Independent Scotland Would Have Volatile Taxes, Osborne Says
An independent Scotland may create a funding gap in the next three years equal to half its education bill as tax revenue becomes “more volatile,” U.K. Chancellor of the Exchequer George Osborne said today.
Annual revenue from North Sea oil and gas has fluctuated from 2.6 billion pounds ($4.1 billion) to 12.9 billion pounds since the semi-autonomous Scottish government was formed in 1999, Osborne told industry executives in Aberdeen. An estimated 90 percent of the money would accrue to Scotland in the event of independence.
“The fact is that the oil and gas remaining in the U.K. Continental Shelf will be increasingly difficult and more expensive to extract,” Osborne said. Oil and gas earnings “are the most volatile tax revenues that exist.”
The Office for Budget Responsibility earlier this year forecast a 4 billion-pound deficit in Scottish public finances by 2016-2017, Osborne said. Tax relief agreed upon by the U.K. government and the oil industry on decommissioning will cost each person in Britain about 300 pounds. In an independent Scotland that would rise to 3,000 pounds, according to Osborne.
The prospects for the North Sea oil and gas industry are at the heart of the debate about whether Scotland would be better off as an independent nation. Scotland’s electorate will vote in a referendum on Sept. 18, 2014, on whether to quit the U.K. as proposed by Scottish First Minister Alex Salmond and his ruling Scottish National Party.
Only the U.K. working together can maximize the volume and value of North Sea oil and gas by pooling the risks and sharing the gains, Osborne said.
The decommissioning agreement, the only one of its kind in the world, will drive 17 billion pounds of additional investment, helping to extract an additional 1.7 billion barrels of oil, Osborne said.
The chancellor is visiting Aberdeen to publish the fifth study by the U.K. into the implications of independence. The paper covers the impact of borders of trade, migration, and economic and cultural links.
The previous four examined why a currency union would be unlikely to work, how an independent Scotland would not be able to rescue its biggest banks in the event of their failure, how Scotland benefits from being part of the U.K. single market and why Scotland would have to reapply for membership in the European Union.
To contact the reporter on this story: Peter Woodifield in Edinburgh at firstname.lastname@example.org
To contact the editor responsible for this story: Douglas Lytle at email@example.com