Comment: Oiling an economy on a risky revenue strategy
OIL is back at the centre of the independence debate but the arguments are no more transparent than the black stuff itself.
The Scottish Government claims its latest analysis shows that the nation’s finances would be underpinned by healthy forecasts of revenue flow from the North Sea. It predicts nothing less than another oil boom. The unionists, naturally, warn that this is a risky strategy.
Certainly these are relatively benign times for the North Sea which is benefiting from the highest level of investment for 30 years and is creating thousands of jobs. Its current attractiveness has drawn funds from China, Korea and the Middle East and total investment is likely to hit another record this year.
But given the volatility of oil prices it is dangerous to build a national budget on North Sea prospects. New technology has helped exploit fields previously considered inaccessible and therefore uneconomic. But technology and investment go hand in hand with the oil price and when the price sinks, investment falls. In 1999 oil tax revenue was just £2.5 billion.
The current conditions for exploration have also been improved by the changes to the tax regime introduced by Chancellor George Osborne last year. A future Scottish Government would have to prove it could offer similar benefits without impacting on its ability to finance other services.
Osborne in line of fire for Tyrie’s commission
George Osborne’s banking reform bill faced criticism yesterday from the chairman of the commission he set up to investigate the industry.
Andrew Tyrie, who has been at the centre of many of the inquisitions into the sector, is unhappy over the level of capital the banks must hold against their loans books and the proposed powers of the regulator.
Tyrie, who chairs the Parliamentary Commission on Banking Standards, among others, feels the so-called leverage ratio is too low, He also wants the regulator to have the ability to impose an industry-wide separation of retail and investment banking. Osborne believes this to be too draconian.
This spat ultimately revolves around whether or not the Chancellor has gone soft on the banks. His was a lone voice in Brussels last week when arguing with his counterparts among the 27 nations against the proposed bonus cap. There is a view that he has grown tired of trying to bring errant bankers to heel and of the criticism by association that the government continues to receive while it retains large stakes in two of the banks.
There is concern that the latest dispute highlights weaknesses in the bill that will make reforms ineffective.
Osborne has at least shown a willingness to change his mind and he has agreed to a periodic review of the ringfence to ensure it is working. It looks like Tyrie, a Conservative MP, may be pushing at an open door.
In any case, this is unlikely to be the last stern test for the bill. Tyrie’s willingness to embarrass the Chancellor and the Treasury, which he has already forced into accepting governance changes at the Bank of England, could spill over into the House of Lords where two of his fellow commissioners sit.
Lord Lawson, a former chancellor, and Justin Welby, the Archbishop of Canterbury, have dished out their own fair share of criticism and will not want to see their efforts to restructure the banking sector wasted in inadequate legislation.
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Weather for Edinburgh
Sunday 19 May 2013
Temperature: 9 C to 17 C
Wind Speed: 7 mph
Wind direction: North east
Temperature: 10 C to 20 C
Wind Speed: 8 mph
Wind direction: North east