Haggis and Scottish independence polarise opinion. Robert Burns was in favour of the former but ambivalent towards the latter. Nationalists have nevertheless co-opted the great poet’s words in a push for a separation referendum. The last poll, in 2014, rejected a split whose long-term costs the Scottish National party expected oil revenues to help cover.
Six years on, a sharply lower oil price and reform to production taxes have weakened that economic case. The other big change is that Britain has left the EU. Scots will need to consider both new factors in weighing arguments concerning independence.
Oil matters less than it did to the Scottish economy. According to data from the devolved SNP government, the value of oil and gas extraction was an estimated £8.8bn in 2019, representing 5 per cent of total Scottish GDP in sterling terms. This compares with an estimate of 13.2 per cent in 2012, a figure invoked during the last independence debate. A recent resurgence in North Sea drilling and production will not compensate for the decline.
One reason for the modest North Sea rebound has been a reduction in producers’ tax burden. In 2016, the UK government lowered tax on their profits to boost local output. UK tax receipts have tended to follow the trend of oil prices. That has changed in recent years, according to earlier calculations by the Financial Times. The government’s estimated future tax take on oil has fallen from about £10 per barrel in 2010 to just £2 per barrel.
A nerve-bolstering double whisky will be needed by SNP ministers when they rewrite their economic prospectus for a split. Scotland’s estimated tax take from oil would, if measured by geographic share, have collapsed in recent years. In the six years since fiscal 2013-14 income would have fallen from under £4bn to £724m according to Scottish government data.
Nationalists can instead talk up prospects for renewable energy. Electricity output from offshore wind farms has been rising and will continue to do so for years ahead. Scotland could sell electricity to England and perhaps other nations. But a limited number of power buyers, relative to the droves of oil customers, may impose a definite ceiling on prices.
The SNP can tap deep emotions to bolster its cause. Scotland’s out-of-favour hydrocarbons, like Burns himself, cannot be invoked so glibly.
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