'Something for everyone' in fiscal report

The report points out that oil and gas resources are volatile and declining

To judge by the political reaction, something for everyone in the analysis of Scottish spending and taxation produced by the Institute for Fiscal Studies.

For understandable reasons, Alex Salmond's SNP tends to pounce upon the finding that - including oil and gas - the spending gap is rather smaller north of the border than to the south.

On the wireless this morning, Mr Salmond repeated his assertion that this added up to some £2.7bn annually foregone by Scotland because North Sea revenues are not assigned geographically at present across the nations currently comprising the UK.

Equally understandably, supporters of the Union tend to draw attention to the warning by the IFS that an independent Scotland would potentially face a bigger challenge than her erstwhile partners as oil revenues decline.

These twin conclusions are not, in themselves, new.

The Glasgow-based Centre for Public Policy for Regions has already made such points: that Scotland currently outpaces the UK as a whole on tax and spending, with oil included, but faces a potentially disproportionate problem as oil declines.

The CPPR also made another point - which is that it would scarcely be feasible to establish a Norway-style oil fund at the moment in Scotland.

That is, they say, because Scotland - while relatively better off than elsewhere in these islands - still displays a deficit. An investment fund, diverting resources from existing budgets, would tend to add to that deficit, at least in the short term.

However, the IFS paper is an extremely welcome and substantive contribution to the debate.

It forms part of a series of papers to be presented at a seminar convened by the estimable David Hume Institute.

(Incidentally, my use of the adjective "estimable" reminds me that the IFS is generally prefixed by the description "respected".

Indeed, I think it is part of their founding charter just as the public accounts committee in the Commons is always called "influential". Forgive my neglect: all adjectives or none, Brian.)

Nationalists with a sense of history - and irony - will note that one of the papers in the DHI canon is composed by Gavin McCrone, formerly a senior economist with the erstwhile Scottish Office.

Those self-same nationalists - with those senses of h. and i. - will remember that, in the 1970s, it was Gavin McCrone who noted that the newly emerging oil wealth was so potentially huge that, should Scotland become independent, that new state would have a budget surplus so large as to be "embarrassing".

His conclusions then were quietly buried.

I mention this merely to reflect that even the most carefully pared economic analysis tends to accrete political, historical and even cultural context when it is released upon a confusing and confused world.

However, the conclusions reached by the IFS - and others - require examination and debate.

Scottish needs

They are that public spending is presently higher than in the UK as a whole; that, in calculating the financing of independence, the value of the North Sea presently trumps that; but that the oil and gas resources are volatile and declining, posing questions for the UK - but even more so in Scotland where the potential dependence upon such revenue is disproportionately high.

Mr Salmond and Scottish Finance Secretary John Swinney would give, broadly, two answers.

That oil supplies and thus revenues have been, wrongly, discounted in the past - and that an independent Scotland would be better placed to generate growth with an economic and fiscal programme tailored to Scotland's needs.

Those adhering to the Unionist cause tend to say that the evaporation of oil wealth is fixed and forecast - inevitable, in short - while the proposals to fill that gap, whenever it emerges, are more inchoate and imprecise.

Many thanks to the respected IFS - and indeed the estimable DHI - for contributing so thoughtfully to this debate.