Oil revenue estimates downgrade post-independence forecasts

AN INDEPENDENT Scotland would start life deeper in the red than the UK as a result of falling oil revenues, according to new North Sea forecasts by the Scottish Government.

Finance Secretary John Swinney yesterday published updated estimates of Scotland’s share of North Sea oil and gas over the next five years. The long-awaited report downgraded forecasts compared with figures produced in March last year, which were used in the government’s independence White Paper as the basis of claims that an independent Scotland would be in a stronger financial position than the UK.

The Scottish Government predicted tax receipts of £34.3billion between the current financial year, 2014/15, and 2018/19, under its “central scenario” and up to £38.7billion under its most optimistic scenario for production and prices. The figure compares with a forecast of up to £45.9billion (over a slightly different period from 2012/13 to 2017/18) used in the White Paper.

By contrast the independent Office for Budget Responsibility (OBR) – whose figures are used by the UK Government – predicts offshore revenues of £15.8billion between now and 2018/19, less than half the Scottish Government’s preferred figure.

If the Scottish Government’s central forecast proves correct Scotland would have a higher deficit – the difference between income and public spending – per head in each of the five years analysed.

Yesterday’s report forecast that in 2016/17, the year Alex Salmond plans to declare independence, Scotland’s deficit would be 2.8 per cent of gross domestic product – assuming the newly independent state took a per capita share of the national debt – compared with 2.4 per cent across the UK as a whole.

Mr Swinney insisted the Scottish Government figures were “cautious,” adding: “The outlook for the North Sea remains strong.”

But Scottish Conservative leader Ruth Davidson MSP said: “The White Paper was already straining credibility as an uncosted wish-list. But now even the SNP has been forced to admit that the oil figures they used to try and underwrite their fiction won’t be achieved.”

Glasgow University economist John McLaren said: “It is odd that the Scottish Government have not included a lower than OBR Scenario, given that the OBR have consistently overestimated such revenues in the past.”