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March 20, 2013 3:20 pm
If Scotland’s best known former energy analyst has any worries about the prospects for North Sea oil and gas, he is certainly not sharing them.
“There can be little doubt that Scotland is moving into a second oil boom,” Alex Salmond, Scotland’s first minister, said this month.
Mr Salmond should know what he is talking about: during the UK’s first oil boom in the 1980s, he served as energy economist for the Royal Bank of Scotland. But the first minister’s optimism also underscores the importance of North Sea oil and gas in the increasingly fiery debate over the UK’s constitutional future.
For Mr Salmond’s Scottish National party, the North Sea’s untapped riches are evidence that Scotland would not only be viable if it chooses independence in a referendum set for 2014, but that it would actually be better off.
A government report said this month that if revenue from Scotland’s “geographical share” of North Sea output was included, its budget deficit for 2011-12 would be £3.4bn, equivalent to 2.3 per cent of gross domestic product – far lower than the 6 per cent deficit for the UK as a whole.
But supporters of the three-centuries-old union between Edinburgh and London say an independent Scotland would be dangerously over-reliant on a dwindling resource subject to large market swings.
“It is great to have oil, but it doesn’t make sense to have an economy so dependent on a resource like oil that yo-yos up and down in price, in volume, and is ultimately going to run out,” says the pro-union Better Together campaign in a briefing paper. “Independence would be forever, oil is not.”
The Budget takes place against a troubling backdrop of persisting flat output and low confidence as the economy experiences its slowest recovery since the 19th century
Union supporters have seized on the leak of an internal Scottish government paper from John Swinney, Scotland’s finance secretary, warning cabinet colleagues that volatility in tax receipts created “considerable uncertainty” in fiscal forecasting.
But while Mr Swinney’s cautions were based in part on downward revisions in expected revenues by the UK’s Office for Budget Responsibility, Scottish officials argue the OBR’s view is conservative.
OBR forecasts put Scotland’s share of North Sea oil and gas revenues of £31bn in the six years to 2017-2018, the Scottish government said in a report.
But a forecast based on more upbeat views of output and combined with the oil price rises predicted by the UK’s Department of Energy & Climate Change yields a very different future. Under such a scenario, the potential tax take for Scotland would be a hefty – almost boom-like – £57bn.
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