The Case for Nationalising Oil
For the Holyrood elections the left should focus on what is achievable within the confines of devolution but point to what could be achieved across the UK and within independence.
Taxation powers now allow a full implementation of a local income tax. A progressive income tax could raise a further €2 billion a year in Scotland and £30 billion in the UK. This would do little to offset the impact of the cuts. In Scotland devolved cuts are around £6 billion and Westminster controlled spending cuts another £6 billion.
Additional money could be raised from reducing tax avoidance and tax evasion. The realistic total is £35 billion a year and not the £120 billion wrongly stated by many (see link below). 20% is a probable maximum recovery rate or £7 billion across the UK and £600 million in Scotland.
Not replacing Trident will save £80 billion but this is over 30 years. That is a saving of £2.7 billion a year for the UK and £227 million a year for Scotland.
With Scotland’s public spending deficit standing at £12.5 billion and devolved cuts standing at £6 billion and further £6 billion cuts from Westminster controlled spending, the economic challenge facing an independent Scotland are enormous.
Despite the collapse in North sea oil revenues from £11 billion in 2011/12 to £2.5 billion in 2014/2015, nationalising oil remains the only solution.
Privately controlled oil means production is cut when prices fall and in addition future investment costs have been brought forward and offset against tax payable in anticipation of lower tax rates in a possible in dependent Scotland.
There are still 25 billion barrels of oil in the Scottish part of the North Sea. Under nationalisation, producing one billion barrels a year at a price of $50 dollars a barrel and a $20 cost per barrel still produces £20 billion a year in revenues. The oil price is unlikely to trade much above $50 a barrel with the era of Chinese super demand over, the new shale and sands production and the Iran nuclear deal.
This means that an independent Scotland would have to gradually restore the cuts and it’s deficit while increasing investment through a newly formed National investment bank.This would provide money in projects such as renewable energy, cheap affordable public transport and communal housing projects.
To manage this we would require to borrow money on the financial markets. Scotland has had the power to do this since April of this year – up to £2 billion but a maximum annually of 10% of capital expenditure around £300 million.
Any economic policy for Holyrood should use this borrowing option to reduce the impact of the cuts but also to start creating a credit history for a future independent Scotland. This will pave the way for us creating our own currency and central bank both prequisites for us building an economy under our control.