Scottish independence: Gap in oil tax forecasts highlighted

There is a gap of more than £1bn in forecasts for the oil and gas tax an independent Scotland could expect, according to an academic study.

The Glasgow University economic analysis highlighted the wide difference between estimates from Aberdeen University and those being developed by HM Revenue and Customs.

The HMRC estimate of Scotland's share of oil tax, which is based on "experimental" data, is as low as 79% of the UK total in some years.

But Prof Alex Kemp of Aberdeen University has estimated that the revenue from Scottish waters has risen as high as 95%.

The gap leaves a wide variation in past estimates of oil and gas revenue, and renewed uncertainty about forecasts.

Prof John McLaren, of the Centre for Public Policy for Regions (CPPR), said the gap between the estimates of HMRC and Prof Kemp was "worth more than a billion pounds".

He added: "It's worth putting a bit of effort into understanding who is more accurate or what is a more reasonable range.

"The variation is because it's difficult to judge how much profit comes from individual oilfields. HMRC ought to be in a good position to decide what is the final amount, but this is the first year they've done these figures, and they're still called experimental statistics."

Pessimistic forecasts

Taxation is derived from profits, which are affected by the costs of investment and of production.

Investment can be written off against taxation, and production costs per barrel have been rising steeply.

Glasgow's CPPR said that production from the UK offshore sector has fallen below even the pessimistic forecasts in recent years.

It said that the current boost to investment may lead to an increase in output, but it would not last much beyond 2017-18 before returning to a long-term decline trend.

And in response to a report by the Fiscal Commission Working Group established by the Scottish government, the CPPR report said that Scotland would have to cut spending if it is to find resources to put into a savings or oil fund.

It suggested these could come from defence, overseas development and foreign affairs.

But it said that "the annual input into such a fund is likely to be relatively small and nothing like the scale seen in Norway".

Prof McLaren said: "There is quite a lot of agreement on what's going on - that the North Sea will continue to produce oil for a long time, but it's past its peak and is on a declining trend.

"The main uncertainty is the price, and what will happen to that. That is the only thing that could substantially change up or down the revenue forecasts looking forward - not just the next two or three years, but looking forward to 2030 to 2040.

"That's the sort of long range you need to look at to decide whether savings to an oil fund would be viable and what the net trade-off between leaving the UK and staying in the UK would be".