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Alex Salmond criticised over North Sea oil claims Alex Salmond criticised over North Sea oil claims
(2 months later)
Alex Salmond has been warned about making exaggerated claims about the potential benefits of North Sea oil to an independent Scotland after asserting that future reserves are worth £300,000 a head for every Scot.Alex Salmond has been warned about making exaggerated claims about the potential benefits of North Sea oil to an independent Scotland after asserting that future reserves are worth £300,000 a head for every Scot.
Economists and opposition parties said the first minister had misrepresented the value of expected North Sea oil and gas reserves by billions of pounds as he sought to boost the economic case for independence.Economists and opposition parties said the first minister had misrepresented the value of expected North Sea oil and gas reserves by billions of pounds as he sought to boost the economic case for independence.
The Scottish government published a new report on North Sea oil and independence on Tuesday arguing that, with a full geographic share of reserves, Scotland would gain the lion's share of up to £1.5 trillion of untapped oil and gas over the next 40 years.The Scottish government published a new report on North Sea oil and independence on Tuesday arguing that, with a full geographic share of reserves, Scotland would gain the lion's share of up to £1.5 trillion of untapped oil and gas over the next 40 years.
That share would make Scotland far wealthier than the rest of the UK because its GDP would be 115% that of the UK, it stated. That would make an independent Scotland the world's sixth wealthiest state.That share would make Scotland far wealthier than the rest of the UK because its GDP would be 115% that of the UK, it stated. That would make an independent Scotland the world's sixth wealthiest state.
Challenging predictions from the UK Office for Budget Responsibility (OBR) last week that short-term oil revenues would flatline to produce cumulative tax revenues of £33.2bn by 2018, the Scottish government paper insisted that oil income would surge to up to £57bn.Challenging predictions from the UK Office for Budget Responsibility (OBR) last week that short-term oil revenues would flatline to produce cumulative tax revenues of £33.2bn by 2018, the Scottish government paper insisted that oil income would surge to up to £57bn.
It said the OBR was greatly underestimating the wholesale value of oil, and prices would rise. In fact, tax receipts from North Sea oil and gas would lift Scotland's tax receipts to £1,700 higher per person than the rest of the UK.It said the OBR was greatly underestimating the wholesale value of oil, and prices would rise. In fact, tax receipts from North Sea oil and gas would lift Scotland's tax receipts to £1,700 higher per person than the rest of the UK.
Although the report admitted that setting up an oil fund could be unaffordable in the immediate future, it said that wealth could allow an independent Scotland to save excess oil tax revenues in a sovereign wealth fund.Although the report admitted that setting up an oil fund could be unaffordable in the immediate future, it said that wealth could allow an independent Scotland to save excess oil tax revenues in a sovereign wealth fund.
To the derision of opposition parties, Salmond claimed on BBC Radio Scotland: "Well, we accept the industry forecast of 24bn barrels – some people say that's pretty low these days. We put forward a reasonable oil forecast of a $100 a barrel.To the derision of opposition parties, Salmond claimed on BBC Radio Scotland: "Well, we accept the industry forecast of 24bn barrels – some people say that's pretty low these days. We put forward a reasonable oil forecast of a $100 a barrel.
"Now if you do these two things then what that tells you is the remaining value of the resource is £1.5tn. [To] put it into everyday terms that is £300,000 for every man, women and child in Scotland.""Now if you do these two things then what that tells you is the remaining value of the resource is £1.5tn. [To] put it into everyday terms that is £300,000 for every man, women and child in Scotland."
But the Centre for Public Policy for Regions (CPPR) at Strathclyde University warned that those figures – which are frequently repeated by the Yes Scotland pro-independence campaign – were misleading.But the Centre for Public Policy for Regions (CPPR) at Strathclyde University warned that those figures – which are frequently repeated by the Yes Scotland pro-independence campaign – were misleading.
It said much of the North Sea's oil wealth was owned by foreign countries, so using GDP – which measures overall output – exaggerated Scotland's prosperity.It said much of the North Sea's oil wealth was owned by foreign countries, so using GDP – which measures overall output – exaggerated Scotland's prosperity.
