24 Feb 2014

Scottish independence: milk, oil and granite

The PM is whizzing into Aberdeen, the granite city, on an RAF flight that the SNP MP Angus Robertson has coined “Scare Force One”.

It’s prime Tory territory in many of its demographics. More multi-millionaires than anywhere else in the UK outside London. But the city’s Labour-dominated and the region is the SNP’s greatest stronghold in Scotland.


The PM is here to back a report by retired oil boss Sir Ian Wood calling for an independent regulator to supervise licensing and get more collaboration between firms on oil and gas exploration. But Scotland’s First Minister will do the same. Likewise, the SNP government will back the extra investment in carbon capture projects at Peterhead proposed by the UK government and say “get on with it.”

So what’s all this really about? Oil has been at the heart of the growth in Scottish nationalism, it’s mother’s milk. “It’s Scotland’s Oil” was a campaign that fired up the SNP to new electoral highs in the 1970’s. But the nationalists come to what they hope is the brink of their promised land, a referendum on independence, as oil and gas reserves are in decline.

They don’t dwindle to nothing immediately – David Cameron’s here with the cabinet promising £200bn worth of reserves than can exploited over the next 20 years. But they’re on pretty steep downward trajectory – the OBR Fiscal Sustainability Report revenue projections – see chart 4.2.

Later years of exploration, David Cameron will argue, are a phase that needs the benefits of scale a bigger country brings. The North Sea exploration business gets more complicated needing a big government to bring big exploration players together. It needs a bigger country to cope with its own equivalent of the nuclear decommissioning costs.

And price volatility, David Cameron will say, is a big thing for a smaller country to cope with. Tax revenue dropped in 2012-13 by £4.7b or 40% on the previous year – a mighty thing for an independent Scotland’s accounts to swallow.

The last trip north

Alex Salmond, who has brought his own cabinet up to the area too, will say the people who squandered Scotland’s oil cannot be relied on to use its later years properly. He told Radio 4’s Today Programme this morning that the UK had brought no stability to the oil industry, chopping and changing tax arrangements at will.

Alex Salmond will say he’s setting up oil funds to smooth out erratic price movements and to save up for future development of the country, things he says the UK should’ve done and which Norway did. But his fund might not be very big if a price shock came in the first year of independence.

The SNP is enjoying pointing out that the last time the cabinet met in the north of Scotland was September 1921. They weren’t here on a charm offensive back then but met in Inverness simply because Lloyd George was holidaying in the area. How his Conservative coalition ministers must have enjoyed the enforced excursion.

That cabinet meeting signed off on a formula that would become the basis for the Anglo-Irish Treaty and the granting of dominion status to the Irish Free State starting Ireland on its journey to independence.

Today the polls suggest Scotland might draw short of going for independence but give much more support than the one third support that has often been assumed.


I should mention that the long-running question over whether London manipulated the maritime border to nick some oil wells appears to have subsided. SNP sources talk about how the line decided on by London which roams way north of the original maritime jurisdiction border is not a massive bone of contention any more because the southern oil fields are much less important relative to the northern ones these days.

Though I should add that one legal expert suggests that the SNP’s relaxation of tensions on this issue may also be informed by their wariness of anything that looks like a border dispute as such things can slam the breaks on recognition of a newly independent state.

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