By Keith Aitken in Edinburgh | 15 April 2013
An independent Scotland’s debt burden could shrink to around half the current UK level if it were credited with historic North Sea oil revenues, the Scottish Government has claimed.
Its argument was made in a study, Scotland’s balance sheet, published yesterday. This is part of a series designed to show, in the run-up to next year’s referendum, that Scotland has paid its way within the UK and is financially fit to go it alone.
It also sets out the broad parameters of the Scottish Government’s potential negotiating stance in the event of a ‘Yes’ vote at the September 18 2014 referendum and the consequent talks to settle the terms for Scotland’s departure from the UK.
Currently, UK debt stands at 72% of its gross domestic product and there is no agreed figure for how much of this is Scotland’s.
The paper offers two possible scenarios for calculating Scotland’s share of the UK national debt. One, a simple per capita sum, would allocate some £92bn of debt to Scotland, giving an independent Scotland a debt ratio of 62% of Scottish GDP at 2011/12 prices.
But if debt were assigned on what the paper calls ‘an illustrative historical basis’, taking account of Scotland’s public spending versus tax contributions over the past 30 years, then Scotland’s debt would fall to £56bn or 38% of GDP. This calculation reflects both the revenues from North Sea oil and a higher Scottish GDP figure reached by factoring in Scotland’s geographic share of the oil. This would notionally give an independent Scotland roughly the same scale of debt burden as the UK bore before the credit crunch.
The conclusions prompted Deputy First Minister Nicola Sturgeon to claim that, on either scenario, Scotland would be better off with independence.
‘Scotland’s share of the UK’s public sector debt will obviously be a crucial part of the negotiations following a vote for independence and this analysis shows that Scotland will be in a strong position in these negotiations,’ she said.
‘The analysis also shows that Scotland more than pays her way in the UK,’ Sturgeon added. ‘There will need to be some hard talking on the debt issue and it stands to reason that Scotland’s share of debt should take account of the substantial and disproportionately large contribution that Scotland has made to the Westminster coffers over the past 30 years.’
But the claim was dismissed in a statement from the UK Treasury, which called it ‘a partial analysis based on favourable assumptions’. The Treasury pointed to estimates from the Scottish Government itself that oil revenues could fall in coming decades, and added that Scotland benefited from public spending that was 10% higher per head than the UK average.
Meanwhile, the Jimmy Reid Foundation, a Left-of-centre Scottish think-tank, has published a paper arguing that Britain is in long-term competitive decline. This is due to a structural trade deficit that has been disguised by North Sea oil, a currency managed for the benefit of the financial sector rather than the wider economy, and growing regional inequalities, the think-tank said.
Robin McAlpine, the foundation’s director, said: ‘The economics of the independence debate has focused on the strength or otherwise of a possible Scottish economy and has assumed that the British economy is safe and secure. This report puts the UK economy into a global context to assess if this is true. It isn't.’
