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THOMSON FINANCIAL NEWS TOP STORIES Macroeconomics 15:30 BST

2007-04-22 14:35:42

German government to raise 2007, 2008 growth forecast to around 2.4 pct - report

FRANKFURT (Thomson Financial) - The German government is expected to raise

its forecast for domestic economic growth in 2007 and 2008 to around 2.4 pct on

Wednesday, weekly Der Spiegel reported in an excerpt of an article to be

released tomorrow.

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Ahead of the Bell: New Home Sales

NEW YORK (AP) - The Census Bureau of the Department of Commerce on Wednesday will release its report on sales of new homes, which slumped from July 2005 through 2006, but gained four out of the last five months. Economists expect the Commerce Department to report a 3 percent decline for January, according to briefing.com.

Wednesday’s report takes on particular significance because of the global markets sell-off Tuesday, which was prompted by a steep plunge in Chinese stocks.

In the U.S., the Dow Jones industrials fell 3.3 percent and the Standard & Poor’s 500 Index dropped 3.5 percent on unusually heavy trading on domestic exchanges.

The Commerce Department report, slated for 10 a.m. EST, could provide a clearer glimpse into the direction of the housing market. A housing boom earlier this decade began to fizzle about a year and a half ago when interest rates rose and many investors stopped buying houses as speculative investments.

The consequences of a buckling housing market have spilled into the broader economy, because housing growth fuels spending and creates demand for construction labor, heavy equipment and retail furniture.

On Tuesday, the National Association of Realtors reported sales of existing homes rose in January by 3 percent, the largest amount in two years, raising hopes that the worst of the severe slump in housing may be coming to an end. Median home prices, however, fell for a sixth straight month.

Copyright 2007 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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The senior economist and a £4.5bn 'hole' in SNP's sums

A CENTRAL plank of the SNP’s case for independence - that Scotland has a healthy budget surplus - is “fundamentally flawed”, the country’s leading public finance expert says today.

Professor Arthur Midwinter says that the nationalists’ claims, made in their “Scotland in Surplus” document, are based on 4.5 billion of “dubious assumptions and unexplained assertions”.

Writing in The Scotsman today, he warns that “in the real world, the SNP will have to cut spending, increase taxes or borrow to tackle the deficit and meet its financial commitments post-independence”.

Prof Midwinter’s intervention is a significant setback for the SNP which has used its paper to dispute the claims made in the Government Expenditure and Revenue in Scotland (GERS) document that the country has an 11 billion “black hole” in its finances.

He has analysed two versions of the SNP paper - one published last summer and one just before Christmas - and he challenges many of the key assumptions made by the party to conclude that Scotland has a fiscal surplus.

Prof Midwinter says that in their document, the nationalists have reduced what they say is the spending north of the Border. They have cut Scotland’s share of defence expenditure by more than 700 million, made an adjustment of 500 million for money said to be spent on UK public bodies but which is used only in England, and removed 750 million of European funds from the figures altogether.

The SNP has increased the share of income tax said to be raised north of the Border by nearly 1.5 billion, the estimated Scottish share of National Insurance contributions by more than 30 million, the VAT raised in Scotland by 330 and the share of fuel duties by 700 million.

Prof Midwinter produces evidence to challenge all of these claims - which amount to a total of more than 4.5 billion.

He concludes that the SNP’s assessment of Scotland’s fiscal position is “fundamentally flawed” and says it “rests on more than 4 billion of accounting adjustments based on unrealistic assumptions or unexplained assertions”.

Prof Midwinter, visiting professor at the Institute of Public Sector Accounting Research at Edinburgh University Management School, goes on: “Whilst the SNP has been heavily critical of the GERS exercises, its own report is much less rigorous and transparent.

“The problem is that GERS - which is widely accepted as a realistic assessment by most specialists - shows an average annual deficit of 4 billions, inc-luding oil revenues, and this is ideologically unacceptable to the SNP, whose proposals for tax reductions and an oil fund rest on the spurious assumption that Scotland is in fiscal surplus.”

Last night, the SNP fiercely defended its calculations. Stewart Hosie, the MP for Dundee East who helped write the “Scotland in Surplus” document

described Prof Midwinter’s criticisms of those SNP figures which part company from GERS as “well wide of the mark”.

He said: “I’m sure we can both agree it would be better to replace all estimates with hard data on actual receipts. Nonetheless, it ill behoves Prof Midwinter to cite as ‘dubious’ the 95 per cent estimates for the Scottish share of North Sea revenues in view of the cited research undertaken by Aberdeen University.

“It is interesting that in criticising SNP methodology, Midwinter has nothing to say on the revised GERS methodology for estimating Corporation Tax receipts, which reduced estimated revenues this year by some 350 million. Such changes are usually intended to improve quality, yet GERS still invites us to treat both their ‘before’ and ‘after’ estimates with ‘extra caution’.”

