Another leading academic has criticised the UK Government’s economic claims. Professor Sir Donald Mackay, businessperson and former Chair of Scottish Enterprise, wrote a piece for The Sunday Times about future tax revenue from North Sea oil and gas. His piece concluded “there is no hole in the Scottish government’s oil predictions, but there is a mountain of black gold missing from (the UK Government’s).”
Westminster underestimated the value of oil for political reasons
Claims that Westminster has hidden and underestimated the value of North Sea oil revenues are nothing new. Last year, former UK Chancellor Dennis Healey said that “we did underplay the value of oil” due to the campaign for Scottish independence.
This is because an independent Scotland would inherit offshore resources worth over £1 trillion in wholesale value, with at least 15-24 billion barrels identified. Over 90% of tax from the sector would go to an independent Scotland, which would help to establish a national investment fund for future generations.
However, despite the vast wealth generated by the sector, Westminster politicians downplay its value for Scotland. Their claims, which focus on forecasts of oil pricing, are demolished by Sir Donald Mackay in his Sunday Times piece.
Academic criticises Westminster oil claims
He writes that the Office for Budgetary Responsibility predicts oil prices far lower than even other parts of the UK Government. This OBR figure is used by Westminster to predict lower tax revenues from oil.
The OBR claims there will be £15.8 billion tax revenue from oil over three years. The Department for Energy and Climate Change predicts a higher oil price, and therefore £28.1 billion in tax receipts. This huge difference is between two departments within the same government.
Sir Donald Mackay, who has considerable experience in the oil and gas sector, says that the price of oil has been stable and higher that the OBR figure. Any change has been driven by “supply side factors”, economic shocks which have been known to increase the price.
Furthermore, there is industry evidence which suggests that record highs in investment will increase production in future years. Professor Mackay quotes the Wood review, a substantial research paper on the oil sector:
“Production hit a low…last year  but a number of large fields are about to come on stream in the next two to three years, and that could take production back to the level of two to three years ago where it could be sustained for the remainder of this decade.”
Evidence from the oil sector is more convincing than Westminster’s claims
This factual analysis flies in the face of Westminster political claims, which state that oil and gas is “a jewel in the crown” for the London tax collector, yet somehow a burden for an independent Scotland.
It is politically useful for Westminster to predict a fall in prices, as this lets the No Campaign politicians predict a fall in tax revenue in the event of independence. Alistair Darling identified this problem when he said that the source of these figures – the OBR – was “part of the Conservative Party”.
In comparison, UK Oil and Gas have identified record investment of £11.4 billion up to £13 billion last year in the North Sea. The evidence from the sector is more convincing than the assertion from Danny Alexander.
Westminster claims “bizarrely inaccurate” and “ludicrous”
Professor Mackay also raised the damage done to Westminster’s credibility regarding independence set-up costs. The Treasury’s claims on Professor Patrick Dunleavy’s work were dismissed by the author himself as “bizarrely inaccurate”. Westminster said costs would be £2.7 billion, before the Professor stated costs would in fact be closer to just £200 million. This was an exaggeration of 13,500% based on an entirely flawed methodology.
Further research by Business for Scotland then identified over £3.5 billion of potential savings from independence.
This case provides further evidence that Westminster is unwilling to tell the truth about Scotland’s economy. A vote for independence ends such misrepresentation and provides the opportunity to invest this natural wealth rather than see if squandered.