One of Scotland’s most respected economists has questioned the UK Treasury’s oil and gas forecasts, arguing that Westminster’s calculations are ill-informed and “wide of the mark”.
Professor Sir Donald Mackay, a former chairman of Scottish Enterprise who advises Reform Scotland, a think-tank, said voters have been left confused by a welter of conflicting claims.
He says there is no hole in the Scottish government’s oil predictions, as Danny Alexander, chief secretary to the Treasury, has claimed.
In a column written for this weekend’s Sunday Times online, Mackay says there is evidence of a recovery in output over the next few years. This will be fuelled by North Sea investors enjoying 100% first year capital allowances against present business revenues. “Both rising output and a falling tax rate will result in rising tax revenues, provided of course that the oil price does not fall out of bed.”
Increases in prices and production
Mackay points to official forecasts by Oil & Gas UK which suggest an independent Scotland’s share of revenues in 2017-19 would be almost £32bn, double the £15.8bn forecast by the Office for Budget Responsibility (OBR).
The OBR forecast implies that an independent Scotland, on a geographical share (90%) of UK oil and gas revenue in 2016-17 and 2018-19, would receive £15.8bn in tax revenues. “Assuming DECC [Department of Energy and Climate Change] prices this would rise to £28.1bn,” says Mackay. “Inserting the Oil & Gas UK production forecast raises this to £31.8bn. If Danny [Alexander] looks at this he might conclude there is no hole in the Scottish government’s oil predictions but there is a mountain of black gold missing from his.”