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  By Martin Kelly
 
An academic think tank, which has links to the Labour party, has launched another attack on independence, claiming Scotland will be worse off than if it remains in the Union.
 
The Centre for Public Policy for Regions (CPPR) has issued yet another report it says shows revenues from the North Sea will not be enough to make up shortfalls from tax receipts that would have come from the UK Treasury.

According to the report: "In effect, Scotland would be giving up the net transfer from the rest of the UK implicit in the existing Barnett arrangement, of around £7bn a year in cash terms, whilst retaining its geographic share of North Sea revenues, now estimated by OBR to be between £3.3bn to £4bn by 2015-16 and projected to fall further."

Critically, the CPPR report assumes the Barnett Formula will remain in place.  The formula calculates spending for the devolved administrations of Scotland, Wales and Northern Ireland based on public spending in England.

The latest report is based on new revised forecasts for the oil and gas sector from the Office of Budget Responsibility (OBR).  This week the OBR revised its forecasts for revenue down further from figures earlier this year (Page 109 of report).

The new figures can be seen below, alongside earlier forecasts from this year's budget.

The latest CPPR report added: "In fact, the latest forecasts suggest that, post independence, North Sea oil and gas revenues would be providing only around half of the net transfer (from the rest of the UK) that the Barnett formula system currently provides.  If this situation were to come about then it would require higher borrowing to retain the same level of public spending (assuming no changes in taxation and spending patterns or changes to Scotland's trend rate of economic growth)."

However concerns have been raised over the apparent uncritical acceptance of OBR oil and gas forecasts by the CPPR with the Scottish Finance Secretary John Swinney this week describing the latest OBR forecasts as "curious".

This week Professor David Bell of Stirling University joined those questioning the ability of the body to forecast accurately, when he said: "The forecasting record of the economics profession in general is not good.  The same can be said specifically about the forecasting record of the OBR."

The academic added: "There could be a particular focus on forecasting North Sea oil revenues, which has proved controversial in the past,"

In October members of the CPPR were forced to respond to claims their reports were too negative and were over reliant on estimates provided by the body created by Tory Chancellor George Osborne.

Writing in the Scotsman newspaper, Professors John McLaren, Jo Armstrong and Ken Gibb rejected claims they relied solely on forecasts from the OBR and insisted they had included a range of forecasts from other bodies.

In a letter, the three said: "In fact, CPPR used a variety of forecasts including those by the Department of Energy and Climate Change and the Scottish Government, as well as illustrating the extent of this range, which included projections by the Norwegian government, and why it comes about.

"With regards to OBR's forecasts, it is worth reiterating that it has consistently overestimated North Sea production and revenues in recent years. Indeed, the most recent North Sea revenues outturn for 2012-13 was below all five of the Scottish Government scenarios from earlier this year, as well as OBR's"

The latest report also bases its claims on the continuation of the so-called Barnett Formula, which is the method used for calculating Scotland's block grant.  There have been concerns that Westminster is planning to scrap the formula in the event of a No vote.  The SNP has claimed scrapping Barnett would lead to a four billion pound cut to Scotland's budget.

Quizzed by Newsnet Scotland on whether the CPPR believes the Barnett Formula will indeed be scrapped or altered significantly, resulting in a loss to the Scottish budget, Professor John McLaren replied:

"We have no firm view on what might happen to Barnett but do acknowledge that it might change and that this might negatively impact on Scotland."

However when asked why, given that the CPPR had no firm view, they had assumed the system will remain in place following the referendum, the academic replied:

"The projections we make are based on OBR's economic forecasts.  Any decision over Barnett would be a political decision.

"Currently we have no basis on which to assume an alternative Barnett related change."

The objectivity of the CPPR has been called into question with senior members' links to the Labour party being highlighted.

John McLaren worked as a researcher for the Labour Party for a year leading up to the first election (1999) of the new Scottish Parliament, being subsequently appointed as a Special Adviser by Donald Dewar, and then by Henry McLeish, for the period up to 2001.

