Oil and gas volatility ‘bigger risk to Scots’

Scotland’s public finances are at more risk of volatility as a result of oil and gas revenues than the rest of the UK, a leading think tank has said.

David Phillips, an associate director at the Institute for Fiscal Studies, looked at forecasts from the Office for Budget Responsibility (OBR) on oil and gas revenues, which are said to be worth around £5 billion to the Treasury in this financial year – dropping from £10bn last year.

If realised, the increase in revenues would be worth 0.2% of UK national income.

But in Scotland, a similar increase in the geographical share of oil and gas revenues which flow from Westminster would amount to 2% of national income.

Mr Phillips said: “Tax revenues from North Sea oil and gas production are volatile and uncertain.

“The direct effects on UK-wide tax revenues are fairly muted, indeed, as a significant net energy importer, increases in revenues from oil and gas producers when prices rise are likely more than offset by reductions in other tax revenues as other sectors of the economy suffer.

“The situation for Scotland is different given most UK oil and gas production takes place in Scottish waters.

“Scotland’s underlying, notional public finance position is much more dependent on these revenues than the UK as a whole is. Under current constitutional arrangements, this does not matter a great deal, but that would change under full fiscal autonomy or independence.”

Deputy First Minister Shona Robison said: “The record revenues from the North Sea in 2022-23 show the extent that the UK continues to benefit from Scotland’s natural wealth.

“However, this does not reflect the full benefits of the green economy, with hundreds of millions of pounds in revenue not yet captured.

“An independent Scotland would have the powers to make different choices, with different budgetary results, to best serve Scotland’s interests.”