Scottish independence: Scotland ‘will be poorer than UK’ as projections for oil and gas revenues plummet
AN INDEPENDENT Scotland would be worse off financially than the remainder of the UK as projections for oil and gas revenues plummet, a leading think tank has warned.
The SNP government’s claim that independence will help protect Scotland from the worst of the austerity cuts from Westminster has also been thrown into doubt by the Centre for Public Policy for Regions (CPPR).
A slump in the predicted amounts of oil and gas being pumped out of the North Sea as well as lower projections for future price levels are to blame, according to the Glasgow University-based think tank.
But while projections for oil production levels are not as high as had been expected, the emergence of fresh investment in the North Sea should help extend its life span, the CPPR said.
The report was seized on by opposition parties at Holyrood, who said it is “reckless and foolish” to base the future economy of Scotland around unpredictable North Sea revenues. But the SNP branded the predictions “pessimistic”.
Report author Professor John McLaren states: “Current projections for Scotland’s share of North Sea taxes seem likely to leave Scotland with a marginally better, or very similar, fiscal balance compared to the UK, but only up to 2014-15.
“Thereafter, Scotland’s fiscal balance is set to worsen. This position could, in the short run at least, further worsen if a sovereign oil fund was initiated in order to improve budget stability.”
The independent Office for Budget Responsibility (OBR)’s North Sea tax revenue forecasts for the period post 2011-12 have almost halved in size over the past 18 months.
It is inevitable that future North Sea tax revenues will remain difficult to predict, the CPPR analysis finds.
The SNP government’s claims that the North Sea revenues would put Scotland in “a position that could enable us to ease the austerity” would only be true for 2011-12, the report said. After this, the position would be similar and the OBR’s latest figures imply that the UK would be in a better position to ease austerity.
A Scottish Government spokeswoman said the OBR projections were “pessimistic” compared with others and “should not be seen as the definitive picture”, with reserves of up to £1.5 trillion still in the North Sea.
She added that the UK government’s own energy department is expecting oil prices of $120 a barrel in 2017.
“An independent Scotland will be able to face the difficult financial choices ahead from a stronger position than in the UK and use the full range of economic levers to support growth, boost revenues and deliver public services,” the spokeswoman said.
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