Boost in N. Sea oil revenue helps improve Scotland’s fiscal position

The latest Government Expenditure and Revenue Scotland (GERS) figures published by the UK-Govt. show Scotland’s fiscal position improved in 2016-17.

Overall, the notional deficit fell by £1.3 billion in 2016-17 to stand at 8.3% of GDP.

Onshore revenues increased by £3.3 billion (6.1%) between 2015-16 and 2016-17 – the fastest increase since current records began in 1998-99 – while North Sea revenue also grew.

Scottish First Minister Nicola Sturgeon, said: ““Scotland’s economy remains strong. In the last quarter, our economy grew nearly four times faster than the UK and the number of people in employment is at a record high.

“These figures reflect Scotland’s finances under current constitutional arrangements. However, they show that our investment in key industries is providing a real boost to our onshore economy. By continuing to invest in key sectors, we will ensure Scotland remains a productive and competitive country.

“The lower oil price had an impact on North Sea revenues and the wider economy last year. However, it is encouraging to see an improvement in the overall fiscal balance and that onshore revenues grew at their fastest rate in nearly 20 years.”

Scottish Finance Minister Derek Mackay, MSP, added: “The evidence also points to signs that confidence is increasing among North Sea operators, with the sector set to remain an important part of Scotland’s economy for years to come.”

Meanwhile, the independent BFS report, released in anticipation of this week’s Government Expenditure and Revenue Scoland (GERS) figures, claimed that the UK’s ‘mismanagement of North Sea oil’ had cost Scotland tens of billions of pounds in the two years since the collapse in crude prices.

BFS said that during the price crash, when a barrel of oil lost more than half of its price-value, Norway has made almost £29.33bn in oil and gas revenues. By contrast, the UK is predicting it will lose nearly £22.8m.

However, BFS also pointed out that Norway kept taxation on oil at and gas at 78 per cent, and drew on its sovereign wealth fund to help workers, rather than subsidising large oil companies, as the UK does with its policy of tax rebates for new oil field exploration and rig decommissioning.

If the UK Government had adopted the same policy, Scotland would have a multi-billion pound oil fund, said BFS.

Professor Andrew Cumbers – co-author of a Jimmy Reid Foundation paper on energy policy in an independent Scotland – agreed with recent reports that Brit-Govt has mismanaged North Sea oil resources.

Cumbers, Professor of Regional Political Economy at Glasgow University, said: “The continued <UK> approach to North Sea oil and gas basically seems to be driven largely by corporate interest. The tax system allows them to do that easily. The tax regime has allowed big corporations to shift away from North Sea oil to more attractive and lucrative markets.

“They sell their shares on to smaller independents, and the only way those independents can make money is by squeezing labour, squeezing down standards in health and safety and so on.”

24 Aug 2017

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