Oil-obsessed SNP figures simply do not make sense

Published on Wednesday 25 June 2008 21:05

NORWAY is one of our First Minister's favourite countries. He often extols its virtues and, in particular, wants Scotland to emulate the Norwegian example of setting up an oil fund.

So, it was a serious setback to SNP thinking when this week Martin Skancke of the Norwegian finance ministry made clear that Scotland could not create such a scheme because it operates a budget deficit.

This is a double blow to the Government since SNP Ministers have tried to claim, on the basis of the annual Government expenditure and revenue statistics for Scotland (GERS), published last week, that an independent Scotland would have a budget surplus.

The truth is that Scottish Ministers attempted to perform a sleight of hand with those figures. First, they added in oil revenues, and second, they subtracted expenditure on capital projects such as roads, schools and hospitals.

Skancke was clearly not fooled, and neither were independent analysts.

On Friday, and again yesterday, using their own independent analysis of the GERS figures, the Centre for Public Policy confirmed that, far from the surplus claimed by the SNP, there would be a large fiscal deficit of 10.2bn if you excluded North Sea oil revenues, and a 2.7bn shortfall even if a geographic share was included.

Last week, the Institute for Fiscal Studies (IFS) debunked another SNP oil myth by warning that "it is far from clear that there will be a net gain to the public finances" from higher oil prices.

This is the Westminster "windfall" of which Alex Salmond demands his share and it is yet another illusion.

The IFS points out that higher income from petroleum revenue tax and North Sea corporation tax will be balanced by falls in receipts of other taxes such as non-North sea corporation tax.

Even if there were to be such a windfall, it would either be spent on devolved matters (such as education), in which case Scotland would get its Barnet share, or on reserved areas, such as social security, in which case Scotland would get its share directly.

In other words Salmond is demanding a share we already get, of a windfall that is largely a figment of his imagination.

But still the SNP see oil revenue and high oil prices as the answer to every difficult independence question. They are, frankly, hung up on hydrocarbons.

Ministers claim that oil will fill the fiscal deficit, that it will pay for a Scottish oil fund and that it can be used to reduce fuel prices.

This calculation triple counts the receipts from a finite resource and it is a cynical attempt to deceive the people of Scotland.

The reality is, as most people know and understand, that Scotland's "black gold" is a diminishing resource.

Production peaked in 1999 at about 4.5 million barrels per day and has declined every year since.

Currently it stands at about three million barrels per day and is forecast to decline about 10 per cent by the end of the decade.

The Scottish oil industry has a great future, exploiting oil and gas around the world. And North Sea reserves will last for years to come. But that means decades, not centuries.

What kind of vision for Scotland is it which would build our future entirely on a single commodity which is both price volatile and finite?

If the Scottish Government is truly committed to growing Scotland's economy, it should ditch the complacent, clichd claptrap about "Scotland's oil" and instead focus its attention on Scotland's infrastructure, its universities, schools and in skills and apprenticeships.

Our future will be built on knowledge, learning, skills and innovation.

Instead of spending money they do not have, over and over, Scottish Ministers should concentrate on spending the 30 billion they do have, on the things that will really drive prosperity.

In every one of these crucial areas, investment has slowed over the past year.

Scotland is in danger of being left behind while ministers indulge themselves in hydrocarbon hysteria.

&#149 Iain Gray is a Labour MSP and a member of the Scottish Parliament's cross-party group on oil and gas