It was inevitable that the question of oil revenues would feature prominently in the Scottish constitutional debate; witness the various and widely reported lively exchanges last month.
Whether much light is shed by the claims and counter-claims is, however, more dubious.
The latest salvoes were fired in response to the Office for Budget Responsibility lowering its estimate of UK revenue from offshore oil and gas between 2018 and 2041 from £67billion to £56billion, which Dick Winchester refers to in his take on this thorny issue.
Not surprisingly, this has been seized on by opponents of Scottish independence as confirmation of a further “black hole” in the Nationalists’ economic plans.
In response, the Nats have insisted that the OBR’s forecasts are “cautious” and that there would actually be another £26billion to play with.
My own suspicion is that one set of figures is as pointless as the other. At best, they are forecasts based on existing conditions; at worst, mere back-of-an-envelope fiction. And the absolute certainty is that the conditions which exist today will not be the same as in 2018, never mind 2041.
This point is illustrated by the fact that the OBR’s estimate has changed by around 20% in the space of just one year. That scarcely suggests a degree of forensic accuracy – and neither, to be fair, would those responsible for the figures claim that it does.
Indeed, the OBR describes oil and gas revenues as “the most volatile of the main UK tax receipts” dependent on world prices, the rate of extraction, exchange rates and all the other obvious factors which make long-term forecasting a very imprecise science.
For example, the past year has seen the quite dramatic impact of shale fracking on gas production in the US.
Nobody can predict what the future extent or impact of this technology will be when applied on a global scale. So why even bother trying – and why attach significance to figures which are virtually certain to be wrong, based on factors that we cannot even begin to envisage?
The Nationalists, on the other hand, have to create their own figures simply in order to keep their political case afloat. So no matter what the data might suggest, they have to come up with wildly optimistic figures covering the same period and then keep a straight face while announcing them; which is exactly what they do.
The OBR’s projections have changed mainly because they now think the price of oil will be lower than previously anticipated, reaching 150 dollars a barrel in 2041 rather than the previous estimate of $173. That is in itself a dramatic enough variation to call the whole point of the exercise into question.
The one certainty is that many of us will not be around in 2041 to check out whether the OBR got it right in 2013 – or, for that matter, in 2012.
And who knows that they will be saying in 2014? Whatever it is, one side or other in the constitutional debate will jump on it as biblical evidence of whichever direction it points in.
None of this has anything to do with the reality of what goes on, or will happen in future, in the North Sea or West of Shetland.
The overwhelming interest, whether in a UK or Scottish context, is to maximise and prolong production to the greatest possible extent. That is what jobs and revenue depend on – not the political point-scoring based on pointless guesstimates.
There are a few basic facts on which it should be possible to agree. North Sea production will continue on a substantial but declining basis far into the future.
It will continue to be a great national asset (whichever national identify you prefer) and it will continue to employ hundreds of thousands of people in good, well-paid jobs. Let’s give thanks for all of that.
Equally, it is indisputable that volatile North Sea revenues would form a higher proportion of Scotland’s revenue base than they currently do for the United Kingdom of which we are part. That is not a political statement but an arithmetic one. And it was helpfully confirmed last year in his leaked paper by John Swinney, the Scottish finance minister.
Indeed, in a document that the public was not meant to see, Swinney spelled out the implications of “North Sea tax receipts account(ing) for a much larger share of tax receipts in Scotland than in the UK as a whole”.
He continued, very honestly, to explain that projections of falling tax revenues would “require some downward revision in current spending” – including benefits and pensions.
It was in response to the unintended publication of this document that first minister Alex Salmond discovered the additional £26billion that everybody else had overlooked.
Quite simply, the politic damage which was at stake dictated some urgent new arithmetic. And since it is all well into the future, who is to say which is right or wrong?
Looking at the headlines generated by the OBR projections, I could not help wondering how often the same football will be kicked back and forward over the next 15 months – or to what effect.
For those who regard them as important, the arguments about the impact of oil revenue reliance on the finances of an independent Scotland are best left to individual common sense – which is at least as good an indicator as any other currently on offer.
