Scotland data duel stokes voter distrust

The UK and Scottish governments squared off on Wednesday in a statistical showdown over the costs and benefits of independence for Scotland, seeking to win over voters wavering on whether to end the three-century-old union.

The highly politicised parading of sharply contrasting fiscal forecasts will win no prizes for objective economics, and risks deepening voter cynicism on the claims of both sides.

But analysts said the data duel did shed light on the challenges facing pro-union and independence campaigns, with less than four months to go to a referendum that could redraw Britain’s map and send shockwaves across Europe and beyond.

Alex Salmond, Scotland’s first minister, kicked off proceedings with research he said showed the nation would be in line for an “independence bonus” worth £1,000 per person a year by 2029-30.

The announcement marked a nationalist pre-emptive riposte to a much-trailed and very different UK assessment unveiled less than an hour later in a hotel only a few minutes walk from the Scottish government headquarters.

There, Danny Alexander, the Scottish chief secretary to the UK Treasury, dangled an even larger virtual political cheque in front of voters.

Retaining the 307-year-old union between Scotland and England was worth £1,400 per person a year, said Mr Alexander. “You can think of it as the ‘UK dividend’ – fourteen hundred reasons why we are better off together.”

The Treasury’s casting of its headline number as a dividend highlighted its determination to put as positive spin as possible on its research, amid complaints that an overly negative pro-union campaign is turning off Scottish voters.

The £1,400 number is a complicated annualised calculation of what the Treasury says would be the extra per capita tax an independent Scotland would need to extract to tame its deficit to UK levels over decades.

The Treasury won some praise from economists by relying on research by independent third parties to chart the fiscal challenge for Scotland of falling oil revenues and rapidly ageing population, nationalist spending promises and setting up new independent government bodies.

But the Treasury paper’s credibility suffered a heavy blow when an academic it cited to support its estimate of an independent Scotland’s start-up costs said the way his research was used was “seriously misleading”.

Mr Alexander waved aside the criticism, insisting that “every single one of these figures is an independent source, independently backed up”, while the Scottish government’s claims were mere nationalist “myth-making”.

But Patrick Dunleavy, whose work was cited, insisted the Treasury had exaggerated the cost of setting up government institutions and that spending on new tax and welfare systems would be an investment that would pay off.

“If the Scottish government is updating its tax and welfare IT systems, which will cost hundreds of millions of pounds, it will presumably invest in the most up-to-date, efficient systems it can,” Prof Dunleavy said.

One No campaign insider condemned the Treasury for its use of Prof Dunleavy's research. “The use of figures was a crass approach and not necessary,” the insider said.

However, the Scottish government’s claim of a £1,000 bonus attracted even deeper scepticism from economists.

In depth

Future of the union

Scotland will decide in a referendum to be held on September 18 2014 whether or not to end the 307-year-old union with England

Even making potentially generous assumptions about extraction costs and output, Edinburgh’s updated forecasts for North Sea revenues made clear that recent falls in the tax take from oil are making it ever harder to argue that an independent Scotland would be born in better fiscal shape than the rest of the UK.

The prediction of a £5bn a year rise in Scotland’s tax take from independence by 2029-30 also rests on expectations of strong productivity growth, higher employment rates and more inward migration.

“If you assume apple pie, then you will get a better fiscal picture,” said David Tinsley, UK economist at BNP Paribas.

Both UK and Scottish reports were produced with a political agenda in mind, said Mr Tinsley. “You have to view them as partial in both cases,” he said. George Buckley, chief UK economist at Deutsche Bank, said “the selectiveness of statistics” was an issue with both reports but that the Scottish government’s forecast required “quite a heroic assumption” of increasing oil production.

John McLaren, an economist at Glasgow university, said falling oil revenues were prompting the Scottish government to raise the possibility that it would take on responsibility for less than its population share of UK debt at independence, a stance that would reduce its initial fiscal burden but could be hugely divisive.

Opinion polls show support for the union retains a clear lead, but the pro-independence campaign has narrowed the gap markedly since last year. Psephologists suggest that many of the roughly 15 per cent of voters still undecided might vote Yes if they could be persuaded that independence would be economically beneficial.

However, Michael Keating, a political scientist at the University of Aberdeen, said neither side was likely to win big gains from Wednesday’s statistical barrage.

“People, for good reason, don’t believe it,” he said. “They think it’s all just plucked from the air.”

Additional reporting by Emily Cadman