Gordon Brown is correct.
There will be a black hole under the SNP's framework for North Sea oil but there is an alternative to their plans and to the austerity offered by the Coalition and Labour.
The one thing we know with certainty about the future price of oil is that we don't know what it will be. That's why the assertion from the SNP that independence for Scotland will coincide with a North Sea Oil "boom" that will enable Scotland to be significantly better off is based on speculative forecasting at odds with the median forecasts of oil analysts.
Loading article content
Even if the "boom" did come to pass it would not provide sufficient funds under North Sea Oil's private ownership to eliminate the cuts suffered under the Coalition; reduce Scotland's deficit to manageable levels; service the large amount of debt Scotland would inherit as part of any independence settlement; and provide funds to rebuild Scotland's economy.
Over the last 10 years North Sea Oil has traded between a low of $27 and a high of $140 a barrel. The price also determines how much the oil companies extract in any year, making revenues even more volatile. The oil price has been driven by many factors over the last 10 years. We have seen the worst recession since the 1930s and the weakest economic recovery, particularly in Europe, since the 19th century. All this points to less demand for oil and a lower future oil prices than in the heady days of 2008.
The median forecast of analysts surveyed by Bloomberg is an almost flat-line $110 barrel for North Sea oil for the next four years, in line with US government statistical department forecasts.These figures are some 15% to 25% lower than the forecasts used by the SNP from the Department of Energy and Climate Change ($130) and the OECD ($150). It would be prudent, if the key factor in running your finances was North Sea Oil revenues, to conservatively estimate future oil revenues given the high volatility of the oil price.
I advocate using a price of $80, with any surplus being put in a reserve fund of which 20% is withdrawn every three years to finance projects in Scotland. This way a buffer is built up in case the oil price falls below $80 and extra funds are needed to plug a gap in public finances.
But these revenues, even at the SNP's inflated figures, would not be enough to deal with the public spending deficit (£12bn on average over the last four years) and restore the near £10 billion in cuts in real terms the Coalition will have made to public services by 2013/2014 or service the £110 billion (our per capita share of the UK's total debt) of national debt we will inherit under an independence settlement.
With North Sea Oil revenues, Scotland's deficit is likely to be smaller but we will not have any more money to spend. We will just have less to borrow than borrowed at present for us by the UK Government. Any "boom" is an investment boom because, at sustained price levels of $100 a barrel, it makes it profitable for the oil companies to explore and extract beyond the estimated 25 bn barrels of North Sea oil previously thought economical. Under private ownership, only 30% of these revenues would go to Scotland.
The only way to deal with the deficit and restore cuts to services and have money to invest to rebuild Scotland' economy is by nationalising North Sea oil. This is the only radical way out for the Scottish people.
This would see a more than tripling of oil revenues. It would take away Scotland' exposure to the volatility of the oil price if a reserve fund was structured as described. It would also allow us to have our own currency and central bank and fund a green sustainable Scotland where people's needs are met.
It would allow Scotland to be independent of the Bank of England and the Treasury. We could take the Norwegian route; the Norwegians own a large majority stake in their oil industry and joined the European Free Trade Association (EFTA) rather than the EU membership. This would allow us to trade with Europe and be European while not being part of a neo-liberal economic block.
Yes, it is the Scottish people's oil but only if it is nationalised can we build a prosperous, equitable and sustainable independent Scotland.