28 July 2013
Everyone in Scotland may have quickly forgotten Alex Salmond ‘s assertion a few days ago that North Sea oil would be worth £300,000 to each and every one of us in an independent Scotland.
Quickly forgotten because his assertion has been criticised as being “deliberately confusing”, and treating Scots “ like fools”.
The £300,000 is the equivalent per Scot of 1.5 trillion pounds’ worth of oil that Mr Salmond says remains to be extracted from the North Sea.
This £1.5 trillion figure is an estimate of the wholesale value of the oil , not the much smaller value of oil revenues that would accrue to his independent Scotland.
International oil companies operating in the North Sea would take a great deal of oil wealth away with them from Scotland, having been already promised a “competitive” tax rate by Mr Salmond that would be advantageous to them.
The £1.5 trillion figure first took form as “ potentially more than a trillion pounds of oil” in the First Minister’s speech to a Scottish Council Development and Industry conference in February of last year.
By the start of this year, in his New Year address to the oil and gas industry the figure had become “ £1.5 trillion”.
Here it should be emphasised before votes are cast in the Referendum that this £1.5 trillion figure would not apply to the period of the early years of an independent Scotland.
It would apply to a 40 year period.
As Mr Salmond told the Canadian newspaper the “Globe and Mail” in January :
“A reasonable estimate over the next 40 years, based on UK oil and gas estimates …would be 1.5 trillion pounds to come.”
Mr Salmond’s says that his £1.5 trillion would come from “ 24 billion barrels of oil”, but it has to be stressed that these are potential figures.
There are several forecasts on the potential amount of remaining offshore reserves, some lower than the one that Mr Salmond has selectively chosen from the top end of the forecasts.
The well-known fluctuations in oil prices make it difficult to predict the value of oil over a long period in the future, and there is the big question of whether or not the oil industry will find it economically viable to develop these offshore fields to recover their reserves.
However, there is one politician who has made a prediction beyond the 40 year period and that is SNP Energy Minister Fergus Ewing whose “personal view” is that it can last up to the end of this century.
He said: “My personal view is that oil and gas production in offshore Scotland will continue for the rest of the century, provided we make the right policy decisions”
However, while Mr Ewing can predict a clear date for the lifetime of North Sea oil production – up to the year 2100 – he is much less clear about the SNP’s Oil Fund.
A few nights ago, on Newsnight Scotland Mr Ewing, was asked time after time to tell Scottish viewers when the SNP would establish its promised Oil Fund similar to the Norwegian fund.
He could give no answer that satisfied either the viewers or the interviewer.
John Swinney, the SNP Finance Minister, on the other hand, did not strike a note of optimisim such as Mr Ewing did on oil.
Far from it.
He drew up a famously-leaked paper laden with a gloomy prognosis for an independence built on oil revenues.
It described how by 2015-16, Scotland’s net fiscal deficit was predicted to reach £28 billion, and fluctuations in the price of oil made it difficult to forecast how much oil revenue would be available to finance spending on social services such as health, education, and welfare. (Link )
In the latest interchange in the Referendum campaign last week, more reality shone on the declining case for independence with the Office for Budget Responsibility forecasting that oil revenues would fall to £56 billion over the period 2017- 2041, £11 billion less than previously predicted.
This would result in a significant gap in the finances of an independent Scotland.
The Glasgow University-based Centre for Public Policy for Regions , (CPPR) an organisation with credibility for its commentary on the use of oil revenues , said that an independent Scotland would find it necessary to use oil revenues to finance current expenditure on social services because other tax revenues were insufficient to cover current spending.
The CPPR said,
“As a result, the Scottish government would need to rely on most, or all, of the tax revenues from the North Sea simply to attain the current, implicit, level of annual fiscal deficit," it said.
"This would mean that no such revenues would be available to build up an oil fund, or at least not without tax increases or budget cuts."
Oil revenues are central to the politics of the Referendum and exchanges on them will continue up to voting day next year.
One new development in this debate has been Mr. Salmond describing the oil revenues as a “ bonus”.
Downgrading your major financial case for independence to a “bonus” does not give the impression that you are winning that debate.
This is particularly so when in his speech in Nigg earlier this month, Mr. Salmond appeared to be re-defining himself as something of a “Unionist” who is in favour of Scotland having :
A union with the European Union
A union with NATO
A union with the £
A union with the Monarchy
A union of social ties with the rest of England and Wales.
If Scotland breaks its political union with Westminster.
" This political union is only one of six unions that govern our lives today in Scotland, " said Mr. Salmond.
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Lesley Brennan : Referendum - The Inflatable Oil Figures & The Claim That They Are Worth £300,000 To Each Of Us http://t.co/AVfov36NaD— Dundee Labour (@dundeelabour) July 29, 2013