SCOTTISH DEFICIT: 9.7% GDP
The Scottish economy has taken a severe hit on the back of falling North Sea oil and gas revenues, taking the country's deficit to £14.9bn (€19.3bn). The deficit is equivalent to about 9.7% of GDP in 2014-2015, almost double the deficit of the UK overall, which is at a deficit of 4.9% of GDP.
The data was revealed with the release of the Government Expenditure & Revenue Scotland (GERS) on March 9. According to that data, North Sea oil and gas revenue fell by 55% between the fiscal years 2013-2014 and 2014-2015. The revenue for 2014-2015 was just £2.25bn, less than half of the £4.8bn recorded in 2013-2014, and less than a quarter of the £10.9bn recorded in 2011-12.
The falling North Sea revenues were in contrast with increasing revenues from the onshore sector of the economy, which grew by 3.2% in 2014-2015 to £51.6bn, a growth of £6.1bn overall since 2010-2011.
Though Scottish First Minister Nicola Sturgeon welcomed the increase in revenues from the onshore sector, she said the country was feeling the effects of difficulties in the energy sector.
"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. (...) However, 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."
Calls for Tax Cuts
Deputy First Minister John Swinney was even more pointed in his assessment of the results, and urged the UK government to cut tax in its upcoming budget in order to make the North Sea more competitive globally.
"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 [UK] 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 North Sea needs urgent help from the UK government, both for the sake of the industry and the wider economy."
The call comes just a day after industry association body Oil & Gas UK urged the UK government to institute a 20 percentage point cut in taxes to secure the ongoing future of North Sea oil and gas sector.
"To bridge the gap between the 6.3bn barrels of oil and gas on the UK Continental Shelf in which investment is already approved and the 20bn that we estimate are out there, we must fight fiercely to attract global capital," the body's economics director Mike Tholen said.
"That requires us to be attractive in cost, technology and fiscal terms, and this year's Budget presents the perfect opportunity for the government to signal to investors its long-term ambition for the sector."
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