Falling oil revenues mean Scotland would face a “devastating” £7.6 billion of cuts if it had to raise all the cash it spends, Labour has claimed.
The party’s Scottish deputy leader Kezia Dugdale had previously claimed the country would be some £6.5 billion worse off if there was a change to the way funds are allocated throughout the United Kingdom.
But after the Office for Budget Responsibility (OBR) yesterday revised down the amount of money it predicted North Sea oil revenues would raise, she said the impact was even greater.
Public cash is currently distributed across the UK using the Barnett formula, but the SNP wants Scotland to have full fiscal autonomy – meaning it would have to raise enough in taxes and borrowing to cover all its spending.
Ms Sturgeon told Holyrood the Scottish Government would publish a new bulletin setting out its latest forecasts for oil revenues “as soon as possible”.
But Ms Dugdale said plans for full fiscal autonomy had been based on significantly higher oil prices of 110 US dollars (£74) a barrel.
The Labour MSP challenged Ms Sturgeon on the issue, telling her: “The new OBR figures show something quite extraordinary, they show even the SNP’s most pessimistic scenario for oil and gas revenues are £10 billion more than the OBR’s latest forecast.
“And on the SNP’s preferred scenario the difference is almost £30 billion, that’s nearly the whole Scottish Government budget.”
She added: “Last week I said scrapping Barnett would cost Scotland £6.5 billion in spending cuts. I was wrong. The oil projections from the OBR confirm the costs would now be £7.6 billion.
“That’s a Barnett bombshell, It would mean billions of pounds worth of cuts.”
Ms Dugdale called on the SNP leader to “just do the decent thing and admit the SNP’s plan to scrap Barnett would be devastating for Scotland”.
Ms Sturgeon told her that when the Scottish Government had forecast oil prices of 110 US dollars a barrel, the OBR was predicting 100 US dollars (£67), while the UK Government Department of
Energy and Climate Change was “projecting an oil price of upwards of 120 US dollars (£80) a barrel”.
She said: “I think it’s fair to say everybody’s projections about oil were wrong.”
The OBR is now forecasting that oil will raise less than #1 billion in revenues for each of the five years to 2019-20.
But Ms Sturgeon argued that while revenues from the North Sea are declining, the amount of money Scotland raised from on-shore, non-oil revenues is on the increase.
She hit out at Labour and said: “I think the most revealing thing about Labour is how they gleefully pounce on anything they can describe as bad news and steadfastly ignore anything that is good news about Scotland’s economic prospects.
“The fact is the projected decline in oil revenues over the next few years is dwarfed in every single one of those years in the projected growth in our on-shore, non-oil revenues.
“In other words our revenues as a country are increasing, our public finances are improving. I know that doesn’t suit Labour’s narrative but it happens to be a fact.”
She said the Scottish Government would “take the time to analyse the fiscal changes” for the oil and gas industry that Chancellor George Osborne announced as part of his Budget yesterday.
The First Minister added: “When we have done that as soon as is feasible we will publish an updated oil and gas bulletin.”
Ms Dugdale, who had challenged the SNP leader on the issue at First Minister’s Questions, said she was pleased Ms Sturgeon had “finally run out of excuses and will publish a new oil and gas bulletin”.
The Labour MSP insisted: “This isn’t some dry statistical exercise, this is about the SNP’s key general election demand for full fiscal autonomy in the UK, a plan that would scrap the stability of higher public spending through Barnett for the austerity max of relying on oil revenues.”
She added: “The SNP’s plans for full fiscal autonomy rests on an oil price of 110 US dollars a barrel, yet the OBR has revised down its predictions for the oil price, they now predict an oil price next year of more than 40 US dollars (£27) a barrel lower than the SNP.”
Ms Sturgeon told her: “If we look to the year 2019/20, yes we will see oil revenues projected to decrease by £3 billion compared to 2013/14. In that same year our on-shore, non-oil revenues will increase by £15 billion.
Conservative leader Ruth Davidson quoted the Green Party south of the border, which described the #1.3 billion package of support for the oil and gas industry announced in yesterday’s Budget as “huge tax breaks for the fossil fuel dinosaurs”.
She attacked the First Minister for advising English voters to back the Green Party earlier this week.
Ms Davidson said: “When she’s in Scotland Nicola Sturgeon has just said that she calls on London to deliver tax breaks to keep the drilling going.
“But when she’s in London she urges people to vote for a party that says that we should stop the drilling altogether and give hundreds of thousands of North Sea oil workers the sack.
“What kind of politics is that? What kind of judgement is that?
“Can I ask why a First Minister of Scotland is telling people in England to vote for a party that would kill Scotland’s oil industry?”
Ms Sturgeon responded: “Dearie, dearie me. Just for the benefit of Ruth Davidson and indeed for anybody else across this chamber I’m Nicola Sturgeon, I live in Scotland, I’m voting SNP and I encourage everybody else to vote SNP as well.
“And I hope for the benefit of everybody in Scotland nobody in England votes Tory, because the Tories are imposing austerity cuts in Scotland and the sooner we get rid of them the better.”
SNP MSP Kenneth Gibson asked what the implications of the Budget would be for public services and public sector employment in Scotland.
Ms Sturgeon said: “One of the worst things… from the Budget yesterday when you look at the analysis is the disproportionate impact of Tory cuts on the poorest in our society.
“The combined impact of Tory tax, welfare and public spending changes will reduce the income of an average household by 1.5% but they will reduce the income of the poorest 20% by 2.2%.
“The disproportionate impact is on the poor and that says all that needs to be said about the priorities of the Tories.”
Ms Sturgeon said the Scottish Government would work with the UK Government on furthering city deals for Aberdeen and Inverness.
“I have already made very clear that the Scottish Government will work with Aberdeen, Inverness and I would like to see in due course other cities to progress city deals.”
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