The report of the Fiscal Commission Working Group, published yesterday, injects a measure of sober common sense into the debate on Scotland's oil and gas, and its potential role in an independent Scotland.
Fluctuating oil prices? Establish an oil stabilisation fund or, in other words, budget cautiously. Concerned that the oil will run out? Invest in a savings fund for future generations. The beauty of it all is that the ideas at the heart of the report are, when it boils down, simple common sense that people in households across Scotland will understand and relate to.
While there is a debate to be had about how best to use our oil reserves, there is no doubt that the Westminster way is nothing short of a national scandal. A policy of exploiting reserves, but blowing revenues without saving a penny for a rainy day, has sold Scotland short.
The UK stands almost alone in having failed to take the simple and obvious step of establishing a wealth fund from its oil and gas resources. Countries and regional authorities around the world from Norway to East Timor and Alberta to Alaska have taken steps to ensure that while the resources themselves may be temporary, if carefully invested the revenue can last indefinitely - helping future generations as well as the present.
Had Scotland been able to set up such a fund in the 1980s, the economists on the Fiscal Commission Working Group whose report was published yesterday - show how it could today have held assets worth between £82bn and £116bn by now. Instead we must face up to a share of UK debt.
Norway started paying into such a fund less than 20 years ago and which is now worth around £470 billion - and forecast to reach more than £720 billion by 2020. Astonishingly, it owns and average of 2.5% of every listed company in Europe.
There can be fewer more damning indictments of Westminster government than the failure to establish such a fund.
But the positive news is the detailed recommendations of the Working Group report's two sensible steps that an independent Scottish government could still take making the best use of oil revenues, should it so choose. At the same time it confirms that we still are less than half way through the likely total wholesale value of our oil.
In the short term, the report recommends that an independent Scottish government should establish a stabilisation fund, a sensible measure protecting us against fluctuating oil prices. This means public finances would be planned on the basis of cautious estimates of North Sea revenues. As and when revenues exceed expectations, mainly through a higher price, these revenues would be set aside for use when revenues are lower than even cautious estimates.
Secondly, an independent Scottish government should look to establish a long-term savings fund. This means a portion of oil revenues being invested in financial assets, to ensure a permanent revenue stream from which future generations can benefit. There would be the potential to start investing in such a fund as early as 2017/18, and certainly by the end of the decade. This is the point at which levels of debt to GDP are projected to begin a downward trajectory.
This latest contribution from the Working Group follows an upbeat Barclays Oil and Gas Survey last month which showed we can expect record levels of investment in the North Sea in the years ahead.
Scotland is a wealthy and productive nation. Even without oil and gas our economic output matches that of the UK as a whole. That is why our North Sea resources can correctly be described as a bonus, rather than the basis, for the Yes case. What we need to do is make that wealth work harder, not only for this generation but for future generations too, and the Fiscal Commission has shown exactly how it can be done.
Stuart McDonald is the chief research officer for the Yes Scotland campaign. The Herald was offered this article by Yes Scotland and no fee was involved.
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