An independent Scotland would look very different in a $60 oil world. Is the ‘carbon bubble’ about to burst, asks Peter Jones
AS THE price of oil continues to hover at around $60 a barrel, almost half the $110 confidently predicted by Alex Salmond during the referendum, it becomes more and more clear that Scots are very fortunate that there was not a Yes vote in September. But are we also looking at something much bigger and potentially more serious – the bursting of what environmentalists call the “carbon bubble” – and which threatens a financial crisis?
According to the Financial Times, analysis by the Office of Budget Responsibility suggests that, at $60, Scotland’s oil revenues in 2016-17, the mooted first year of independence, would have been just £1.25 billion. This is about a quarter of the most modest yield of £4.7bn predicted by the Scottish Government in May, and a sixth of its most bullish prediction of £7.8bn.
If we take the mid-range prediction of £6.9bn, which was the figure used in independence campaigning, a newly independent Scotland would, at $60 oil, have found itself £5.7bn short on tax revenues, and looking at a public spending deficit equivalent to 6 per cent of national income.
If it had also become an EU member, it would also be facing EU demands to reduce that deficit by at least 3 per cent of national income, or by about £5bn. All the campaign fantasies of higher pension and welfare benefits, and lower tax bills, would have been exposed for the fantasies they always were, and the country would instead be looking at much worse austerity, not the promised escape from it.
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