WHETHER you think the low oil price is good news largely depends on where you are standing.
If you live in rural Scotland and rely on your car to get around, then the prospect of petrol at £1 a litre is a welcome one. Similarly if you run a firm where transport is one of the major costs to the business.
Most of us will benefit from the low inflation likely to result from oil being at a five-year low, as well as the low interest rates that now look set to continue to at least the end of next year.
But while many individual Scots might benefit in these ways, others may suffer. Because Scotland as a whole, it now seems clear, risks taking a disproportionate economic hit from the effects of the low oil price.
The pay freeze announced by one of the biggest employers in the oil business in the North-east is just the first symptom of the chilling effect the low price could have on one of Scotland’s key industries.
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With analysts predicting as many as 30,000 jobs at risk as a result of an oil production slowdown, coupled with fresh doubts over new exploration projects, the scale of the crisis that may befall Scottish industry is only now beginning to be realised.
Such a toll of jobs would be three times the estimated job losses caused by the closure of the Ravenscraig steel works in 1992, an iconic moment in Scottish industrial history.
Whether or not the low price is the product of market volatility or – as some allege – sinister geopolitical acts of aggression against the Russians, is of academic interest to those in the firing line. This is a moment that calls for concerted action from our political leaders.
The SNP government yesterday called on major employers in the North-east to hold their nerve, to protect jobs and retain skills. The Treasury has the option to use its tax powers to soften the short-term impact on the industry. Make no mistake, this has the potential to be a grave crisis, the biggest challenge to the Scottish economy since the threat to the Grangemouth refinery in October last year.
Massive reductions in oil revenue should also give us pause for thought as we near the end of a momentous year in Scotland’s story. The volatility of oil prices was a major feature in the independence referendum campaign, with Alex Salmond predicating the viability of a separate Scottish state on a forecast of $113 for a barrel of Brent crude.
Nationalists place far less reliance on oil than they used to, these days characterising it as a welcome added extra rather than a foundation stone of the Scottish economy. And it is true that of all the problems a country might encounter, having a windfall of natural resources must be one of the easiest to thole.
Nevertheless, the collapse in the oil price demonstrates the perils of making economic – and political – predictions based on such an unreliable asset.
LBTT highlights dilemmas ahead
THE debate about which powers should be devolved to Scotland is turning to the uses to which those powers can be put.
Witness the announcement from the Scottish Tories yesterday about their proposed rates for the new land and buildings transaction tax (LBTT). This tax, which comes into effect next year, derives from Holyrood being given the power over stamp duty under the 2012 Scotland Act.
The Tories say they would – in the unlikely event of coming to power in Scotland – recalibrate LBTT so that the tax on buying a home worth between £250,000 and £500,000 would be 5 per cent. This is half the levy proposed by SNP finance secretary John Swinney.
Mr Swinney is in something of a bind. His LBTT proposals have been overtaken by changes to UK stamp duty in the Autumn Statement. The net effect is that the SNP’s changes will now disadvantage more middle class Scots than he originally envisaged.
In a recent Holyrood debate, First Minister Nicola Sturgeon ridiculed opposition MSPs for suggesting Mr Swinney was some kind of leftist firebrand. A less likely Ché Guevara it would be hard to find.
Nevertheless, Mr Swinney is likely to have to revisit his LBTT figures. Otherwise he risks being characterised as a far more left-wing finance secretary than we expect is actually the case.
The debate over LBTT shows, however, the very real political debates that stem from Scotland winning new powers and responsibilities.
Expect similar dilemmas for Scotland’s politicians once the Smith Agreement measures begin to take effect.
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