Scotland to contribute an extra £1.87bn

While I'm sure that the reduction of fuel duty and the fair fuel stabilizer is going to benefit many people, it is worth noting that this is going to be paid for by an increased levy on North Sea oil and gas production.

According to this article on the BBC, it will cost the industry an additional £2bn a year. That's fair enough. With the price of oil and gas going up, the oil and gas companies are making much bigger profits and can easily afford it. But if we look at the information on this page we will see that Scotland's geographical share of North Sea revenue is now running at 93.5% of the total.

This means that Scotland will in effect be contributing £1.87bn to make fuel cheaper for people across the whole UK. George Osborne certainly knows how to be generous with their money. If he's looking for an appropriate soundbite, I think he's just fuelled the growth of Scotland's desire for independence.

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10 comments:

Anonymous said...

It's got to be a big boost for the SNP in the May election.

Anonymous said...

Correct me if I am wrong, but according to the Holtham Report doesn't Scotland receive about £2 billion more out of the Barnett Formula than they should if it was based on need? About time they gave some of it back then.

MH said...

The point of my post was simply to highlight the way that Scots will see it, Anon 23:06. Would you stand on a street corner in Scotland and say it was about time they gave some money back? What response do you think you would you get if you were standing for election there in May? This will help the SNP, as 22:12 says. In fact one could almost believe that the Tories did it partly because they want to make it as hard as possible for Labour to win in Scotland.

However this measure won't reduce the amount the Scots get through the block grant, and neither will it affect the situation if the Scotland Bill goes through, because the UK government treats oil and gas as if it belonged to the UK as a whole.

As it happens, Scotland gets a block grant that is more like £4bn more than it would get under a needs based formula. And that is, of course, why there is so much resistance in Westminster to changing it. But even though Scotland does very well out of Barnett, it does very poorly in terms of retaining the revenue raises from Scotland. So even though it isn't based on any principle, the two unfairnesses tend to cancel each other out. No unionist party wants to concede that Scotland's oil and gas belongs (even partly) to Scotland rather than the UK as a whole, so they are reluctant to open either can of worms.

In my opinion we will never get a needs based formula unless we also address the issue of the devolved administrations being able to keep a proportion of the revenue they raise. And because of this, a needs based formula cannot be considered in isolation from taxation. That's Labour's big problem in Wales: of course they want the needs based formula because it will benefit Wales, who in Wales wouldn't? But they refuse to accept taxation issue. That's naïve and untenable.

I want to see a needs based formula as much as anyone, but I want it as a fair baseline against which to set taxation powers. For unless we work out a fair, underlying set of principles, any moves towards fiscal autonomy will descend into little more than horse trading.

But I don't want to be too negative. I think there is a good chance of us getting a Barnett floor. That won't solve the underfunding problem, but it will stop it getting worse.

Toque said...

According to Holtham Scotland receives 4.5bn more than it would if the Barnett Formula was changed to a needs based formula.

It's not 'Scottish oil'. It could be if Scotland was independent, but as they're not I'm afraid that it's UK oil - just as profits from the City of London raise tax receipts for the UK, not just England.

MH said...

I think £4.5bn was David Bell's figure, Toque, Gerry Holtham said £4bn. As in fact we can read here ;-) But the point is obviously just as valid whatever the figure is.

The energy resources in Scotland's waters, just like the energy resources in Wales', are a crucial factor in the arguments about independence. And indeed the successes (or otherwise) of the banks in London are a crucial factor in the argument about independence for England.

But there is a difference. The financial institutions in London are just headquartered there. They could just as easily be headquartered somewhere else. And the profits that these institutions make are not generated from London but from customers all over the UK and all over the world. Resources such as oil, gas, wind and tide can only be exploited where they happen to be.

Anonymous said...

The point is, until Scotland becomes independent it's not 'Scotland's Oil' but the UK.

The most important argument is that is undermines any argument people (read Labour Party) have that Scotland couldn't 'afford' independence.

You have to be a cretin (or a Scottish Labour MP or MSP or former UK Prime Minister) and not see that Scotland would be a richer country were it independent. I'm Welsh and I can see that!

Owen said...
This comment has been removed by the author.
Owen said...

On the wider issue of the budget, it looks as though George might have produced a budget that sounds reasonable on paper but causes a traffic jam (excuse the forthcoming pun) of big problems down the line, most notably fuel prices.

The extra oil tax should logically give the SNP a boost but as we know all to well in Wales, Labour are very keen to pounce on weaknesses and take the credit when it suits them. Scottish Labour posters with "it's oor oil" on them would give Alex Salmond a hearty grin though I'd imagine.

Sometime us Nats need to sit back and let the Unionists do the hard work for us.

Leanne Wood said...

http://leannewoodamac.blogspot.com/2011/03/time-to-control-our-own-resources.html

Leanne Wood said...

Sorry, I should have added ...we have issues of our own as far as ownership and control of natural resources goes. That's what the blog post is about.

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