‘FORMULA for success: rise early, work hard, strike oil”, was John Paul Getty’s famous dictum. Well, for most of us we can control the first two. Maybe we should add “work cleverly”. Striking oil? A natural lottery win everywhere but here, it seems.
My spirit is tested whenever political types in Scotland talk of oil. I have said before I think it has little positive political value for the SNP or the independence case, because people have been persuaded – wrongly – that its discovery has been a curse on us. And anyway, even if it was once a good thing it isn’t now because it is running out and its price is falling.
No country should sensibly base its future on a volatile commodity. And all who are blessed by them should save the proceeds for future generations rather than blowing them in the present. The UK stewardship of a £300 billion boost to public finances has been possibly the greatest domestic policy failure of the last century.
The UK has squandered the resource on current expenditure that has been unsustainably funded and run up dramatic debt and deficits that are both beggaring the generations to come and proving extremely difficult to put right.
The volatility of oil prices demonstrates nothing other than the folly of the failure of the UK government to save over decades. Of course, the current low prices would have deepened the difficulty the inheritance from the UK a Scottish chancellor would be wrestling with right now, had the country voted Yes.
That inheritance determines the way things are now and says nothing about the possibilities of a different way. But if there had been a Yes vote, the process of putting this mess right would be in our own hands and on our own terms, starting now.
Instead it is being addressed with little regard, if any, to the specific Scottish economic interest. No point me whining about that. My side lost the vote for a reason. But please let us all – on all sides – keep our eyes open and engage our brains.
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Do not be diverted from the true story of the moment which is the fundamental weakness in the productive capacity of the UK economy, which in turn is throwing off anaemic revenues. The austerity gambit failed to invest in growth and the price being paid by us all could be most grave.
The Office for Budget Responsibility’s December outlook runs to 228 pages of detail. The eye-catching falls in oil prices have meant that since May it has cut its forecast for UK oil and gas revenues for this year by £900 million. Troublesome. But the cut in other taxes, driven by income tax shortfalls, was around nine times higher at £7.8 billion.
Crucially its projection for productivity growth represents what it admits is the “most important uncertainty” in its entire report. If they are wrong about that then the projected 2018 return to surplus evaporates and we lose a colossal £58bn from public finances, knocking on for twice the Scottish budget. All bet on an uncertain assumption about productivity growth.
So if the empty promises aren’t kept, or the muscle doesn’t grow, then the knife comes out to public services and taxes go up – even more violently than already planned. Any progressive who genuinely thinks Scotland is sheltered and subsidised within the comforting embrace of the UK economy better think again. Fast.
Oil revenues are, and should be, the very least of our economic worries. We need to gear our economy and finances to treat them as a bonus rather than the basis of so much spending, as the UK has for 30 years and more.
Another economic report this week provided the regional economic performance statistics for the UK. Once again it demonstrated that the UK economy is, by a country mile, the most unequally balanced in Europe. Outside of the South-east, Scotland is the best performing economy and closest of any region to the UK average.
The focus of all policymakers north and south should be on strengthening the economic sinews of the whole country, allowing jobs and wages to grow and more people to pay more tax fairly. That is the only sustainable way to restore healthy public finances and do right by the generations to come.
If our politics and policymaking in Scotland drifts into indulgent symbolism about who can tax a shrinking pool of the better-off most then we all fail. Badly.
Whichever way you come at it, keeping things on the track we are on now is the biggest policy gamble of all our lives. It might come off and surging productivity might rescue us all. More likely we all have to knuckle down for decades of early rises and long days of hard and clever work if we are blessed with employment.
The grand error and big lie of UK oil and gas stewardship cannot be reversed. Keeping on repeating it and its borrow, tax and slash successor though? An unforgivable inheritance to hand on.
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