SNP projections over North Sea oil revenue have now been shown to be more than just over-optimistic, writes Brian Wilson
Most eyes glaze over at the mention of billions. Whether it’s one or 10, the sums involved are so far beyond normal contemplation that they all just merge under the general heading “an awful lot”.
Take this week’s furore over the readjustment of the UK’s contribution to the EU because our economy has performed relatively well in the past 20 years (of which 13 were under the management of Labour governments, as it is now unfashionable to point out).
As a result, the UK must chip in an additional €2 billion – or £1.7 billion. Much outrage has ensued. According to Nigel Farage, this will “fan the flames” of resentment, via the forthcoming Rochester and Strood by-election. According to a “loyalist Tory MP” (sic): “The news could not be worse”.
You should hear what the disloyal ones are saying.
So, in order to merit such outrage, we must assume that £1.7 billion really is a load of money. Large enough, it seems, to fan flames and rock governments. The Prime Minister of Holland is similarly exercised by the EU’s demand for a mere half-billion pounds.
Let us then turn our attention to this week’s report from the research body, Fiscal Affairs Scotland, on “the implications for Scotland’s future public finances of the levels of North Sea oil tax revenues” in the light of actual figures which have just emerged for the first half of 2014-15.
Again, we are talking in billions. More billions, in fact, than are involved in the great EU outcry. Critically, we are talking about the impact of these missing billions on a population of five million rather than 60 million. This is, after all, the figure that was meant to compensate for the loss of the Barnett Formula in the event of independence.
The bleak fact is that in the first half of the financial year 2014-15, tax revenues from the North Sea oil and gas industry have amounted to £1.1 billion, which is almost £1 billion less than last year. In the light of the low oil price and “flat production levels”, it is deemed unlikely that the second half of the year will be any better.
Add 1.1 to 1.1 and you get 2.2. This compares with the Office of Budget Responsibility’s estimate of North Sea revenues which ran at £3.7 billion. You will recall the excoriation of the OBR throughout the referendum campaign for the modesty of its projections. In fact, in this current real, actual, demonstrable year, they turn out to have been significantly over-optimistic.
But then, if you really want to talk billions, look at the Scottish Government (aka SNP) estimates of North Sea revenues for 2014-15. Not 2.2, not 3.7 but a remarkable £6.1 billion – almost £4 billion adrift from what now seems likely to be the reality, rising to a projected £5 billion next year. Equivalent to more than 15 per cent of the Scottish Government’s entire budget.
These figures are devastating, not only for the potential impact on public spending in Scotland if we were ever to adopt “full fiscal autonomy”, far less independence, but also for the credibility of Scottish Government forecasting. That was once the province of respectable, apolitical economists but is now run under political direction in order to make the numbers stack up – however implausibly.
In response to the Fiscal Affairs Scotland findings, the normally loquacious Scottish Government propaganda machine could do no better than offer a single lame sentence: “Scotland has generated more tax per head than the UK as a whole in each of the last 33 years”. Apart from being wildly tendentious, this response is utterly useless for either the present or the future.
So let’s recap. Two political hand grenades involving the use of the word “billions”. The first involves £1.7 billion, covering a 20-year period and affecting 60 million people. The second involves £4-5 billion, covering a single year and potentially affecting just five million people. Which, in both absolute and relative terms, should represent the bigger political liability?
I don’t find a lot of difficulty in answering that. The SNP should currently be on the ropes, every hour, every day, every broadcast, for having run a campaign which was based on figures which are now proven to have been wildly false – by a margin of at least 200 per cent, every penny of which would – if they had prevailed – been translated into service cuts, tax rises and all-round austerity on a scale which the wickedest Tory has never contemplated.
Yet this is not what I see and hear in Scottish politics. The case for the political prosecution is scarcely being made while the defendants have awarded themselves permanent parole, carrying on as if there had never been a contradiction to their case and the jury had made some sort of inexplicable mistake.
Instead, it is the Labour Party which is invited to behave as if it has something to apologise for – ie, being on the winning side of the referendum campaign. One-third of Labour voters supposedly supported the Nationalists. Significantly fewer might still do so if someone was taking the trouble to impress upon them the economic dishonesty, now proven in hard numbers, of the case that is still being pursued under the guise of “full fiscal autonomy”.
There has been no shortage of sages from Henry McLeish upwards telling Labour what it should be doing. Henry is weighed down these days by the patronage of SNP ministers as chairman not only of Glasgow Colleges but also the umbrella body which one might otherwise expect to speak up for the beleaguered FE sector. Next time he is in a studio, maybe he could be asked about the 130,000 cuts in college places rather than to pontificate on Labour’s challenges, with nary a backwards glance to his own considerable contribution?
Not wishing to join that club, I will keep my advice simple and non-ideological. Get up earlier, both literally and metaphorically. The SNP’s great success for years has been in dictating the news agenda and closing down sustained scrutiny. If their opponents cannot hang a £5 billion annual black hole round their necks and translate it into jobs, schools and hospitals, then they have to face up to problems of effectiveness, and articulation of their own arguments, far more than ideology.