Scottish oil and gas revenues set to sink by 17%
DIMINISHING oil revenues will have a major impact on Scotland’s economy if it becomes independent, an economic think-tank has warned.
The Institute for Fiscal Studies forecasts in a report on the UK economy that by 2017-18 oil and gas revenues could be down as much as 17 per cent from 2011, which will be an “important issue for an independent Scotland.” The report also warned that the UK government may have to cut public spending by a third to balance the books.
The report said that by 2017, oil production is expected to have fallen by 16 per cent and gas production by 15 per cent compared with 2011. Revenues are also likely to be depressed as the result of a falling oil price, and could be down as much as by 17 per cent between 2011 and 2017.
“The loss of revenue is of some importance in a UK context,” the report said. “It would, of course, be a much more important issue for an independent Scotland.”
Opponents of independence said that the report was the latest evidence of flawed economics by the SNP and the pro- independence movement.
A spokesman for Better Together, the cross-party group co-ordinating the campaign to keep Scotland in the UK, said: “Oil and gas are great resources for Scotland. However, this report shows that they are both volatile and declining.
“We are better together with the rest of the UK as it allows us to cope with the shock of managing these declining tax receipts.”
However, the SNP pointed to recent reports that there is more oil and gas to be extracted in the North Sea than has already been taken out.
A Scottish Government spokesman said: “North Sea oil and gas is a fantastic asset and will continue to be so for an independent Scotland, as there is more value still to come from North Sea exploration than has already been extracted. With 24 billion barrels of oil still to be recovered, with a wholesale value of up to £1.5 trillion, the North Sea oil and gas sector has a bright future, underlined by recent major investments.”
The IFS also said that spending on services such as defence, transport and justice could be cut by a third by 2017-18 under current UK Government spending plans.
The plans suggest 1.2 million job losses in the public sector by that date, 300,000 more than predicted by the government’s official forecasters, according to the Green Budget, published by the Institute for Fiscal Studies.
The think-tank said Chancellor George Osborne’s failure to hit deficit-reduction targets means tax rises or “substantial” additional cuts in welfare benefits are likely after the 2015 general election to avoid “hard to contemplate” cuts in Whitehall budgets.
The fiscal position may force the Chancellor to raid pensioner benefits, the NHS, schools in England or overseas aid, said the report. “Over the last 30 years, tax rises announced in the year after a general election have averaged £7.5 billion,” said the IFS.
“Considering this trend, and in the context of the current fiscal situation, further tax rises following the next election would not be surprising.”
Mr Osborne is due to borrow £64bn more than he planned by 2015.
Shadow chief secretary to the Treasury Rachel Reeves said: “The IFS report shows how badly the government’s plan has failed.”