He was a member of the Labour Party from 2000 to 2005.  In 2006 Mr McLaren was hired by the Labour Party on a consultancy basis to undertake work leading up to the 2007 election.  Mr McLaren's CPPR colleague, Jo Armstrong who is joint author of the latest report, was an adviser to Labour First Minister, Jack McConnell.

The CPPR has been a constant critic of the Scottish Government claims on North Sea Oil revenue.

In March this year, the think tank rejected Scottish Government claims that the North Sea was experiencing another oil boom.  The CPPR insisted that revenues would at best remain the same or fall slightly in real terms and remain well below the 2011-12 level.

It added that "to suggest some sort of new oil-tax revenue boom is about to emerge is not readily supported by the evidence".

This year the oil and gas industry enjoyed record investment with £13.5bn set to be targeted at the sector. 

Speaking in August, Oil & Gas UK’s chief executive, Malcolm Webb said the sector was worth £40bn to the UK Treasury and supported hundreds of thousands of jobs.

Mr Webb said: "The offshore oil and gas industry generates almost £40 billion a year for the economy by producing oil and gas worth £32 billion and by exporting oilfield technology and expertise worth £7 billion."

He added: "The industry is the UK’s largest industrial investor and contributor to gross value added. With 15 to 24 billion barrels of oil equivalent (boe) still remaining to be developed, the UKCS possesses great potential for contributing to economic growth for decades to come."

Comments  

 
# Breeks 2013-12-07 17:01
One observation I would make about oil revenues is the habit of defining them as a one off return - there one day and spent forever. This at best is the face value of oil, but if Scotland had an oil fund like Norway, the interest paid on such a massive investment would be a source of revenue year after year after year, and you'd still have the capital value of the investment.
It is tiresome to lament the loss of our oil at its face value, because the truth is far more devastating, and many times the face value. Having a fund is also a superb instrument to flatten out the volatility in oil price every panics about.
It's not the size of your oil bonanza, it's what you do with it that matters.
 
 
# Leswil 2013-12-07 17:15
I remember (just!)the last referendum, and all the same tactics were employed, the over all mantra was "why bother about Independence? it is only going to last 10 years! "
Yet, here were are again after around 40 years later hearing the same thing. How could we ever fall for it again?
Record investment ( ever! ) made by oil companies does not suggest, in any way, that oil is just about to run down any time soon.
Experts suggest another 40-50 years of production. Of course that does not take in the possibility of other large finds ie West of Scotland for one.
So, should we believe ANYTHING that has connections to the Tories OR the labour Party.
I would suggest not, they are out to deceive us yet once more. Trust the SG, who only have Scotland's welfare at heart.
 
 
# call me dave 2013-12-07 17:28
Aye right! Huge investment in the seas around Scotland. Scotland's economy doing well against a background of austerity
Barnett hanging by a thread and will disappear whatever colour of Tory is elected down South.

Referendum closing in and a NO vote is not a certainty, better get some figures done by our pals planted in the chattering classes and academia. Please paint a gloomy picture and scare a few folk for us because the 'project fear' ain't working yet.

Sorry I'm not buying it. Lets do this and realise our full potential, oil is grand and 'size may not be everything' but, as Breeks has said, 'it's how you use it'

Swinney & Co can handle this no problem.

This story bobs to the surface every month and it will, like other scare stories, turn out to have no substance.
 
 
# Leswil 2013-12-07 18:30
Sorry to post again so quickly, but I just watched BBC Scotland news.They reported " leading think tank says ..."
They went on to speak of the report as if it was fact.
It makes the tactic clear, they or anyone really can say what they want as long as it goes against the idea of Independence and the BBC will report it as fact.
So really what that means is that there is wide collusion in these reports knowing they will get good billing on the BBC, who are only too willing to push the point to try and deter us.
Almost as if they are made to suit the BBC agenda.Hmm could it be !!
 
 
# Macart 2013-12-07 18:35
So just to be clear we firstly had the right wing think tank of the IFS who with a fifty year forecast predicted hard times for Scotland based on current UK economic policy and spend. We now have a think tank associated with Labour predicting a similar gloomy future again based on a static economic policy. Both think tanks based their cases on George Osborne's OBR figures...

