Highlands and Islands Labour MSP, David Stewart, is warning that Scottish Government’s plans for TWO oil funds in an independent Scotland would mean big tax rises for hard working families across the Highlands and Islands or cuts to local public services like schools and hospitals.
The Scottish Government published a report this week which finally admitted the obvious – that the finances of an independent Scotland would be at risk from volatile world oil prices – and proposed putting tax revenue from the North Sea into two separate funds.
However, Mr Stewart says: ‘Currently Scotland uses every penny of tax revenue from the North Sea to pay for vital public services like schools, hospitals and pensions, and that diverting money from the North Sea into two oil funds would mean putting up our taxes or cutting spending.
‘The Scottish Government can’t have it both ways.
‘As part of the UK we share energy resources, risks and rewards, which allows Scotland to manage the volatility of the tax we get from the North Sea without putting public services at risk. You simply can’t spend the same money twice. Yet Scottish Government would have you believe that an independent Scotland could borrow, save and reduce debt at the same time without raising taxes or cutting public services. It just doesn’t add up.
‘Every penny we get in tax from the North Sea is used to pay for vital public services like local schools and hospitals, as well as pensions and benefits. If the Scottish Government want us to save some of that revenue into their two oil funds in a separate Scotland then they need to be honest about how much our taxes would increase or which local services would be cut.
‘As part of the UK we share energy resources, risks and rewards. Where is the sense in putting that at risk?
In support of his analysis, Mr Stewart points to the recent conclusions of the universally respected and independent Institute of Fiscal Studies which makes the position clear:
‘analysis of the fiscal situation facing Scotland in its first few years of independence suggest that if the OBR’s forecasts for North Sea revenues are borne out, a newly independent Scotland could actually find itself with a somewhat larger budget deficit than the rest of the UK.
‘under the OBR’s projections for North Sea revenues, Scotland’s budget deficit may be 2.2% further into the red than that of the UK as a whole in 2017–18. To fill this hole would require a further £3.4 billion of tax rises or spending cuts, on top of the £2.5 billion required as part of the plans set out by the UK government.
‘Assuming that it changed defence and ODA spending in line with stated SNP policy, and the rest of the required consolidation was delivered entirely by cuts to other public services, a £5.9 billion total fiscal consolidation (£2.5 billion plus £3.4 billion) would amount to a cut of around 15%, based on 2011–12 levels of spending. If the Scottish government wanted to protect health and education spending, the cuts to other non-protected services would be close to one-third.”
Independence = higher interest rates.’
Mr Stewart also points to the conclusions of economists from the National Institute of Economic and Social Research, which were: ‘an independent Scotland would face additional interest rate costs of between 0.72% to 1.65% above the UK borrowing costs for 10 year debt’.
