Everyone who voted for Scottish Independence back in late 2014 have dodged a bullet – and a big one at that!
Of the 3.6m voters some 45% voted for independence and the rest who won the race saying “no”. At the time the Scottish Nationals were complaining that London – aka Westminster – kept most of the tax revenues from North Sea oil and that if they were independent, the Scottish would keep a higher amount. After the failed referendum, the leader of the Scottish Nationals, Alex Salmond resigned to be replaced by Nicola Sturgeon and at the next General Election, she lead a rout in Scotland taking many seats from the established Conservative and Labour parties. A strange occurrence after the referendum!
However, since the referendum, the world has changed, specifically the price of oil and in parallel to that the tax revenues. The Scottish Nationals modelled their budget on very high prices and did not discuss with the voters the possibility of a drop in the price per barrel. When the referendum was announced in 2012, the Institute of Fiscal Studies suggested that if Scotland became independent, the share of oil revenue would cover the public spending by the new Government (at that time), however they also noted that the deficit for Scotland was already around £8.6B!!
90% of the oil extracted from the UK’s share of the North Sea fields would move into the new Government’s territory, thus they would take 90% of the revenues.
At the time of the announcement of the referendum (in 2012), revenues were around £11B but sliding downwards. For the 2014/15 tax year ending in March 2015, revenues were down to £2B and last week the UK Government announced that tax revenues from the North Sea had plummeted during the 2015/16 tax year becoming a paltry £35M! This was also partly due to tax credits provided as part of a wider agreement, so not only due to oil prices which are down over 60% from their peak and with production costs being trimmed, the industry analysts still suggest a weakening of revenues over the next few years.
Even before the referendum, senior politicians – notably Gordon Brown, the ex Prime Minister and Scottish, warned that any new Government would have a disastrous economic plan if they ignored the volatility of oil prices. Quite clearly the politicians were right (for a change), had a new Government been formed, within a year they would have been bankrupt and asking for a bail-out, joining other European countries in distress.
What amazes me is that the Scottish Nationals still want to cede from the UK despite knowing that there is no money, yet they daren’t suggest tax rises to counter the reduction from oil revenues as that would simply kill off any voter sentiment! Perhaps the Scottish could learn from the United Arab Emirates on how to plan for a future without oil.