Commodities and Caledonia
Thursday, 18 June 2009
There has been a major study into oil revenues in Scotland and what it would mean for an independent Scotland published by the Scotland Office.
It's an interesting report with a great deal of fool for thought on the economic consequences for a potentially independent Scotland.
If all North Sea oil revenues had been allocated to Scotland there would only have been 9 years out of the last 27 when Scotland’s finances would have been in surplus. Bear in mind that there is no reason to believe that all North Sea oil revenues would be allocated to Scotland and this is I imagine based on each years oil revenues and we all know how volatile oil prices are.
What's more there has been 18 years of consistent fiscal deficit in Scotland where you include oil prices, and taxation raised in Scotland against public expenditure. The idea that we are sitting on a massive surplus being taken away from us has not been true for a very long time.
Even if we go back in time from 1980 onwards including all oil prices as well as taxation raised (and I repeat again it's far from guaranteed that we would get all of the North Sea oil revenue) then the total deficit would be £20 billion. Bear in mind that is not a figure for in the short-term as a response to the incredible borrowing that all Governments have had to undertake to rescue the financial system and provide a stimulus this is over 3 decades through all the peaks and troughs and shows a consistent gap in Scotland's spending.
So we know now that in fact 'London' has not been stealing Scotland's money to be fund projects in the South East of England as one Nationalist put it to me. Indeed as the Independent Expert Group from the Commission of Scottish Devolution put it:
“Scotland has over the years contributed these [oil] revenues into a general UK pot, from which it has drawn to finance Scottish public spending. In some years that has meant that Scotland’s tax revenues, including a geographic share of oil taxation, have contributed more to the UK than it has received as a share of public spending, but in most years it has not.
That seems to us to have been an example of the pooling of risk and resources that is represented by the social Union, and we do not think at this stage that it should be altered for the future.
This would then expose a large proportion of the Scottish budget to very high levels of volatility driven by the market price of a globally traded commodity rather than the Scottish
Parliament’s decisions. Such volatility can be accommodated and such fluctuations absorbed more readily in the larger and more broadly based UK economy."
Ah, but what about an oil fund? The Norwegian utopia of the Nationalist movement where an oil fund is created and the interest can fund expenditure for generations. Well even if you go way back to when North Sea oil and all revenue was put into an oil fund then there would be a budget deficit of £150 Billion.
Remember you can't spend the same commodity twice. You can't spend the same revenue to invest in an oil fund and to plus our public finances deficit.
None of this will put off impassioned Nationalists who see independence as the end game. For those who actually want independence for a reason though this poses some important questions, would you be willing to slash public spending to sustain an independent Scotland and what would you cut?
Do you really want to base the future revenue on a commodity which has halved in value in a year? How will it be forecasted when oil experts can't even do it? What about the decrease in oil production and exchange rate risk? Will an economy dominated by banking and oil revenues really be stable?
Yes Scotland can be independent and can survive as an independent country. But this report shows how Scotland walks taller in the Union.
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29 comments:
What a dull Labour party drone you're becoming!
Is it the imminent availability of all those seats that are about to be vacated, by lying fraudsters, that has you trotting the London Labour line so consistently?
Surely no need for that sort of language Jim?
Yousuf - I could dispute the 'independence' of the report you quote, but regardless of that, oil is merely a (big) bonus we have over many other countries our size.
Recent events should surely have shown Labour that economies aren't static. Just because, as you guys love to tell us, we do badly in Scotland under the union, why assume we can't grow our economy under independence? Increased confidence and a change in culture will make a massive difference to productivity in my view.. plus there's the setting up of business HQs, control of the levers to suit our circumstances, etc etc... I'll take it, thanks.
what part of what I've said do you disagree with Jim?
9 out of 27 years in Surplus according to UK Gov figures...
Can you tell me if there any countries in the EU (including the UK) which have been in surplus in 9 of the last 27 years?
Linda - I agree there's more to the economy than oil but another point raised in the study is the level wich oil prices affect the fiscal position of the whole economy.
I have to say I'm slightly skeptical that the workforce of Scotland will suddenly start working harder because we are an independent country. You may be righ tbut I struggle to believe that people who are currently working to sustain and improve the conditions of their family will work harder after a constitutional change.
Why do you call Scotland Caledonia? By trivialising us you try and do them down and make it seem parochial and historical
"this report shows how Scotland walks taller in the Union."
How does it show that? What mental leap has your imagination made?Isn't your conclusion just the type of baseless emotional claptrap you often accuse us Nats of peddling??
As for the rest of you argument - interesting to see that the Labour Party is reverting to the "too poor, too wee" line. It smacks of desperation.
Yousuf
This is a Labour party report presented by Murphy.
