending per head in Scotland is higher than in the rest of the UK - something that he supports.  I disagree that this is necessarily something to be supported in and of itself.**  That being said, I think Darling's answer touched on two important points: firstly, that Scotland is financially better off as part of the UK; secondly, and more importantly, even if Scotland would be financially better off if it were independent from the rest of the UK, using this as a justification for independence is on shaky moral grounds.  An analogy: the 10% of richest people in the country could be financially better off were they independent from the other 90% as they then wouldn't have to subsidise or support poorer members of society - does anyone seriously think that's a good justification for the richest 10% to secede from the rest of the UK and declare themselves independent?

It's interesting that there's a general narrative amongst the nationalists that the Scottish people would be better off financially if Scotland were independent from the rest of the UK (since they wouldn't be subsidising others in other parts of the UK on average), but at the same time they pursue statist policies, including taxpayer funded higher education, taxpayer funded medical prescriptions, etc. and that they don't seem to see a contradiction in these positions.  The whole nationalist narrative is full of contradictions and seems to be based around a general xenophobia or misplaced feelings of oppression rather than based on any fundamental principles as such.

Darling references this IFS report and suggests that in the event of Scottish independence, in the early years of independence circa £6 billion of cuts would be required.  I'm assuming Darling has estimated this from the figure of £6.4 billion reported in Table 1 (pp. 19) as the budget deficit of Scotland in tax year 2010-2011 (the most recent year covered in the IFS report) based on a geographical share of North Sea oil & gas revenue (the most realistic, but also the most optimistic case).

Darling described "free" (read: taxpayer funded) higher education as a "theoretical right" in reference to cuts of 130,000 college places.  I don't like this - basically because it is an outright nonsense.  "Free" higher education cannot possibly be a right for anyone because it costs resources to provide.  This is the distinction between negative rights and positive "rights".  If there were a right to receive education without paying for it directly that would put an obligation on someone else to pay for that education - who is that someone else and why should they be paying rather that the person receiving (the vast majority of) the benefit of the education?  This blog post is already far too long to get into a detailed discussion of such concepts, so I'll save any further comment for another day.

Alex Salmond answering questions on the issue of pensions referred to Scotland's declining working age population.  He referred also to 37,000 young people leaving Scotland each year and spoke about retaining these skilled people within Scotland and ensuring they are allowed to stay here.  He gave no details about how he planned to achieve this or how it would be any easier/better within an independent Scotland.

Darling attempted to emphasise the additional economic opportunity that comes with being a part of the UK.

Closing Statements:
Darling's closing statement was a narrative of not introducing any new borders or boundaries to increasing wealth and opportunities and the additional security that comes from being part of a larger country such as the UK.

Salmond's closing statement was a reiteration of the points he made in his opening statement.  He emphasised that Westminster governments have often not reflected the votes of the Scottish population, that Scotland is a wealthy nation with abundant natural resources and that this can be used as a basis for a more 'just' society and that no-one will govern Scotland better than the people who live and work here.

* It would have been helpful if he'd mentioned the name of the company that carried out this "risk assessment" - the cynic in me suspects that no such document exists and it's all rhetoric.
** I'm in favour of public spending being as low as possible - after all, the goal is not to spend as much money as possible, it's to get the best and most cost-effective results possible.  Put another way - we want to get as many public goods/services as possible for the lowest possible cost.  One is also reminded of the law of diminishing returns as well as the fact that one will never spend others money so carefully as they would spend their own.

Friday, 15 August 2014

An Open Letter to Alex Salmond: Democracy & the "Will" of the People

Mr Salmond,

During the recent Scottish Independence Debate between yourself and Alistair Darling,you made the statement that for more than half of your life Scotland has been governed by parties that "we" (by which you mean the people of Scotland) didn't elect at Westminster and that these parties have given us the "Poll Tax" and the "Bedroom Tax" (by which you are referring to the under-occupancy penalty, which of course, you know as well as I do, is not a tax).

