We have a bit more respect for Professor Brian Ashcroft than most of the No camp’s scaremongers (indeed, we’ve even run an article of his on Wings Over Scotland), so we looked with interest at the latest entry on his blog yesterday, a piece with the fairly self-explanatory title of “Has Scotland already spent its oil fund?”
It purports to examine what Scotland’s financial position would have been had it been independent for the last 32 years, in response to a Scottish Government document (which was backed up by fullfact.org) showing that Scotland had been a large net contributor to the UK over the period, but arrives at a bizarrely tangential conclusion.
We’ll hand you directly over to the Professor:
“Not only has Scotland received a significant dividend from North Sea oil revenues, it has been almost fully compensated for these higher revenues by higher public spending.
When you do the numbers, over the 32 year period the total value of tax receipts is £1,425 billion while the total value of public spending in and for Scotland is £1,440 billion.
Spending was nearly £15 billion higher in Scotland than the tax receipts including a geographic share of oil revenues. That amounts to additional spending over and above tax receipts of £89 per person per year.”
We’ve emphasised the important bit, because Prof. Ashcroft seems to be trying to bury it amongst some distracting decoy figures. The pertinent point of the Scottish Government’s paper is that Scotland would have been relatively better off independent, and the absolute spending figures have no impact whatsoever on that.
This particular red herring is one that “Better Together” have been trying to sell for some months, in an attempt to draw attention away from the fact that Scotland contributes a larger share of tax revenues than it gets back in spending with the smoke-screen that the UK as a whole (and therefore Scotland as a part of it) spends more than it earns, like almost all Western nations.
This is true, but irrelevant. Let’s say the UK budget was in surplus. Would it then be fine, from the point of view of the independence debate, that Scotland contributed more than its share, and subsidised the rest of the country by billions of pounds a year? It’s a tough argument to make, and its fundamental point isn’t changed one iota if the UK is in deficit rather than surplus. Scotland’s still getting ripped off either way.
So let’s ignore the diversionary tactic. Prof. Ashcroft is saying that had Scotland controlled its own revenues, and kept all spending exactly the same as it’s been within the UK (including, for example, the several billions Scotland has unwillingly contributed to the cost of Trident, the Iraq and Afghan wars, etc etc), the country would currently have a debt of £15 billion.
In reality, of course, we could comfortably have saved all of that £15bn – and another £10bn on top – from the defence budget alone, while still actually spending more on defence in Scotland than has been the case, had defence policy not been controlled by Westminster for those 32 years.
But wait. It’s even worse than that. Because the good Professor hides another little bombshell a little further down his article:
“I estimate that Scotland’s share of UK debt interest amounted to £83 billion at 2001-12 prices. Subtracting this from total estimated Scottish spend of £1,440 billion we get a debt interest adjusted estimate of spend of £1,357 billion. This means that Scotland was in overall surplus by about £68 billion“.
The answer to Prof. Ashcroft’s original question, then, is “No, Scotland hasn’t spent its oil fund”. Had Scotland been independent for the last 32 years, the figures suggest we’d have an oil fund of at least £68bn, closer to £100bn if you factor in what an independent Scotland’s actual spending would have been, and higher still if you add the interest/investment return the whopping sum would have earned over those three decades (as the largest surpluses arose in the 1980s).
At a very very conservative estimate, assuming a 3% annual return and allowing for some capital spending, that’d be anywhere between £150-200 billion. That’s not as impressive as Norway’s £480bn or so, but it’s not a bad nest-egg for a rainy day, and it’s certainly a heck of a lot better than the situation Scotland is actually in, ie in hock for a chunk of the UK’s enormous and growing debt.
It would be enough to protect all current universal services for at least a hundred years, for example. It would also pay to build a formidable armed forces from scratch, plus every major infrastructure project in Scotland ever dreamed of in the last decade.
Dualling the A9 (£600m), building the Glasgow (£210m) and Edinburgh (£650m) airport rail links, paying for the new Forth crossing (£1.2bn) and the Borders railway (£350m) and saving the Longannet carbon-capture plant (£1bn), for example, would barely make a dent in it – at £4bn for the whole lot – and of course all that spending would in itself also stimulate the economy and produce even higher tax receipts.
And all of this, remember, despite the terrible volatility of oil revenues.
The share of the UK’s debt Scotland is likely to be asked to take on as a result of not having been independent for those 32 years isn’t yet clear. Estimates vary from the Guardian’s calculation of somewhere above £81 billion, up to £140 billion if you believe the Daily Mail, or a hilarious figure of £270 billion from the Telegraph in 2012.
£150bn+ in the bank, or debts of anywhere between £81bn and £270bn? Tough call. The impartial observer with a grasp of basic arithmetic might conclude that the quicker Scotland extricates itself from this cripplingly expensive union, the better off it will be.