The Scottish government’s latest oil forecasts show that the country would be more than £7bn a year worse off if it became financially independent, a new analysis has predicted. The Fiscal Affairs Scotland (FAS) thinktank has found that under the Edinburgh government’s most optimistic forecasts for oil and gas revenue, it would be £1,308 per head worse off under full fiscal autonomy or independence in 2019-20 than if it remained funded by the UK.

Its analysis of the Scottish government’s latest oil and gas bulletin also found that even if North Sea oil prices bounced back to $100 (£63) a barrel – a scenario considered highly unlikely – its oil revenues would still fall far short of previous estimates.

Published in June just before the Holyrood parliament went into recess, the Scottish government study had to make far more pessimistic predictions about Scotland’s notional share of North Sea oil and gas receipts. These predictions came after the UK Treasury cut taxes and increased tax breaks to shore up slumping production following the collapse of global oil prices to $50 a barrel.

That analysis offered a far more cautious assessment of Scotland’s notional oil wealth in a clear sign that Nicola Sturgeon has distanced herself from exaggerated claims by Alex Salmond, her predecessor as first minister and Scottish national party leader. He repeatedly claimed before last year’s independence referendum that North Sea oil and gas reserves were worth up to £1.5tn to the Scottish economy by 2040.

July’s bulletin said that oil revenues could be up to £40bn less over the next four years than Salmond’s government had predicted in its previous bulletin. It now assumes Scotland will get 85% of overall UK oil and gas receipts, rather than the 90% during Salmond’s time in office.

But the FAS report found that under the most optimistic new scenario developed by Sturgeon’s officials, where the oil price rose to $100 per barrel, Scotland would remain in deficit until 2018-19, amassing a cumulative deficit of £36bn over the next five years in comparison with a per capita share of the UK’s forecast revenues.

In 2019-20, Scotland would see a per capita surplus of £192 within the UK, but a £1,308 per capita deficit if it was fiscally independent. Under the worst-case scenario, which the Scottish government based on Office for Budget Responsibility data and an oil price of $70 a barrel, that gap would be far larger: at £1,702 or £9.3bn in 2019-20.

The FAS headline figures appear more optimistic than predictions from the Institute in Fiscal Studies in April that Scotland’s deficit could be as high as £9.7bn in 2018/19, because the FAS used updated OBR figures from July and the Scottish government analysis.

John McLaren, a co-director of the FAS, said: “Under Nicola Sturgeon, the revised assumptions used, which could be seen as more realistic, have shown that even with a higher oil price, there’s still a gap with the UK.”

Source: www.theguardian.com

Please leave comments and feedback below