I would like to point out, that for my entire life I have been governed by parties that I didn't elect at either Westminster or Holyrood.  This is part of the nature of democracy - sometimes you get stuck with some politician or some party that you didn't vote for (most of the time if you happen to be a libertarian or a true liberal).  Your adversary Mr Darling observed as much when he quipped about not having voted for you.  This was more than a joke, he clearly understands this important truth concerning the nature of democracy.

Indeed, by your standards the UK has been governed by parties that "we" (by which I mean all of the people of the UK) didn't elect at Westminster for my, and indeed your, entire life.  Not for eighty-three years, since the 1931 UK General Election, has any single party won an absolute majority of votes.  That is to say, for every single one of the 19 UK General Elections held since 1931, the majority of voters in the UK have voted against whomever was in power at Westminster.

Furthermore, implicit in your statement that "we" the Scottish people didn't elect those parties in Westminster is the idea, to borrow Don Boudreaux's words, that a "multitudinous and extraordinarily complex and diverse group of individuals" (i.e. "the Scottish people") can have "anything reasonably called "a representative" or an agent or agency that carries out its 'will'."  I completely reject such a notion - "[g]roups of people have no 'will'.  It is mistaken anthropomorphism to imagine otherwise."

The distinction which you implicitly draw between "we" the Scottish people and "we" the British (and Northern Irish) people is completely arbitrary.  When politicians move political boundaries to their own advantage we call it gerrymandering.  This argument which you put forward during the debate is nothing more than an argument for gerrymandering on a national scale.

I assure you that I feel more kinship and national identity in common with my English wife and with many English friends, colleagues and acquaintances I have known throughout my life than with you or any of your nationalist party colleagues.


Thursday, 14 August 2014

On the Cost of Trident

During the Scottish Independence Debate between Alex Salmond and Alistair Darling, Mr Salmond alluded to the Trident nuclear weapons at Faslane and stated that £100,000 million (i.e. £100 billion) is planned to be spent on them "over the next generation", of which £8 billion is "Scotland's money" (by which he of course means is the equivalent forcibly extracted in tax from individuals living & working in Scotland in order to pay for this expense).

He's not explicit about exactly what time frame is a generation.  Assuming a generation is say 30 years and taking these figures on face value, that means £3.33 billion per year, of which £270 million per year is coming from Scottish taxpayers.

The UK government budget 2014 estimates total expenditure of £732 billion in 2014-15 (ignore for now that they also estimate revenue to be only £648 billion - if you earned £648 per week would you think it a particularly sensible policy to spend £732 per week?)

Scotland represents approximately 8% of the UK in population terms, so assuming similar patterns of taxation and spending as in the UK as a whole (it's not going to be exactly the same, but it'll be close enough for my back-of-the-envelope estimate), total government spending in an independent Scotland would be circa. £59 billion.

£270 million is less than 0.05% of £59 billion - that's a rounding error!  It's about 50 quid per person per year.

To put this into perspective, the UK government is forecast to spend £222 billion on 'Social protection' this year alone (this includes state pensions, child benefit and jobseekers allowance) - that's billion with a b.  This works out at over £3400 per person.  That's 68 times larger (or two orders of magnitude larger) than spending on nuclear weapons.

Believing that Scotland should get rid of it's nuclear weapons on the basis that you don't agree with them on moral grounds or on other principles is one thing, but to argue for getting rid of them on the basis of cost is a very weak argument indeed when their cost is so much smaller than so many other things the government spends our money on.

Wednesday, 13 August 2014

The Bedroom Tax is not a Tax

Warning: This is a bit of a bugbear of mine, what follows is pretty much just a rant.

Disclaimer: Just to get it out in the open before I get any complaints about defending this unpopular policy: I am not a fan of the under-occupancy penalty, I think it is unfair to large numbers of people, many of whom will be among the most vulnerable members of our society (minorities, the poor, the sick and the disabled).  This post should not be taken as a defence of the policy, which I oppose.  This post is merely about the term "bedroom tax" which is an inaccurate and misleading way to describe this policy.  I think it may also be counter-productive for opponents of the policy to label it such, in much the same way as calling anyone who disagrees with your political leanings a communist, a Nazi or (most commonly) a fascist.