You may have missed it but most of the Scottish population stopped listening to anything Labour has said for a long time.
Usual scenario, country finds oil, country gets rich. Small country finds oil, small country gets even richer. Scotland finds oil and is in debt! You could not make it up.
Leaves on the line.
It is desperation and it is showing.
Also Murphy BNP threat in Scotland, fact even if Scotland had the 13 Euro seats it would have if independent, BNP would not have a euro seat on their vote in Scotland.
Expect many more too wee too poor stories in the weeks ahead.
Leaves on the Line - I say we walk taller because as the figures show we can ahve higher public spending than we would under an independent Scotland so we can spend more on things like education, research and innovation to boost Scotland.
There is no 'too poor' argument. None of this says that Scotland can't be independent, rather we can grow Scotland better within the Union, hence we are walking taller in the Union.
There's no emotional claptrap, ths entire report is based in the cold logic of hard figures.
Anon - this is not a labour party report - it's a Scotland Office report by civil servants. Do you accuse Scottish Government publications of being SNP reports?
The reason that there is still a deficit after Oil revenues is simply because of the high expenditure Scotland needs due to the high Public Sector and deprivation that sadly still exists in large parts of Scotland.
In your zero sum game of independence you may call that doing Scotland down, I would call it trying to address the most important scourge in our society which is why no one who believes in helping the worse off would look at these figures and believe in Independence.
No Yousuf I dont, but I do accuse the Scottish Office (Westminster controlled and run by a NuLabour stooge) of political bias.
And just who is interested "in helping the worst of in our society" it most certainly is not Labour. You may not have noticed but Labour have been in power in Westminster for 12 years. In the last 12 years the only thing Labour has done for the worst of in our society is make their numbers grow.
As an example "end child poverty by 2010" how is that going Yousuf. Your moral crusade party has had 12 years to work on that, oil at $150 a barrel, money flooding into big business, but the moral crusade party had, and I quote "no problem with people getting filth rich" so big business got richer as people go poorer.
Yousuf
What about Uist? Labour, sold part of the MOD research to Quinetic. They are now cutting 120 Scottish jobs.
Another example of the moral crusade party selling out to big business.
What did you think of Labour MSPs heckling the local MSP when he tried to ask questions about his constituents future unemployment?
Do not go to Ions Yousuf, the noise you will hear is John Smith turning in his grave.
Hi Yousuf, maybe you skipped over my earlier comment in the fray of the other comments so I'll give it another go.
Can you name a country in the EU (including the UK) who have been in surplus in 9 of the last 27 years?
"Remember you can't spend the same commodity twice."
Surely the point of an oil fund is that revenues are invested in the fund not 'spent'.
Revenues invested become financial capital which generate further revenues as dividends on your investment. All the while the original capital remains unspent.
This, surely, is the answer to Calman's attempts to create panic over 'volatility'. Returns on invested capital can be much more predictable than oil prices.
This also is the money London has 'stolen' - not so much the original revenues but the return on them had they been sensibly and prudently invested rather than been squandered on things like the Iraq war.
Yousuf
I disagree with your easy dismissal of the Norwegian's oil fund as a means of investing a nation's current wealth in it's future and find your argument that we would have spend the oil money on a large inefficient public sector that we couldn't afford utterly deficient.
But if I find folly in anything, it's this facile comment that you've registered.
The reason that there is still a deficit after Oil revenues is simply because of the high expenditure Scotland needs due to the high Public Sector and deprivation that sadly still exists in large parts of Scotland.
Bearing in mind that this is after 50 years of Labour hegemony in Scotland.
What you're saying effectively is that because Scotland is shite, we need to have a huge, inefficent public sector which costs loads of money and we couldn't afford that on our own.
Why in God's name would England want us if any of your arguments actually held water?
Still, it's nice to see how worried Labour are if you're going to stoop to this 'it's all about Oil' pish. Scotland has a range of rich resource which should be managed better for the benefit of the people of Scotland, rather than London.
Jim
The Scotland Office? Hmmmmm.....let mne think now, which political party runs its executive?
Independent Expert Group from the Commission of Scottish Devolution? Hmmmm......that's another tricky one.
Yousuf my man, this kinda guff was exposed as such a coupla years ago under the 30 year rule. Westminster and its cronies have lied about oil and its associated revenues for decades.
And anyway, the arguments about independence are not about economics for people like me, they are about democracy, accountability, integrity and decency - themes which i believe are somewhat alien to the mob who make up the rules of our unwritten constitution to keep the elite in place at Westminster and Buck Hoose.
Stop buying Labour lies. And even if they aren't lies (they are) can you answer Pollster 2000's question about which EU countries have had a surplus in how many of the last 27 years?
