Labour seizes on official figures showing Scotland had a significant deficit a year ago even after including North Sea oil revenues
Fresh doubts about the economic case for Scottish independence have emerged after an official study said the country had a significant deficit a year ago even after including North Sea oil revenues.
The annual assessment of Scotland's economy found that in 2009/10 the country had a £14.9bn current spending deficit without taxes from North Sea oil and gas and a still sizeable £9bn deficit if Scotland had a full geographical share of North Sea revenues.
The findings in the Government Expenditure and Revenues report led to fresh opposition attacks on Alex Salmond's claims that an independent Scotland could use oil revenues to build up a substantial "oil fund" while still paying for heavily-subsidised public services in Scotland, including free prescriptions, a council tax freeze, free university tuition and free care for the elderly.
The Scottish National party argues that Scotland "owns" 90% of current North Sea oil and gas tax income, based on its geographical share of the North Sea. Last year's assessment found that booming North Sea incomes in 2008/09 would have given Scotland a £1.9bn current budget surplus.
But those figures exclude capital spending. Even with oil receipts, the Centre for Public Policy for Regions (CPPR) at Glasgow university said that including capital spending would have left an independent Scotland with continual deficits for the past five years, from 1.7% to 10.6% last year, broadly similar to the UK's overall deficits.
Richard Baker, Scottish Labour's finance spokesman, said: "These figures show the huge economic risks associated with independence and starkly illustrate the volatility of oil. Revenues have halved in the last year alone and this really shows the folly of relying on oil to anchor the Scottish economy.
"We have seen oil prices rise and fall over the last 20 years and we should not rely on a commodity whose price is completely out of our control."
His case was challenged by John Swinney, the Scottish finance secretary , who said the new figures - based partly on taxes that the SNP wishes to cut - showed that Scotland was in a stronger overall position that the UK as a whole.
That £9bn deficit including oil revenues was equivalent to 6.8% of Scotland's GDP, a better figure than the UK's deficit in 2010 of £107.3bn, or 7.6% of overall GDP. Including oil, Scotland also contributed 9.4% of public sector revenues through taxation but received 9.3% of total public sector spending.
"Scotland has now been in a stronger financial position that the UK as a whole for each of the last five years," Swinney said.
"Despite the fall in North Sea revenues to £6.5bn in 2009-10 - less than half the level for this year - Scotland still contributed far more to the UK exchequer than our share of population, which underlines the breadth and strength of Scotland's finances, and the opportunities of financial responsibility and independence."
Swinney brushed off last year's fall in oil and gas receipts, arguing that current oil and gas resources were worth £1trn, 10 times more than Scotland's per capita share of the UK's debt. The overall trend on oil receipts was increasing on "a sharply rising curve", Swinney said.
He said the industry was expected to generate an "all time record" of £13.4bn in taxation this year and was forecast to raise £61bn over the next five years.
John McLaren, of the CPPR, said the new assessment showed that an independent Scotland could survive comfortably with oil revenues but it would be dangerous to base its public spending on global oil prices. Unless spending was cut heavily, it would be impossible to create a new oil fund for the foreseeable future, he said.
"Oil prices and production are crucial to Scotland's position relative to the UK but because these prices are so erratic, that makes it difficult to know what the future holds," he said.
"It's right to say that Scotland gets more spent on it per head of population but it's also right to say that if the price of oil is high it contributes more in revenues. At the moment, the two kind of balance up. But in the future, whether they balance up or not pretty much depends on the price of oil," he said.
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Source: http://www.guardian.co.uk/politics/2011/jun/22/new-study-undermines-economic-independence-scotland
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