'Little prospect' for oil fund plan

Feb 23 2012

A study has found "little prospect" that any financial surplus would be available for a potential oil fund in an independent Scotland.

The Centre for Public Policies for Regions (CPPR) looked into the viability of the Norwegian-style scheme, which First Minister Alex Salmond hopes to establish if Scotland gains full control of tax and finances.

While the fund is possible, the report also suggests "very difficult decisions" will need to be taken.

The report adds: "At existing oil prices and production levels, all North Sea taxes are, and will continue to be, needed to help fund the deficit that emerges from maintaining existing levels of public services.

"There is little prospect of any surplus becoming available for an oil fund, and certainly not of the size being suggested."

Mr Salmond, in a speech to the London School of Economics on February 15, said that £1 billion a year, invested over 20 years, would create a fund for Scotland worth just under £30 billion.

The CPPR said the annual real return, or yield, would need to be at least 4% a year and no money could be spent from the fund in the 20 years to reach the target.

Jo Armstrong, one of the report authors, said: "Investing £1 billion each year in an oil fund will add to the Scottish Government's budget challenges.

"With current oil prices and more importantly, with declining North Sea production, such a level of investment will put current service levels at risk or will require adding to Scotland's debt levels."

A Scottish Government spokesman said Government Expenditure and Revenue Scotland (GERS) figures show that from 2005 to 2010 Scotland was in a stronger financial position relative to the UK as a whole by a total of £7.2 billion.