Oil Hype and Underspending

12 January 2015

 

The price of oil has been crashing, with bleak repercussions for the value of North Sea oil revenues and jobs in the oil industry in the North East and across Scotland.

Scottish Labour leader Jim Murphy has pressed the Scottish Government on the case for establishing a Resilience Fund to safeguard communities against crises such as the condition of the oil and gas industry.

Abundant revenues were the cornerstone of the SNP's claim for independence for Scotland, and so calls upon the Scottish Government to provide an updated forecast of the value of these revenues following the fall in prices was not just a matter of political interest but of the wider public interest.

With the price of oil per barrel at around just half of the SNP's figure used for their oil revenues estimates , now shown to be well over-optimistic , the independent Office for Budget Responsibility revised its forecast downwards to just one fifth of the SNP Government's projected forecast during the Referendum campaign.

In an independent Scotland , the effect of the scale of tumbling oil prices of this size would have been felt much more dramatically because oil revenues would have made up a greater percentage of government revenue than in the larger UK.

The price of oil has slumped still further since to $50 a barrel with what would have been even more worrying consequences for an independent Scotland.

This failure to be frank with people about the hyped-up value of oil revenues has led to press comment  ("Herald" 10/01/15) such as :

" The predictions proved to be wildly optimistic, with the price nosediving over the last six months to around $50.

"The drop has led to fears that Scotland would be left with a £18.6 billion black hole in its finances between 2016 and 2019, should the SNP achieve its goal of Holyrood achieving full fiscal autonomy following May's general election."

This kind of neglect is worthy of this comment from a political figure :

“a party that is now in its second term of office cannot avoid taking responsibility for its own failings”

At the same time as coming under heavy criticism for markedly unrealistic claims about the value of oil revenues in the near future, the SNP Government has also been taken to task severely for underspending on essential services.

£440 million was not spent in the last financial year, in the same year as councils were compelled to cut spending on services, thousands continued to be shut out of Further Education places,

Such underspending deserves the same comment from the same political figure quoted above :

“a party that is now in its second term of office cannot avoid taking responsibility for its own failings”

That political figure quoted was Nicola Sturgeon, speaking in 2001 when she was an SNP's spokesperson in the Scottish Parliament.

 

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