In the spirit of being helpful, here's a start towards an answer to Pollster 2000's very apt question.
The answer's not - the UK - which has only managed a surplus for 6 of the last 27 years.
In other words - Scotland has performed better than the UK as a whole over the last three decades but has suffered, in terms of unemployement etc. as a result of poor management of the Union.
They call it the 'Union Dividend' apparently.
This is all from GERS (Govt. Expenditure and Revenue in Scotland), right?
The same GERS cooked up by the Tories under John Major to "bash the Nats". Inherited by the Labour wrecking crew and used in exactly the same way.
Nice to see the Onionists working, once again, hand in glove against anything that threatens the Westminster cartel.
And the cheek of the Labour govt to talk about ongoing debt, when we are now stuck in a UK fiscal situation that would make anyone weep when looking at debt and deficit, is utterly laughable.
Still, at least multi-millionaire Mr Sarwar MP has his £400,000 London home (interest paid by us) to fall back on.
No Jim it's not that Scotland is 'shite' it just has major strctural problems with the hysteresis affects of the decline of manufacturing and that will sadly probably continue in the future. We could go independent but we would have to cut expenditure a great deal, what is it that you want to cut?
Pollster 2000 - I don't have the figures for every fiscal deficit of every country in the EU as you no doubt know.
Bandages_for_Konjic the point is that if all oil revenue was invested in a fund there would be a £150 Billion deficit, are you suggesting that the interest payments on this fund would make up anywhere near this massive shortfall?
Youself, do I need to remind you your UK government is curreently running a £170bn annual deficit? - more than your total claimed scottish deficit since North sea oil was discovered over 40 years ago
Near all countries run deficits, but even by Jimbo Murphy's figs Scotland was in absolute surplus for 9 years...nine more than the UK I think.
And your comment, "this is not a labour party report - it's a Scotland Office report by civil servants" - I just had to laugh!
One more fundamental question. If it is indeed the case that England subsidises Scotland, why?
Are there not more pressing and deserving cases for overseas aid?
Or Liverpool?
Aye We Can - I really don't understand why Scottish Government civil servants are all independent publis servants working for the people of Scotland and British Government civil servants and new labour propogandists.
The truth is that the Union is more than an economic relationship between a few countries, it's a very powerful cultural bond which has lasted over 300 years.
And let's remember the massive contribution in so many fields that Scots have made to this Union. That's why it's mutually beneficial, there is no free-rider in the Union.
it just has major strctural problems with the hysteresis affects of the decline of manufacturing and that will sadly probably continue in the future.
The Union dividend?
50 years of Labour hegemony in Scotland?
We could go independent but we would have to cut expenditure a great deal, what is it that you want to cut?
Well, I'd probably start with the subsidies we're sending London...
As I no doubt know? I don`t know what you know Yousuf. Have a scoot over to the ECB website - its a haven of stats.
In 2005, 2006, 2007 and 2008 the majority of states in the EU were in deficit at one point or another. Italy, Austria, Poland, Czech Rep and the UK were in deficit in all of those years.
At the same time Finland, Bulgaria, Denmark and Sweden were all in surplus in all of those years.
What does this tell us? I think it tells us that the Scotland is in surplus/deficit debate is painfully futile.
But what I would say is that there isn`t a lot of logic is arguments that says Scotland in deficit is bad while the UK is itself (like the vast majority of countries in the world) is in deficit.
Likewise decrying oil as a volatile resource...when it is being used as part of the mix of resources by countries like Denmark (surplus) and the UK (deficit) at the moment is is just plain odd.
I think the debate surrounding independence(or otherwise) in Scotland would be better served by both sides focussing on whether it should or shouldn`t rather than whether it could or couldn`t.
Yousuf @ 20:05:
"British Government civil servants and new labour propogandists."
No, no, they aren't New Labour propagandists. When the Tories win next year they will become Tory propagrandists. For the purposes of this issue, it's irrelevant which cheek of the Unionist arse they serve. Their aim is purely to preserve the Westminster British state.
And your knee-jerk dismissal of the Norwegian experience is just shoddy, frankly. I've been, and the infrastructure is fantastic. As in, it would take us decades to get near it. Because instead of investing our one-off carbon bonanza, the UK stuck it on the roulette wheel of casino capitalism.
And look where that's got us now.
Yousuf
That paper is useful, but could have been better.
Apart from the awful English, in one case they've done the wrong sums with the wrong data - i.e. you can't get to a cumulative deficit number by adding up a series of money-of-the-day numbers.
See here:
http://nat-mythbusting.blogspot.com/2009/06/new-scotland-office-oil-paper_21.html
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