[Begin Rant]

Let me state explicitly and to avoid any ambiguity: the "bedroom tax" is NOT A TAX!

I'm talking about the under-occupancy penalty - to give it it's proper name - which is part of the Welfare Reform Act 2012.

So, if it's not a tax, what is it?  It is a reduction in benefits paid out to people living in council housing deemed to have "spare" or "unoccupied" rooms.  Some people may read this and think to themselves "what's the difference?"  I suspect that that's how the colloquialism "bedroom tax" came about in the first place.  Someone has equated a withdrawal of benefits to a tax.  And taxes are bad, right?  So, the bedroom tax must be bad!

Whilst I agree with the conclusion, it is not because of this argument.  The problem here lies in the first premise, that equating of a withdrawal of benefits to a tax.

From the perspective of an individual, a reduction in benefits and the levying of a tax may look the same and may have exactly the same consequences for the individual concerned.  For example, imagine Dave currently works part-time in a low wage job, he doesn't earn enough to pay Income Tax or National Insurance (Social Security) contributions.  He also receives some money paid to him by the government in benefits of some sort (e.g. Child Benefit, Working Tax Credits, Carer's Allowance, etc.).  Now, imagine the government alters the tax rules, so that Dave now has an annual tax bill of £200, but his benefit payments remain unchanged.  The effect of this is obvious: Dave is £200 per year worse off, he's going to have to cut back on £200 per year of consumption (or saving) or draw into any savings he may have.

Now, lets imagine an alternate scenario where Dave's tax bill (from Income Tax + NI) remains zero, but in this alternative universe the government reduces Dave's benefits payments by £200 per year.  What is the effect on Dave and his consumption?  The answer of course is exactly the same as in the previous scenario where Dave's benefit payments were untouched, but he was taxed more heavily: Dave is again £200 per year worse off and he's going to have to cut back on £200 per year of consumption.

This is, I suspect, where shallow thinking has led some to conclude that:

Reduction in Benefits = Tax


Under-Occupancy Penalty = Bedroom Tax

The problem with this equivocation is that taxes and benefits are not morally equivalent.  This becomes apparent if, instead of looking at it from the perspective of a single individual affected by the changes, we look at it from the much wider perspective of society as a whole:

If the government reduces the benefits it pays out to Dave, it must also reduce the amount it taxes Nick (all other spending remaining equal), since all benefits payments are someone else's taxes.  The government has no money of it's own, it merely shuffles money around between individuals.  This offsetting benefit to Nick exactly cancels out the harm done to Dave (in strict monetary terms).  Whether or not this is good or bad policy depends on the specific circumstances of Dave and Nick and crucially it requires a value judgement.  A similar story can of course be told regarding taxes, albeit the opposite way around.  If the government increases the taxes it charges Nick then it can increase the benefits it pays out to Dave.  Again, a value judgement is required to judge the merits of such a policy change.

The key difference is that a tax is the government taking money by force (or the threat of force - if you don't pay your taxes you can go to jail) from an individual who has rightfully earned that money.  A benefit is the government giving out money which it did not rightfully earn (whoever paid the tax to fund that benefit did).

Viewed in these terms then a reduction in benefit is seen to correspond to a reduction in tax, or in other words a reduction (however minor) in the coercive power of the state.

An increase in tax is precisely the opposite - an increase in the coercive power of the state.

From the libertarian perspective the former is unambiguously a good thing and the latter a bad thing.  However, that being said, policy changes that reduce the coercive power of the state still have to be weighed up against the harm that they inflict upon individuals.  In my opinion there is a long list of more desirable policy changes which could be made to reduce the coercive power of the state which I'd rather see implemented (e.g. university tuition fees and prescription fees in Scotland) and the under-occupancy penalty scrapped.

[End Rant]