... and they think we can't see the glaring chasm in both their thinking and outcomes? Equally they don't seem to think we're able to discern the motivation for such erroneous arithmetic and gloomy predictions?

Good grief.
 
 
# bringiton 2013-12-07 18:36
When you are heading for the divorce courts and are worried about your partner taking too much away from you,what do you do?
Try to bully your partner by telling him/her that they cannot survive without your economic support.
Get as many friends as you can muster to reinforce the message.
Get as many friends as you can muster to tell your partner that they will have nothing to do with them if you go through with the divorce.
Anyone who thought this would be amicable is extremely deluded.
 
 
# eddiekitson 2013-12-07 19:39
It should be pointed out continuouosly that Scotland presently does not have oil revenues and is doing well and better than the UK as a whole. Sadly we have a large number of people who now believe Scotland is dependent on oil revenues and this is our fault.
 
 
# xyz 2013-12-07 19:45
Are we angry yet? I'm sick to death of these people.

Too poor one day, too stupid the next- twitter.com/.../...

On and on it goes.

This abuse is the most damaging price of London rule.
 
 
# Marian 2013-12-07 19:53
Its patently obvious that having lost all the other arguments the Project Fear mob are now busily getting their proxies to massage down the income figures in order to put the economic case for independence in a bad light.

There is nothing these people won't stoop to in order to protect the hegemony of the Westminster establishment.
 
 
# cynicalHighlander 2013-12-07 20:00
The £4bn 'cut threat' plays into SNP hands: archive.is/TFvsC

Quote:
But if the SNP is guilty of exaggerating the "threat," it shouldn't be dismissed altogether. It is largely forgotten now but the Labour, Tory and LibDem-backed Calman Commission, which led to greater devolution of tax powers in Scotland, also favoured a needs-based alternative to Barnett, provided nations' needs could be assessed on a UK-wide basis. There is widespread agreement at Westminster, too, that Joel Barnett's temporary fix in the late 1970s is in need of reform.


Time for some academic transparency?: joanmcalpine.typepad.com/.../...
 
 
# hiorta 2013-12-07 20:46
It is almost incredible that Scotland's tax take is thought insufficient to meet our normal expenditure.
When we add in all the hidden streams of revenue quietly flowing to Westminster direct, add the surplus savings for WMD and nuclear disarmament, levies for the huge upkeep of Westminster, the rebate for surplus monarchic costs then we should be nicely in surplus.
Just using our own 'levers of power' should provide a surplus, too.
Additionally increased tourism revenue following independence should be helpful. A little speculative, but then two can play that game.
 
 
# dundie 2013-12-07 21:06
There is also the previously surveyed (many years ago, and survey techniques have improved dramatically in the past 30+ years) areas off the west coast, currently embargoed by the MOD as a nuclear sub playground. The potential there is vast, and (as yet) undetermined. The potential for a mini-Aberdeen in this locale is huge, given the difficulties of transport round Cape Wrath - much more sensible to construct a secondary port and transport station locally and improve the road/rail access to this area. Both temporary and permanent employment thus secured for the area, and the potential for expansion and the resultant local income from infrastructure... Perhaps that might just offset fears in the area for the "massive" (aye, right) loss of jobs from the nuclear submarine facility - already earmarked as a naval base...
 
 
# bringiton 2013-12-07 21:23
The American oil companies aggregated in Aberdeen originally because they were operating in a foreign country and that is what they do.
If Westminster had taken a view other than wanting to extract the maximum amount of cash from the industry,they could have spread the economic boom around other parts of Scotland.
However,that was neither their intention nor desire.
Westminster has not and will never operate in Scotland's interest.
 
 
# call me dave 2013-12-07 21:31
Swings and roundabouts and coincidence.

archive.is/2K6Mb

Funny old world.
 
