By Keith Aitken in Edinburgh | 3 October 2013
An independent Scotland could start pumping North Sea revenues into a national oil fund as early as 2017, under plans published by an expert panel of the Scottish Government’s Fiscal Commission.
The report was endorsed by Cabinet Finance Secretary John Swinney, but ridiculed by the unionist parties. It recommended creating a savings fund in two distinct parts: one providing short-term interventions to mitigate energy price fluctuations, the other financing longer-term public investment.
Though the working group said the fund be set up immediately following a ‘yes’ vote at next year’s referendum, Swinney calculated that it would take until 2017/18 before Scotland’s inherited deficit could be reduced sufficiently to allow money to be paid into the fund without cutting spending or raising taxes.
‘Scotland’s fiscal position will strengthen with economic recovery, and could be below a 3% deficit by 2017/18,’ he said.
‘This would allow an independent Scotland to consider investing modest sums into a long-term savings fund without an offsetting change to public spending or taxation.
‘In the long run, the economic levers available under independence will enable us to grow the Scottish economy more quickly and thereby boost tax revenues. Our ambition is therefore that, in time, a greater proportion of Scotland’s oil and gas wealth be invested for the future as the country moves towards fiscal balance.’
The model for Scottish ministers is Norway, where oil revenues have been accumulated since 1990 into an oil fund now worth some £470bn. The Scottish fund, starting later and on the back of an inherited deficit, would be of much more modest order, and the UK Treasury recently suggested that it might ultimately reach around £32bn by 2014.
Swinney said that the price stabilisation element would work by depositing in the fund any additional revenues that arose from oil prices going higher than forecast, which would then be used in subsequent years to ease the impact of lower-than-projected revenues.
But the report was dismissed by the Scottish Government’s unionist opponents. Iain Gray, Swinney’s Labour shadow, said that the stabilisation plan confirmed that an independent Scotland would be ‘dangerously exposed to the volatile fluctuations of price and production of oil and gas’. Gavin Brown for the Tories said: ‘The SNP’s entire financial case rests on hoping that oil ceases to be volatile and constantly retains a very high price.’
The Scottish Greens, who support independence, condemned the report’s focus on fossil fuels. Co-convenor Patrick Harvie said the oil and gas industry was ‘immensely overvalued, and ending our reliance on it is both an environmental and an economic imperative’.
Meanwhile, Swinney has today announced the share-out between local authorities of an extra £20m set aside in his budget to soften the impact of the UK coalition’s ‘bedroom tax’ benefit cut. The money comes on top of £15m previously allocated. The biggest recipients are Glasgow, with total support of £5.95m, Edinburgh (£3.55m) and Highland (£2.45m).
