Row erupts over £20bn North Sea oil cash shortfall claims

SCOTLAND would be £20 billion in the red even if it had retained all its oil money, a new government report claims.

A Scotland Office paper, published today, shows North Sea oil revenue would not have plugged the gap between spending and tax raised. The paper claims that if all the North Sea oil revenue had gone to Scotland, the country's finances would have been in surplus in only nine of the past 27 years.

The figures have been hotly disputed by the SNP on the day when the Government Expenditure and Revenue Scotland (Gers) report is to be published. The pre-emptive attack by the Scotland Office has been taken as a sign that Gers this year will show Scotland making a surplus.

But the Scotland Office paper suggested that the last year of surplus would have been 1988-89 and in the following 18 years spending in Scotland would have exceeded taxes raised north of the Border, even including oil revenue. Scottish Secretary Jim Murphy said: "These figures show that oil revenue makes a valuable contribution, but it is not magic.

"Even if all the oil revenue had been given to Scotland for the last 27 years, then we would still be 20bn short of the actual spending that has taken place. By sticking to the facts, this paper helps to inform the debate."

The debate on Scotland's oil wealth has often been defined by confusion over whether that would include per capita share of about 10 per cent or a geographical share of around 80 per cent. Last year's Gers figures suggested Scotland would be in budget surplus to the tune of 800 million with a geographical share of North Sea revenues – but a per capita share of oil revenues would mean a deficit of 6bn.

Today's document was produced by the Scotland Office "with the co-operation of the Treasury and the Department of Energy".

But Scotland's SNP finance secretary, John Swinney, said:

"These figures are plain wrong, and this is a joke report. The serious study and official figures will be published by the Scottish Government (today] . The Scotland Office has proved once again that it is headed by the Secretary of State against Scotland."

He added that the paper was a sign that London-based political parties were in "blind panic" because of the SNP's increasing popularity in the polls.

Mr Swinney said: "The fact is that the most recent official Gers figures show that Scotland has been in surplus for two years running, and in 2006-7 paid 837m more to the Treasury than we received, or 0.7 per cent of GDP. This compares with a UK deficit of 4.3bn, or 0.3 per cent of GDP."

But the Liberal Democrats said the paper showed that the SNP would be wrong to "gamble" Scotland's future on oil revenues.

The party's finance spokesman, Jeremy Purvis, said: "Surely there is no doubt now that we could not and should not put our public service investment on the basis of such a fluctuation of one commodity."

TURNING UP THE HEAT ON OIL

THE latest attack on the strategy of basing Scotland's economic future on oil comes at a crucial point in the country's constitutional debate.

The Calman Commission published its recommendations for improving devolution this week and recommended that oil revenue continued to flow to Westminster.

This was fiercely criticised by the SNP, which has have always claimed Scotland loses out. In this context the paper published today was the latest salvo by the UK government to show that oil is not able to to underpin Scotland's economy.

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