Margaret Curran, Labour’s minister for parliamentary business, said: “Families know they should be worried about the cost of independence. Now leading academics, doing independent analysis, are telling them just how worried they should be. The SNP’s sums do not add up.”

Prof Midwinter’s analysis can be read in full at www.scotsman.com, Between now and the Holyrood election, he will be analysing the financial plans of all the main Scottish political parties for The Scotsman.

SCOTLAND’S BALANCE SHEET

Revenues

VAT: 330m

The basis for the SNP’s claim that Scotland would get 8.5 per cent of UK VAT income is not transparent. GERS puts the figure at 8.1 per cent, based on survey data from households. The SNP assumes that Scotland’s spending on tobacco and alcohol is higher than the UK average, producing more VAT revenue.

Nat Ins: 33m

Between the first and second version of their Scotland in Surplus document, the SNP increased its estimate for Scotland’s share of National Insurance contributions income from 8.2 per cent to 8.45 per cent. This adjustment is not explained in the nationalists’ document.

Income tax: 1,470m

The SNP says that Scotland would benefit from 8 per cent of the UK income tax take. But its calculations take no account of the fact that there are proportionately fewer people in Scotland earning higher incomes than the UK average, so Scotland’s tax yield would be lower than claimed.

Fuel Duties: 700m

The SNP claims that Scotland brings in 8.5 per cent of UK fuel duties, but GERS puts this at 5.6 percent. GERS uses adirect measure of fuel duties, the SNP a measure based on traffic estimates.
With a higher proportion of Scots having no car, and fewer with access to two cars, the assumption of the higher level is implausible.

Expenditiure

Public cash: 500m

The Public Expenditure Statistical Analysis, published every year by the Treasury, lists “identified” and “non-identified” spending for UK nations and regions. Some spending categorised as UK-wide, for example on prisons, was actually spent only in England and should not have been included for Scotland.

EU: 750m

The SNP has completely removed the figure which reflected Scotland’s share of the flow of money between the European Union and the UK from its calculations. By putting that figure - made up largely EU fisheries and agriculture spending - “below the line” it reduces expenditure in Scotland.

Defence: 746m

The SNP has reduced the defence spending figure from the one that appears in the Government Expenditure and Revenue in Scotland publication (GERS). It bases its figures on where spending occurs geographically, but does not do so in other parts of the document.

Experts shine a light into the darkest corners

IF TRUTH is the first casualty of war, facts are the first casualty of political battles. Between now and May, Scottish voters will be bombarded by claim and counter-claim; spin and contra-spin; assertions, rebuttal and even prebuttal.

Politicians rarely lie - and are foolish if they do - but they choose facts to suit their case and often ignore what Al Gore, the US politician turned environmental crusader, now calls the inconvenient truth.

So who can voters turn to? The experts. Those who will, without fear or favour, tell the inconvenient truths.

Arthur Midwinter is one such. A political scientist by profession, he has become one of Scotland’s foremost experts in public finances. Since retiring from Strathclyde University, he has taken up a position as visiting professor at the Institute for Public Sector Accounting Research at Edinburgh University.

And since 2002, he has also been the budget adviser to Holyrood’s influential finance committee. It is here that Prof Midwinter, 61, has demonstrated that he has no axe to grind, giving trenchant advice on everything from the Executive’s efficient government initiative to local government funding.

Although he served on a number of government committees - including the Arbuthnott commission which studied the distribution of health funding in Scotland - Prof Midwinter has never pulled his punches.

His advice to the finance committee that the Executive’s efficiency savings were questionable and that local government was underfunded did not endear him to ministers. In a number of parliamentary debates at Holyrood, Prof Midwinter’s analysis has been used by John Swinney, the SNP’s finance spokesman, to challenge the Executive.

And it is this that makes his analysis of the SNP’s surplus document telling. He cannot be accused by the nationalists of being in the pocket of the Executive.

Prof Midwinter, dapper and tanned from regular foreign holidays, is comfortable in the corridors of power at Holyrood or St Andrew’s House.

The former Dean of the Faculty of Arts at Strathclyde is an insider in that respect, but he works on behalf of the political outsider - the voters who will be faced by a blizzard of party political spin in the lead-up to May’s crucial Holyrood poll.

In that mission he is both respected and feared by ministers and by opposition politicians alike.

But along with other academics, such as Professor John Curtice of Strathclyde University, who analyses polling for The Scotsman, and Professor David Bell of Stirling University, he is one of those experts on whom we must rely to shine a light into the darkened corners of political parties’ policies.

UPI Energy Watch

WASHINGTON, March 1 (UPI) — Jakarta, Kuala Lumpar hope to iron out border spat

The Indonesian government said it is waiting to receive a full report before approaching Malaysian officials over that country’s alleged trespassing into Indonesian waters in the Ambalat maritime area in the Sulawesi Sea.

The navy said several times on Feb. 24 and 25 a number of Malaysian warships and military airplanes made intrusions into Indonesian territory around the oil-rich Ambalat oil and gas block.

