RUTH Davidson came up with a pretty good wheeze at First Minister's Questions the other day.
She revealed how she ran the civil service's advice on establishing an oil fund in an independent Scotland and the Fiscal Commission's recent report on the same subject through university anti-plagiarism software. Lo and behold, the Scots Tory leader told MSPs, it turned out the two documents shared many identical or near-identical passages.
The stunt achieved a laugh in the chamber - the surest way to irritate the First Minister - but more importantly raised the real question at the heart of this week's overheated oil fund argy bargy: how did the Fiscal Commission, the Scottish Government-appointed panel of outside economic experts, take the work of the civil service and come to a completely different conclusion?
The civil service, you'll recall, came to the view that over the past 20 years an independent Scotland could only have created an oil savings fund by raising taxes, cutting spending or increasing borrowing. For each year bar one between 1990 and 2011 Scotland was in the red, so it would only have made sense to save oil revenue if it could generate a bigger return than the cost of borrowing the same amount to maintain public spending. Officials considered that unlikely. They cited figures showing that between 2000 and 2011 the average interest on Government borrowing was 4.4%. Norway's oil fund, by comparison, produced a return of 4.1%.
The advice dates back to last year but was only made public this week after a successful Freedom of Information appeal. The timing of its release was interesting - it was withheld until after the Fiscal Commission published their very different conclusion last week. They insisted that going forward payments could be made into an oil savings fund as early as 2017/18 without "in principle" requiring tax hikes, spending cuts or extra borrowing. The view is underpinned by a couple of important assumptions. The first is that George Osborne's austerity drive would continue in the early years of an independent Scotland ("assuming that Scotland follows a similar timetable for moving debt on to a downward trajectory" is how the Fiscal Commission phrases it). The second is that savings could earn more than the cost of borrowing. The claim is based on a five-year look-back showing UK Government borrowing cost 3.1% on average, while Norway's oil fund generated a return of 5.9%. The decision to focus on the highly unusual period from 2007 to 2012 rather than the civil service's longer-term view raised eyebrows among some economists but the figures were being quoted enthusiastically by Government spin doctors in the aftermath of this week's row. Even accepting these two factors, though, the Fiscal Commission say rather cautiously that "this may allow the Scottish Government to consider starting to make modest investments into an oil savings fund" by 2017/18 or towards the end of the decade.
Whose analysis is right? The question provoked angry clashes at Holyrood, where Johann Lamont was rebuked by the Presiding Officer for accusing ministers of "dishonesty". But purely in terms of hard cash it hardly seems to matter that much. It's clear from the Fiscal Commission's report that an oil savings fund would be on a relatively small scale. The plan is more about the principle of creating an oil fund than getting rich quick. "There is a strong case for establishing the framework," says the report. To make the point it describes how Norway's oil fund was nothing more than an "accounting exercise" for the first six years, as oil revenues were paid in then immediately transferred to the government budget to pay for things.
The Treasury reckons an independent Scotland could build up an oil fund of £32 billion, at today's prices, by 2040, the kind of money the Scottish Government spends annually on services. But it's the image of Norway, where an enviable £470bn has been amassed, that the SNP would dearly love to implant in the public mind. There is nothing, however, in the Fiscal Commission report to justify such a comparison. Mr Salmond's economic wise men may have kept the idea of an oil fund in play but what they have not done is describe some kind of North Sea Lotto win.
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