Academics have cast doubt on whether an independent Scotland could build up an oil fund to manage fluctuating offshore tax revenue.
The National Institute of Economic and Social Research (NIESR) took the view after looking at the likely share of debt and estimated income facing Scotland following a Yes vote.
The Scottish Government wants to set up an energy fund to “safeguard” the benefits of oil and gas production as an early priority.
Immediately following independence, ministers aim to set up a stabilisation fund to “smooth” receipts from revenues which can vary from year to year, the Government’s White Paper on independence proposes.
A research paper from the NIESR compares the past five-year average of £9 billion and a projected revenue of £3.2 billion in 2016-17, the year Scotland would officially be independent according to the SNP’s timetable.
“Tax revenues from offshore oil and gas are notoriously volatile,” the NIESR paper states.
“Revenues from oil and gas fell by almost one-half between 2011-12 and 2012-13 to £5.3 billion, equivalent to 3% of Scotland’s GDP.
“The White Paper proposes building up an oil fund to be able to smooth out this volatility, but it is difficult to see how such an oil fund could be built up.
“In 2012-13, Scotland’s onshore fiscal deficit was 14% of its GDP.”
The research paper updates figures from February which estimated Scotland could inherit £146 billion of UK debt, based on an 8.4% share of UK population.
The paper now suggests Scotland would inherit debt of around £143 billion, leaving a debt to GDP ratio of about 86%.
Without the resources to cover the obligation, an IOU would be created where the Scottish Government makes annual payments to cover the share of debt. About £23 billion would be needed in the first year, plus money to cover the fiscal deficit, according to the NIESR.
Oil and gas money between 2019 and 2041 would account for about one-third of Scotland’s inherited debt, it adds.
Meanwhile, the rest of the UK’s debt burden would increase.
“Our report shows that because an IOU from independent Scotland would not constitute a liquid asset, the gross debt burden of the continuing UK would rise by nine percentage points to 102%,” the paper states.
“This would be likely to catch the attention of credit rating agencies.”
A Scottish Government spokeswoman said the report shows the scale of debts and liabilities run up by UK governments over recent decades.
“What this report fails to mention are the considerable difficulties the UK would have in meeting the same debt criteria that this report sets for Scotland,” the spokeswoman said.
“Whichever way you look at the figures an independent Scotland would start life with lower debt ratios than the rest of the UK and with strong public finances.
“The Scottish Government has set out our proposals, supported by the work of the Fiscal Commission, to establish a short-term stabilisation fund and a long-term savings fund. The model proposed by the Fiscal Commission would allow Scotland to consider investing modest sums into an oil fund in the years immediately following independence without any need to change public spending or taxation.”
Scottish Labour MSP Iain Gray said the report shows people will be worse off after independence.
“A substantial debt burden, higher borrowing costs and volatile tax revenues would mean cuts to services, higher taxes and more expensive mortgages,” he said.
“With a formal sterling zone off the table, the NIESR are clear that the SNP’s apparent plan to use sterling anyway would make Scotland a hostage to fortune, while the lack of a lender of last resort would drive financial institutions out of Scotland.
“This bleak prospectus heaps further evidence on that of other non-political assessments by academic institutions and business analysts all of whom reach similar conclusions. The SNP’s casual dismissal of almost daily demolition of their dishonest and discredited White Paper as scaremongering is just becoming ridiculous.”
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