Primo Alui Joelianto, foreign ministry director general for Asia, the Pacific and Africa, said he is awaiting an official report from his country’s navy regarding allegations that Malaysia frequently crossed into Indonesian territory.

“We will summon the Malaysian ambassador here to file our complaints or at least ask for an explanation if we get the supporting data regarding the alleged trespassing,” Primo told The Jakarta Post on Wednesday.

Desra Percaya, Foreign Ministry spokesman, said the ministry was still waiting for more information from the Navy.

“We are now in close contact with the Navy to get the data and decide what steps should be taken,” he said.

Brig. Gen. Edy Butar Butar, Defense Minister spokesman, said the Indonesian military chief had not informed the defense minister regarding the incidents.

“We just read it from newspapers. The TNI needs to verify it before informing the Defense Ministry. After that, the Defense Ministry will work with the Foreign Ministry to decide further actions,” he told the Post.

The navy had said in earlier that Malaysia violated the border in that area 35 times during December last year, but on all those occasions, the navy said it managed to push the Malaysian ships out of Indonesian territory.

The two sides are still struggling to find a solution to the border spat around the Ambalat oil block after the two engaged in a showdown in March, following Malaysia’s earlier claim to the area.

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Uganda to begin commercial oil production

Uganda has completed final tests from one of its oil wells in the western region of Kingfisher, a move that could increase maximum output to 13,893 barrels of oil per day, increasing the country’s potential to begin commercial production, according to Heritage Oil & Gas, a company conducting the tests.

Heritage Oil & Gas said Thursday in a statement that final results from the successful testing of all three intervals in the deeper horizon of the Kingfisher-1A well in Block 3A showed a cumulative maximum flow rate of 13,893 bopd from the well.

“The three intervals tested, from between 2,260 meters to 2,367 meters, had a total net productive thickness of 44 meters and produced at a cumulative maximum flow rate of 9,773 bopd. Additionally, the test of the shallower interval reported in November 2006 produced at a rate of 4,120 bopd, resulting in an overall cumulative maximum flow rate of 13,893 bopd from the Kingfisher well,” the statement said.

“The oil is good quality light and sweet with a low gas-oil ratio and some asociated wax,” the statement said.

Tony Buckingham, Heritage’s chief executive officer, said the cumulative flow rate of 13,893 bopd from the Kingfisher well surpassed the company’s expectations.

“This is a very exciting time for Heritage. Heritage is accelerating the work program to maximize the potential of what could be a world-class petroleum basin. All five wells drilled in the Albert Basin in the last 15 months have been oil discoveries, which we consider exceptional for a virgin onshore hydrocarbon basin,” Buckingham said.

Uganda hopes to begin petroleum production with a mini refinery as early as 2009, making its first step of shifting from a fuel importer to a self-reliant country, which would save the country millions of dollars on oil imports annually.

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Gazprom unable to meet target for Yamalo-Nenets reserves

Russian gas giant Gazprom was short 24.6 percent of targets for growth in reserves from the Yamalo-Nenets autonomous district, where it produces about 90 percent of its gas, as agreed with the district government, the Yamalo-Nenets natural resource department said in a statement.

Gazprom’s structural subdivisions met their reserve growth targets 81 percent, while Gazprom itself met 35.7 percent of the target. Other firms have not yet released their 2006 growth figures, the statement said.

The Yamalo-Nenets autonomous district administration is extremely concerned about the reduced effectiveness of geological exploration work in 2002-2006, the department said.

Although investment in drilling oil and gas wells increased 150 percent during this period, the effectiveness of drilling — the amount of increase in reserves per meter of drilling — fell 80 percent.

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Closing oil prices, Mar. 1, 3 p.m. London

Brent crude oil: $62.52

West Texas Intermediate crude oil: $62.37

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(Please send comments to AMihailescu@upi.com)

Plea over tests on mothers-to-be

PRIVATE testing for genetic disorders in pregnant women needs regulation, health professionals warned yesterday.

Concerns about tests offered to expectant mothers for Down’s syndrome by private health practitioners were raised at a meeting of the Human Genetics Commission in Edinburgh.

Dr Rosalind Skinner, Chief Medical Officer for Scotland, said the biggest use of private testing was for nuchal screening, an ultrasound that looks for signs of an increased risk of Down’s syndrome in the fluid at the back of a foetus’s neck.

Dr Rosemary Leonard, the GP on BBC 1’s Breakfast, said poor availability of nuchal screening within NHS Scotland could push more women into going private.

The lack of regulation for private scans was worrying, particularly because of the accuracy required in measuring the fluid. “If you are looking at measurements that small, you could easily get it wrong. The margin for error is huge,” she said.

Someone might have an increased risk of Down’s syndrome but then have a “false negative”, she said, while a “false positive” could force a woman to have an unnecessary amniocentesis, a procedure that carries a 1 per cent chance of miscarriage.

Related topic

- http://news.scotsman.com/topics.cfm?tid=1418
http://news.scotsman.com/topics.cfm?tid=1418