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Oil and gas revenues drop by 55% in a year, figures show

Oil and GasRevenues from North Sea oil and gas fell by more than 50% last year, with Scotland having a higher rate of fiscal deficit than the rest of the UK, new figures have revealed.

The Scottish Government published its latest data on revenue and expenditure, which showed a deficit of £14.9 billion for 2014-15, when a geographic share of North Sea revenues is allocated to Scotland.

That amounts to 9.7% of Scottish GDP – twice the rate for the UK, where the figure is 4.9% of GDP from a deficit of £89 billion.

The publication of the Government Expenditure and Revenue Scotland (GERS) figures showed “total Scottish revenue fell in cash terms by £607 million in 2014-15”.

It added this “reflects the decline in North Sea revenue, which fell by 55% compared to 2013-14”.

North Sea revenue fell from more than £10.9 billion in 2011-12 to less than £4.8 billion in 2013-14, before dropping to £2.25 billion last year, according to the data.

Scotland Office Minister Andrew Dunlop said: “These figures show that Scotland is facing challenging economic times, in particular because of the drop in oil price, and demonstrate the value
of the broad shoulders of the United Kingdom.”

First Minister Nicola Sturgeon stressed Scotland’s onshore economy is “doing well”, with revenue growth of 3.2%.

She said: “Taken in the context of the wider economic environment, which has been impacted by muted global demand, falling oil prices and more difficult conditions for manufacturers, the
economy has remained resilient with record levels of employment, positive economic growth and growing exports.

“This shows the foundations of Scotland’s economy are strong and that we have a strong base to build our future progress upon.”

She added: “Despite the fact the onshore economy accounts for more than 90% of Scotland’s output, Scotland is clearly not immune to the problems being felt by the oil industry internationally.

“It is important to bear in mind that these are figures from just one year and while we are doing what we can to mitigate these problems, this needs immediate action from the UK Government.”

Deputy First Minister John Swinney urged the UK Government to cut tax in order to make the North Sea more competitive globally.

With Chancellor George Osborne due to unveil his budget on March 16, Mr Swinney said: “Immediate action is needed to support the industry and make the North Sea more internationally competitive – primarily by a substantial reduction in the headline rate of tax.

“I am also urging the Chancellor to remove fiscal barriers for exploration and enhanced oil recovery, to implement fiscal reforms to improve access to decommissioning tax relief and encourage
late life asset transfers, and urgently consider additional non-fiscal support – such as government loan guarantees – to sustain investment in the sector.”

The figures show income from tax was #10,000 per person – broadly similar to the UK figure.

In every previous year, Scottish tax receipts per person have been higher than in the rest of the UK.

Expenditure was £12,800 per person, £1,400 more than the UK average.

Opposition parties said the figures illustrated the impact leaving the UK would have had if Scotland had voted for independence in the 2014 referendum.

Scottish Labour leader Kezia Dugdale said: “These figures from the SNP Government show once and for all the devastating impact leaving the UK would have had on Scotland’s finances.

“People were misled by the SNP in the run-up to the referendum and that is unforgivable.”

Scottish Liberal Democrat leader Willie Rennie said Ms Sturgeon made a “fatal error of judgment” in “recommending that Scotland should be independent even though its finances would be based on such a volatile and unpredictable source of income”.

“Thank goodness Scottish people had the great sense to reject her reckless recommendation,” he said.

Scottish Conservative finance spokesman Murdo Fraser said: “These figures today illustrate the impact of the falling oil price on Scotland’s balance sheet.

“They also shed new light on the SNP’s deception before the referendum.

“During that referendum debate, the SNP was warned repeatedly by us that they were overestimating the future value of oil.

“But instead, Nicola Sturgeon and others cited the good years to claim we would all be £500 better off, and wilfully ignored the bad years because it didn’t fit with their plan.

“Had their con succeeded, we would now be only 15 days away from separating the most successful political union in history in favour of a leap into the dark.”

But Ms Sturgeon emphasised the strength of the onshore economy, saying: “Over the last five years the growth in onshore revenues has outstripped the fall in offshore revenues, and if we project ahead, the growth in onshore revenues over the next five years will significantly outstrip the fall in offshore revenues.”

She added: “Is it a sign of the broad shoulders of the UK that today, when the oil and gas sector is facing the challenges it is facing, that we are sitting without an oil fund that has been built up over the good years of oil and gas, whereas a country like Norway has that substantial reserve to draw on.

“I think what we are talking about today is at least in part an indictment on the mismanagement by the UK of Scotland’s finances, and our oil revenues in particular.”

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