Stability vs Volatility
One of the benefits of being part of the United Kingdom is that as part of a larger, more diverse UK economy we are able to spread risks, share rewards and focus spending in areas of greatest need.
That brings strength, security and –crucially – stability to Scotland’s finances. It means we all benefit in the good times and we are all protected in the bad times, like when the banks collapsed.
An independent Scotland’s economy would be highly dependent on oil and gas from the North Sea. Not only will North Sea oil and gas eventually run out, its value is notoriously volatile.
The fact is: independence would be forever, oil is not.
Over the years the price of a barrel of oil has fluctuated massively. The amount of money generated from oil and gas has been up and down like a yoyo.
Source: HMRC and Office of Budget Responsibility
It is irresponsible to base our economic future on the ups and downs of a finite resource. Being part of a larger, diverse UK economy is in Scotland's best interests.
In recent days, academics and the Office of Budget Responsibility have warned that the decline in production of both oil and gas that will start just as the separatists would have us breaking off from the UK.
The Office of Budget Responsibility has predicted that revenues from oil and gas will drop from £11.3bn in 2011/12 to just £4.4bn in a few years’ time.
The anti-UK campaign will talk a lot about the revenues from oil, but rarely about the costs. The reality is, hundreds of billions of pounds would need to be investment would be required not only to get the remaining oil out of the ground but then to clean up the oil fields as they dry up. Experts estimated the costs of extraction and clean up of North Sea oil is more than £340 billion.
Oil and Gas is hugely important to Scotland and to the rest of the UK. We are glad that we have it and grateful for all the jobs and wealth it has created. But the fact is even if an independent Scotland were to receive a generous share of oil and gas revenues – an independent Scotland would have had a multi-billion deficit in each and every one of the last TEN YEARS.
Source: Scottish Government, Historical Fiscal Balance Calculations
In order to make the books balance an independent Scotland would be faced with a series of difficult choices. Here is what the Institute of Fiscal Studies has to say:
“In the longer term, the choices may be starker. Spending in Scotland is higher, per capita, on many public services than is the case elsewhere in the UK. … This balance may not be sustainable in the face of volatile and, over the long run, probably diminishing North Sea revenues. That, alongside the same sort of demographic pressures that are affecting the UK and most other European countries, will force some choices on an independent Scotland.”
To make the budget balance, an independent Scotland may be forced to increase taxes, cut services or borrow more (and get even further into debt). Scotland doesn't need more instability. We need to concentrate on getting our economy back on track. As part of the United Kingdom we benefit from being part of a larger, more diverse UK economy where we are able to spread risks and share rewards. It brings real strength, security and stability to Scotland’s finances. Let’s keep it that way.