Doubts cast over SNP's claim for oil-cost windfall

Published on Wednesday 25 June 2008 23:23

SERIOUS doubts have been raised over claims that Scotland is losing out on a huge oil-revenue windfall, after an independent think tank said there may not be a large net gain for the Treasury.

The report by the Institute for Fiscal Studies (IFS) states that extra funds gained from oil revenue will be lost in reductions in other taxes.

The claims have added fuel to the row between Holyrood and Westminster over what Alistair Darling, the Chancellor, should do with the oil revenue.

Alex Salmond, the First Minister, has demanded that the money be used to ease pressure on fuel prices and should also be used to set up a Scottish oil fund.

In its report, the IFS states that, as a result of higher costs, people are buying less fuel, which means the government will lose out on petrol taxes. It states that the expected decision by Mr Darling to cancel the proposed 2p fuel tax rise in October will cost another 1.6 billion over the next two years.

Gemma Tetlow, a senior research economist at the IFS, said: "Taking all factors together, it is far from clear there will be a net gain to the public finances from the higher oil price."

Writing in The Scotsman today, Iain Gray, Labour finance spokesman at Holyrood, calls the windfall another "illusion from Alex Salmond".