 
# oldnat 2013-12-07 21:50
Doubtless, if Scotland votes NO next September, the new OBR director will find huge methodological errors in his predecessor's work. and oil revenue projections will be upgraded radically, and found to solve all of the UK's economic difficulties.
 
 
# cuckooshoe 2013-12-07 22:41
When Scotland becomes independent it will produce its own Pink Book.

en.wikipedia.org/.../Pink_Book

"The Pink Book is the annual publication by the Office for National Statistics that details the United Kingdom balance of payments."

Until then, everything else is conjecture
 
 
# From The Suburbs 2013-12-07 22:54
its about time the Tory influenced OBR was taken to task by the supine Scottish media as their pessimistic forecasts have been proved wrong on numerous occasions.

Yet they accept as gospel the CPPR, IFS and George Osborne pronouncements based on flawed OBR forecasts as the truth on the Scottish independence debate.

The YES campaign needs to challenge this perception head on as the economy will be the deciding factor in next year's referendum
 
 
# call me dave 2013-12-07 23:09
O/T
Dougie Alexander plucking at the heart strings for a NO vote. Doing his bit for 'better together'

archive.is/SVfIf

PS:
Passport anyone? Not a new idea apparently.

archive.is/DR5AQ
 
 
# James01 2013-12-07 23:50
Another day another scare story with the BBC once again reporting dubious opinion as fact. I really hope that the Scottish public realise that the No campaign and the media are one and the same thing.
 
 
# Independista 2013-12-08 00:59
Contrast the CPPR report to the complete media silence to the 2013 Legatum Prosperity Index, whose findings actually reflect what is happening now, and the only global measurement of prosperity based on both income and wellbeing.
So, what do our political editors think of the fact that the prosperity of the citizens of the UK has dropped three places from 13th to 16th?
Where are the searching questions to Chancellor Osborne and Alastair, the ‘Darling’ of the No Campaign, as to why lowly Ireland and Iceland have overtaken the UK?
Is the clue in the tables that show Norway at the top for the fifth consecutive year? www.prosperity.com/#!/ranking
Or that of the top ten countries seven have populations below ten million and of that seven, five have populations similar to Scotland?
 
 
# Breeks 2013-12-08 10:21
I have a crazy theory formulating in my head.

We're all led to believe the current economic woes are all down to the mad bankers tripping over their own greed. But take a step back a minute, and the whole banking bailout is nowhere near the what, £1.3 Trillion UK debt.

Far be it from me to defend the Banks, but the UK has a borrowing crisis which runs much deeper than the Bank bailouts. I would hesitate to call the Bankers scapegoats, but take a moment to set aside the Banking crisis, the Banks are taking all the heat, but it strikes me there is still a Balrog smouldering away hidden in the darkness and slinking about in the shadows, and we're all looking the other way. Even without the Credit Crunch, the UK economy would still be in a mighty bad way.

Look at it that way, and the whole banking crisis has been a mighty convenient distraction for 'some'.

I've got a baaaad feeling about it. Paranoia? I think not.
 
 
# Breeks 2013-12-08 10:36
When George Osborne trumpets a return to growth, it seems such an insignificant event given the enormity of the bigger economic problems. The Monty Python film 'Life of Brian' comes to mind, when the Roman Patrol search a house full of people, find none of them, and triumphantly announce to their officer "We've found this spoon sir!".
 
 
# Breeks 2013-12-08 11:45
I find the negativity and scare stories of Unionists only exist because there's a vacuum there to fill.

To give them credit, bar 2 or 3, our YES politicians may be inspired, but they are not inspiring. Don't worry, they stand head and shoulders above most unionist and have integrity in their arguments, but is that to be it? I want more than a status quo which survives the earth tremors of referendum and changes the management. I want more.

I want vision. I want initiative. We know what social democracy we want for our citizens, but why can't we also have social democracy for our small businesses? A welfare state for businesses, access to support, networking and help, and see them credited meaningfully for excellence, and their contribution to our business and social fabric.
Let's have an end to Scottish Enterprise and the lame white elephants which browse a depressed community near you.

We talk about hope but don't define it.
 

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