Scottish independence: Questions raised over oil fund

Scottish ministers were warned by their own economic advisers that plans for an oil fund under independence may require tax rises or spending cuts.

The advice, written for the government last year and published under freedom of information laws, has been seen by the BBC and the Daily Mail newspaper.

Pro-Union campaigners claimed the pubic was being deceived.

But the Scottish government said the private advice had since been overtaken by events.

It warned that, if Scotland became independent, it would have to raise taxes, cut services or borrow to create the oil fund.

But it also said Scotland could have paid off its debts 30 years ago if it had been independent and had had oil revenues.

The advice calculated the tax surpluses of the 1980s could have been set aside to create a Norwegian-style oil fund which would have been worth £117bn by 2011.

The emergence of the paper led to stormy exchanges during first minister's questions at the Scottish Parliament, where Labour and the Conservatives accused the SNP government of trying to hide information detrimental to its case for independence, ahead of the referendum on 18 September next year.

Labour leader Johann Lamont asked the first minister: "When was he going to tell us his choice to raise taxes or cut public spending? The answer is, never. Honesty is not something this government deals in."

When Ms Lamont was asked to withdraw the remark by Holyrood's presiding officer, she continued: "I accept the advice of the presiding offer, but I have to say I do not know what word you use to describe a government that says one thing in private and something different in public.

"The fact of the matter is, Scotland is on pause and we will not be given the full facts with this government ahead of a referendum."

But Mr Salmond said the contents of the private advice had come before recommendations published last week by the Scottish government's fiscal commission working group set out a scenario where, under independence, money could be put into two separate oil funds without spending and taxation changes.

One fund would help stabilise finances as revenue fluctuates, while the other would be a long term investment fund, similar to the one operated by Norway.

The first minister said: "We've got a fiscal commission report which sets out clear criteria, how we can marshal Scotland's resources and make sure that asset is used for the benefit of this generation and for future generations.

"Nobody would seriously argue that the UK has handled oil well as a resource over the last 40 years. Nobody would seriously dispute that Norway - the country across the North Sea - has handled that resource much better."

"The fiscal commission have put forward a proposal which allows Scotland to get towards the fortunate position of Norway, as opposed to making the unremitting bungles of Westminster and successive United Kingdom chancellors."

However, Conservative leader Ruth Davidson said she ran both the private advice and the fiscal commission report through "university cheating software".

She went on: "And what did I find? Whole sections cut and pasted - entire paragraphs on Scotland's projected net fiscal debt, on the country's debt interest payments and on notional borrowing costs.

"All the good stuff made the grade. All the bad stuff hit the bin.

Ms Davidson added: "It seems when the government reached any section in here - and there were plenty - that said that an oil fund would mean higher taxes, more borrowing or lower public spending, they simply hit delete."

Earlier, on BBC Radio Scotland's Good Morning Scotland programme, Alistair Darling, who is former chancellor and head of pro-Union Better Together, said: "If you were to set up an oil fund you would have to borrow money to save it so that seems to be complete nonsense.

"The problem we have here is yet again we are being told one thing in public when the SNP knows something else is the case in private."

Finance Secretary John Swinney told the same programme that if debt in an independent Scotland was reducing it would be prudent to invest in an oil fund.

He added: "People will have mortgages, which is debt, it is an obligation to pay back, at the same time many people will also be saving - if they have the money to put aside for their future - and that is exactly what we are trying to do as a country."