Scotland ‘would need cuts and tax rises’ to set up oil fund, says report

John Swinney
John Swinney

The UK Government claimed yesterday that an independent Scotland would need to find £12.5billion in cuts and tax rises to set up a Norwegian-style oil fund.

Forecast deficits would force the nation to slash 19% from spending or increase taxes by 27% if it decided to put North Sea revenues into a wealth fund, according to Westminster’s coalition.

The Treasury’s fifth analysis paper on the impact of independence also states that Scotland’s public spending is about 10% more per capita than the overall UK figure and that the nation would have received £74billion less since devolution if its funding was based on population.

However, it admits that adding Scotland’s geographical share of North Sea oil and gas would wipe out the difference, with the nation generating about an equal 10% more in revenue per capita than the UK.

The Treasury is estimated to have received more than £300billion in revenues from North Sea oil and gas since production began.

Norway set up an oil wealth fund in 1990 and it is now worth about £500billion.

The Scottish Government proposes to establish an oil fund after independence, “when fiscal conditions allow”.

The UK Government paper said that with the budget deficit predicted for the first years of an independent Scotland, it would need to find £8.4billion in 2016-17 to balance the books, including oil revenues.

If all of the North Sea receipts were channelled into an oil fund, a further £4.1billion of savings would be needed.

“It is very difficult to see how changes of this magnitude would be credible,” the report stated.

Scottish Finance Secretary John Swinney said: “Scotland has paid more in taxes per person in each and every one of the last 30 years than the UK as a whole and even, excluding North Sea oil, Scotland’s economic performance is worth 99% of the UK’s.

“What HM Treasury’s paper shows very clearly is that there is no doubt Scotland can not only afford to be an independent country but has the means to thrive.

“North Sea oil will be a bonus with up to 24billion recoverable barrels and with a potential wholesale value of £1.5trillion, more than half of the resources in the North Sea, by value, still to be extracted.”