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Edinburgh has vowed it will have the resources to invest in an oil fund from the point of independence, amid a growing UK Treasury attack on the fiscal case for scrappingthe union.

The Treasury will on Wednesday publish a much-trailed report on an independent Scotland’s fiscal prospects: it will emphasise the problems posed by dwindling North Sea oil receipts, an ageing population and the costs of setting up a new state.

In an effort to blunt the assault, the Scottish government said the relatively large per-capita tax take in Scotland, when North Sea receipts are included, showed that it would “start life with strong public finances” and be in “prime position” to begin immediate investment in a national oil fund.

However, given that Scotland would face a large fiscal deficit, diverting income into such a fund would mean increased borrowing at the relatively high interest rates that international markets would probably demand of a new state.

Edinburgh said it would lay out where the money would come from on Wednesday, when it will publish updated forecasts for public finances in 2016-17, the proposed first year of independence.

These will have to take into account a steep fall in oil and gas revenues since the projections used in its white paper on independence last year.

London argues that falling oil revenues are easier to cope with in a larger union.

The Treasury’s report this week will try to put a number on the fiscal benefit for Scotland of staying in the UK.

The report adopts the research of a Canadian academic to calculate the costs of setting up a state. This puts the price at 0.4-1 per cent of gross domestic product.

The Treasury has taken the higher 1 per cent figure – equivalent to £1.5bn, or £300 per person in Scotland – as what it calls a conservative basis for its calculation of the total cost of independence.

It said the actual cost would be “likely to be far greater”, citing what it called a Scottish government estimate that it would need to create 180 new institutions.

Alex Salmond, Scotland’s first minister, dismissed the Treasury claim as “ridiculous”, saying the Edinburgh administration had never suggested that it would need 180 new government departments and throwing doubt on the rest of the analysis.

“It leaves the Treasury’s claims about the finances of an independent Scotland without a shred of credibility,” he said.

However, Edinburgh has offered few details of how much it thinks setting up a new state might cost and the first minister did not offer an alternative estimate.

Copyright The Financial Times Limited 2017. All rights reserved.
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