Scotland's North Sea Receipts Nearly Halve in 2019-2020
Scotland's tax revenues from North Sea oil production plunged £642mn to only £724mn ($956mn) in the fiscal year to April 5 2020, the annual government expenditure and revenue Scotland (Gers) report stated on August 26.
The report attributed the decline to lower oil prices towards the end of the period. Oil averaged $61.4/b in the latest fiscal, down from $70.1 in the previous year. Brent began sliding in January and plunged in April to under $20/b as the coronavirus (Covid-19) crisis worsened and Russia and Saudi Arabia initially failed to agree on new production cuts.
Brent has recovered since and now trades at $45/b, but the consensus is that it will not recover above $60 this year. Scotland's North Sea revenues are therefore set to be considerably lower in the 2020-2021 fiscal.
Scotland's overall revenues were £65.9bn in 2019-2020, up 0.7% yr/yr. But spending grew by 3.2% to £81bn, meaning its budget deficit crept up £2bn to £15.1bn, equivalent to 8.6% of its GDP. The deficit of the UK as a whole was only 2.5%. Like almost all other countries, Scotland and the UK as a whole have suffered a collapse in tax revenues as a result of Covid-19, while having to increase spending significantly to mitigate the pandemic's effects.
Scotland's budget situation has attracted special attention given the ruling Scottish Nationalist Party (SNP)'s calls for a new referendum on independence. Some 55% voted in support of remaining in the UK in a 2014 referendum, but the SNP says a second one is justified because of Brexit, which Scotland voted 62% against. However, UK prime minister Boris Johnson has refused to grant one.
The Scottish government's finance secretary Kate Forbes said the pandemic had "fundamentally changed the fiscal landscape."
"Countries across the world, including the UK, have increased borrowing to record levels and, as we emerge from the pandemic, high fiscal deficits will inevitably be one of the consequences," Forbes said. "An independent Scotland would have the power to make different choices, with different economic budgetary results."
Scottish Conservatives hit back saying the data showed how valuable remaining in the UK was for Scotland. Their finance spokesman Murdo Fraser said every man, woman and child in Scotland enjoyed a £2,000 "union dividend", due to taxpayers from other areas of the UK supporting Scottish public spending.
"That shows us how the broad shoulders of the UK are supporting Scotland through the Covid-19 pandemic and through a time of economic difficulty," he said. "That's something to celebrate for the UK and all that will be put at risk if we were to go down the SNP route of tearing up the UK and creating a separate Scotland."