Referendum : The oil boom last week and the projected fall in oil revenues this week

Lesley Brennan

22 March 2013

Last week’s article on the issue of the level of North Sea oil revenues was entitled ;
“The £28 billion deficit last week and the oil boom this week “ .

That was when a leaked Scottish Government report written by Finance Secretary John Swinney was shown to have acknowledged that the facts of life in an independent Scotland were far removed from the SNP Government’s public statements.

By 2015-16, Scotland’s net fiscal deficit was predicted to rise to £28 billion.

The fluctuations in the price of oil made it difficult to predict how much oil revenue could be used to pay for social services such as health, education, and welfare .

The implications for the SNP’s independent Scotland were disconcerting.

John Swinney’s pessimistic report then provoked a new analysis from the Scottish Government, drawn up over the following weekend, which Alex Salmond described as showing that Scotland was on course for “a second oil boom”.

That was last week.

This week,the Office for Budget Responsibility,(OBR),the source of the value of the oil revenues in John Swinney’s leaked report, came forward with its updated forecast for them, prepared in time for the Chancellor’s Budget.

The OBR dismissed Alex Salmond’s vision of a new “oil boom” , saying instead that the assumed revenues from oil by 2017-18 would be at least £7.5 billion less than Mr. Salmond’s forecasts.

John McLaren, of the respected Centre for Public Policy for Regions, based at Glasgow University , commenting on the Budget, referred to the fall in oil revenues thus :
“ For John Swinney’s argument of earlier this week that Scotland would have had a £4.4 billion relative surplus to play with, the news is bad.
“North Sea revenues are forecast to fall by £4.8 billion, from £11.3 billion in 2011-12 to £6.5 billion in 2012-13, wiping out all of this relative surplus, and more.”

Earlier in the week , there had been another set-back for the Salmond figures.

It was revealed that the Scottish Government had not been able to provide details for public inspection of their calculations used to demonstrate the amount of oil revenues that Mr. Salmond has predicted.

The Scottish Government said that this was on the grounds that “the scale and complexity of the models we use, combined with the fact that some of them rely on firm level data and subscriptions to commercial data sources means that we are not in a position to make them publicly available.”

So now that the date of the Referendum has been set, the quality of the information used about oil revenues has to be of the highest available standards, while taking into account that predictions are not precision instruments.

This is necessary because oil revenues are a crucial factor in voters’ decision on whether or not a separate Scotland would be viable enough to provide a sustained good standard of living for Scots.

The public has to be confident of the credibilty of the information that it is given.

After all, Mr. Salmond had previously assured us that an independent Scotland would automatically enjoy membership of the European Union with no negotiations required.

 

 

 

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