Two candidates in the 2016 Scottish Parliament elections have given their view on a report which said every person would have been £1,800 fiscally worse off in an Independent Scotland as a result of the oil price decline.
Here, Lewis MacDonald, the Scottish Labour candidate for Aberdeen Central and North East Scotland gives his view.
To read candidate Kevin Stewart’s view click here.
These are tough times for the oil and gas industry. A dramatic fall in the oil price has led to the loss of tens of thousands of jobs, while many North Sea fields have ceased to make any profits at all.
The impact on the wider economy of Scotland in general and the North East in particular has been severe, and there is as yet not much light at the end of the tunnel.
The slide in the oil price began almost as soon as the Scottish referendum campaign ended.
Two million people voted on 18 September 2014 for Scotland to remain in the United Kingdom, producing a decisive majority in favour of staying in. The future prospects of North Sea oil had been hotly debated during the referendum campaign, and both Aberdeen and Aberdeenshire produced majorities against leaving the UK which were roughly double the national average.
Since then, the oil price has fallen sharply, and the North Sea oil industry has adjusted its expectations equally dramatically.
Companies now operate on the basis that the price of oil will remain “lower for longer.” That means cutting costs in order to remain financially viable, in the hope of still being in business when the price eventually recovers.
Oil fields which don’t make profits don’t pay taxes either, and so the UK Exchequer has taken a hit too. The recent Budget acknowledged that the North Sea has moved on to a new phase, where the jobs and business it supports are more important than oil revenues to pay for public services. Windfall taxes don’t really work in the absence of windfall profits.
The Scottish Government recently negotiated a deal with the Treasury, to protect the value of financial transfers from the UK Government after new tax-raising powers are devolved to the Scottish Parliament.
That was by all accounts a tough negotiation. If the Scottish people had voted in favour of leaving the UK altogether, that would have been a very much more difficult process – regardless of the oil price.
But an oil price lower for longer would have made the business of negotiating an exit from the UK painful in the extreme.
Oil and gas are many times more important to the Scottish economy than to the wider British economy, and the SNP’s claims that independence would have been virtually free of risk or cost were based in large part on very optimistic assumptions about future oil revenues.
Absorbing the pain of reduced oil revenues would have been many times harder for a Scottish Government, if the referendum had led to Scotland leaving the UK, than they have been for Britain as a whole.
Funding interventions to support the sector would also have been a bigger deal, although my party would argue that the UK Conservative Government has not yet intervened enough.
Above all, leaving the UK in the face of a low oil price would have meant Scotland facing the oil jobs crisis on our own, at the very time when sharing risks and responsibilities across a wider Union of neighbouring countries makes most sense.
Given that other referendum, scheduled for 23 June, that is surely food for thought.
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