Alex Salmond’s oil dream goes bust

Alex Salmond’s dream of an independent Scotland based on North Sea oil revenue to keep it afloat was dealt a fresh blow last night as new research by the Office for Budget Responsibility showed the extent of decline in revenue from North Sea oil taxes.

Alex Salmond’s dream of an independent Scotland based on North Sea oil revenue to keep it afloat was dealt a fresh blow last night as new research by the Office for Budget Responsibility showed the extent of decline in revenue from North Sea oil taxes.

In its Fiscal Sustainability Report for July 2013, the OBR has concluded that the total amount the UK could expect from taxation between 2018 and 2041 from oil revenue was £56 billion, down from the £67 billion last year.

The report goes on to continue:

“Revenues from the UK oil and gas sector fell from 0.7 per cent of GDP in 2011-12 to 0.4 per cent in 2012-13 and are forecast to reach 0.2 per cent of GDP by 2017-18. Our central long-term projection shows revenues falling to 0.03 per cent of GDP over the subsequent two decades. Sensitivity analysis suggests that this broad conclusion holds across a variety of reasonable assumptions for the sector.”

The figures are likely to raise yet further questions over the feasibility of the SNP’s ambitions for independence, based as they have long been on an assumption by the Scots Nats that the good times from oil revenue will somehow keep going.

Declaring it to be “madness” to base independence on the basis of North Sea oil, Alistair Darling as leader of the Better Together Campaign has declared:

“Today’s figures confirm that revenue from the North Sea makes an important contribution to our economy, but that contribution is declining.

“It is absolute madness for the SNP to base their case for separation around a commodity that is declining and volatile.

“The SNP promise the earth on public services, welfare, pensions and an oil fund off the back of oil and gas revenues. Yet the OBR’s figures make clear that revenue from the North Sea is declining now and over the long term.”

Challenging the first minister to level with the public, Darling continued:

“Alex Salmond must explain to the Scottish people how all his promises would be funded if his forecasts turn out to be wrong. What public services would be cut if the reality doesn’t match his rhetoric?

“We know that privately the SNP accept the OBR’s figures, yet in public they cook the books and predict an oil boom. It is simply not credible and more and more people in Scotland recognise this.”

Backing up Darling’s argument, the Lib Dem chief secretary to the Treasury, Danny Alexander declared:

“Scotland has a thriving oil industry that plays a key role in the UK economy. But independent forecasts like the OBR’s consistently show oil revenues are set to decline in the long term – a fact confirmed by John Swinney’s secret internal analysis.

“This would leave a massive gap in an independent Scotland’s finances. Scotland is better off dealing with a volatile resource like oil in the UK.”

Seeking to spin their way out, a spokesperson for the Scottish government has responded:

“There are estimated to be up to 24 billion barrels of oil remaining with a potential wholesale value of £1.5 trillion remaining in the North Sea which means, by value, more than half of North Sea oil and gas resources have still be to be extracted.

“The OBR’s central forecast is cautious and relies on both production and price forecasts below the levels assumed by industry and other independent bodies.

“The report shows that adopting the latest industry production forecasts could boost future tax revenues by £17.4bn above the OBR’s central forecast, whilst assuming prices follow a path similar to that assumed by the International Energy Agency would boost future receipts by £25.9bn.”

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