A more useful figure was gross national product, which measured the wealth kept within a country, it said. Assessing Scotland's GNP was hard for technical reasons, but a comparable gross national income figure suggested Scotland would slip down to 13th in the world rankings, in equal position with the rest of the UK.A more useful figure was gross national product, which measured the wealth kept within a country, it said. Assessing Scotland's GNP was hard for technical reasons, but a comparable gross national income figure suggested Scotland would slip down to 13th in the world rankings, in equal position with the rest of the UK.
The CPPR said that meant Scotland would be heavily reliant on oil revenues to fund day-to-day expenditure. Taxes from the rest of the Scottish economy would not be enough to fund current spending, which was well above the UK average per person.The CPPR said that meant Scotland would be heavily reliant on oil revenues to fund day-to-day expenditure. Taxes from the rest of the Scottish economy would not be enough to fund current spending, which was well above the UK average per person.
"As a result, the Scottish government would need to rely on most, or all, of the tax revenues from the North Sea simply to attain the current, implicit, level of annual fiscal deficit," it said."As a result, the Scottish government would need to rely on most, or all, of the tax revenues from the North Sea simply to attain the current, implicit, level of annual fiscal deficit," it said.
"This would mean that no such revenues would be available to build up a sovereign (oil) fund, or at least not without tax increases or budget cuts.""This would mean that no such revenues would be available to build up a sovereign (oil) fund, or at least not without tax increases or budget cuts."
The first minister's arithmetic was also undermined by the Scottish government paper and his own official statement issued on Tuesday morning. The policy paper stated that the £1.5tn figure was based on an estimate of the wholesale market value of all oil and gas reserves across the entire UK continental shelf, not just in Scottish waters.The first minister's arithmetic was also undermined by the Scottish government paper and his own official statement issued on Tuesday morning. The policy paper stated that the £1.5tn figure was based on an estimate of the wholesale market value of all oil and gas reserves across the entire UK continental shelf, not just in Scottish waters.
Scotland's expected share of current reserves would actually give it about 99% of all the oil but only 60% of all gas believed to be in UK waters – less than claimed by Salmond on the BBC and by Yes Scotland's campaigning posters and leaflets. Salmond's official quotes, however, referred to that important qualification.Scotland's expected share of current reserves would actually give it about 99% of all the oil but only 60% of all gas believed to be in UK waters – less than claimed by Salmond on the BBC and by Yes Scotland's campaigning posters and leaflets. Salmond's official quotes, however, referred to that important qualification.
Those estimated reserves of 24bn barrels of oil equivalent are at the upper end of many estimates, and are not yet proven. Economists and oil experts agree, however, that oil and gas reserves could prove to be far larger than lower estimates.Those estimated reserves of 24bn barrels of oil equivalent are at the upper end of many estimates, and are not yet proven. Economists and oil experts agree, however, that oil and gas reserves could prove to be far larger than lower estimates.
The CPPR said the Scottish government was right to say successive UK governments had repeatedly underestimated the long-term size and viability of North Sea reserves.The CPPR said the Scottish government was right to say successive UK governments had repeatedly underestimated the long-term size and viability of North Sea reserves.
But it said short-term revenue figures were repeatedly exaggerated – including by the OBR: "However, such pessimism does not apply to medium-term forecasts of North Sea oil and gas production. Here the bias is the other way round with repeated over-predictions of oil and gas production levels."But it said short-term revenue figures were repeatedly exaggerated – including by the OBR: "However, such pessimism does not apply to medium-term forecasts of North Sea oil and gas production. Here the bias is the other way round with repeated over-predictions of oil and gas production levels."
Alistair Darling, the Labour former chancellor and head of the anti-independence Better Together campaign, said: "For Alex Salmond to treat us like fools by deliberately confusing the wholesale value of oil with the amount we would actually raise through tax is fundamentally dishonest. He should withdraw the claim."Alistair Darling, the Labour former chancellor and head of the anti-independence Better Together campaign, said: "For Alex Salmond to treat us like fools by deliberately confusing the wholesale value of oil with the amount we would actually raise through tax is fundamentally dishonest. He should withdraw the claim."
Willie Rennie, the Scottish Lib Dem leader, said that the £300,000 figure was "stretching the wildest boundaries of any imagination" and also called on the first minister to withdraw his claim.Willie Rennie, the Scottish Lib Dem leader, said that the £300,000 figure was "stretching the wildest boundaries of any imagination" and also called on the first minister to withdraw his claim.
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