Thursday, October 3, 2013

Scottish independence: SNP Minister John Swinney backs call for a Scottish Oil Fund, Alex Salmond and Nicola Sturgeon’s deluded wish list strategy is damaging his political credibility, you can’t save for a rainy day if the Oil Fund can’t generate revenue, where’s the plan to raise interest rates?

Dear All

The Scottish National Party is playing ordinary working class Scots for mugs in this independence referendum.

One of the ideas that actually has merit is a Oil Fund, however, the SNP haven’t properly planned for independence and as such they are trying to shore up a crumbling system.

There is no Government and local government reform as such the SNP although wanting an Oil Fund as part of their ‘milk and honey’ and everything will be nirvana won’t be able to have a meaningful fund for decades.

That is right….. decades!

On top of that, the Oil Fund needs interest rates to rise so that the money earns and pays its way. No interest rates rise then the Oil Fund is actually not particularly viable. Unless the SNP plan to use the fund to start State controlled city banks giving out loans!

As usual Alex Salmond and Scotland’s unpopular Deputy First Minister Nicola Sturgeon have gotten ahead of themselves, with all spin and no substance.

So, with money in short supply, cuts to budgets and services set to increase, the Scottish Government say they plan to invest "modest sums" of oil cash if Scots vote Yes in next year's referendum.

The idea of a long-term national savings fund isn’t new; Norway has such a fund for decades and has benefited from it.

But Scotland isn’t Norway.

And the tax system is radically different and higher.

Finance Secretary John Swinney is backing a new report saying an independent Scotland should set up an oil fund even if the country's finances were in the red; the document is produced by a little group set up by Scottish Government.

When Swinney talks about the country’s finances being in the red, he is also talking about austerity, not what we have at present, but the Greek style, elderly people who are so poor eating out of bins.

Sound like nirvana to you?

Scottish Government sources suggested around £200 million would be paid into the long-term investment fund in its first year.

We should also remember that the SNP also plan to take a billion pounds out of the Scottish economy for overseas aid.

Add in the massive spending pledges and the whole thing looks like utter nonsense, the first thing would be to secure the country’s stability, and at some point Alex Salmond and Nicola Sturgeon need to address the financial black hole that they keep avoiding talking about.

In the region of £7 billion, still think that Scots are heading towards milk and honey, still think nirvana is round the corner?

It isn’t!

Hell on earth might be round the corner and there is a real sense that Salmond’s plan is independence at any price no matter what damage he causes and whose lives he wrecks in the process.

The Oil Fund move was criticised by Alistair Darling, of Better Together pro-UK campaign, who stated the plan to borrow and save at the same time flew in the face of common sense.

Scotland needs to reform public services both government and local government, without such a move, the whole structure is like an old wooden house, a few hard kicks and the whole thing could collapse.

The SNP set up the Government's Fiscal Commission Working Group “expert” panel, who are producing the narrative that the SNP want to sell, they aren’t impartial and where is the analysis of risk?

Swinney said:

"Their report recommends that a savings fund should be established immediately following independence. This would allow an independent Scotland to consider investing modest sums into a savings fund without an offsetting change to public spending or taxation."

This isn’t credible, tax would have to rise to accommodate Nordic welfare, then there are the other departments which would need to be set up, and they must have a reserve to operate on for daily spend and additional set up costs. 

Think millions, big double digit millions.

For the Scottish air force, one fast jet comes in at somewhere in the region of £120 million, we need about 30 of them, minimum, plus support.

So far the SNP have been promising everyone anything they want, £32 billion so far, and a lot of that un-costed.

Scottish officials say that the Norwegians made a £220m initial payment to launch its oil fund in 1990.

So, with that as a benchmark they came up with the number £200 million, is it just me or does this look and smell fishy?
The Fiscal Commission Working Group also wants two oil funds to be running at the same time, with a portion of North Sea tax revenues in a "stabilisation fund" which is designed to smooth out big year-to-year differences.

The other fund is the piggy bank, the savings fund which will be earmarked for major projects.

Where’s the reserve?

Investing oil wealth in a long-term fund has been a key SNP policy for many years because they ran with a slogan called its Scotland’s oil, or to be more accurate it is the oil companies Oil and the SNP want the tax that it generates.

Oil production can vary, the price is also another factor which can be influenced, therefore you can’t chuck all your eggs in one basket, that isn’t the way to plan government spending, in a bad year, the entire fund could be spent on daily spend.

And without a mechanism for generating interest, the fund as it sits loses money.

Plan for that?

SNP plan to raise interest rates?

What if the Bank of England refuses to raise interest rates if there was a currency union?

The SNP should have planned for a separate Scottish currency, the piece meal approach of their shambles of an independence campaign can be picked apart, because they don’t know, they are not pro active, and have done no work.

Earlier this year First Minister Alex Salmond said Scotland was on the cusp of a second oil boom and also Salmond said that there was going to be a boom on renewable.

Sadly, where’s the evidence?

Well, it’s all in his mind, he thinks it, he says it and in his world it all happens, much like he wanted a debate with David Cameron and the Prime Minister was just going to agree because Salmond says so.

In the real world out with Salmond’s control, the reality is stark, and hope and aspiration doesn’t count, cold hard cash and ability matters.

A country cannot be won on hype, smoke and mirrors, on guess work, and relying on other people to carry the load for you.

A recent UK Treasury study says an independent Scotland would be able to build up a fund worth £32bn, at today's prices, by 2040/41.

But in order to do so, all oil revenues have to be saved, that means no money would be available to assist current spending, which rather leaves the SNP up shit creek without a paddle.

That is why I blogged on the reform of government have done so for years….. years!

On the Better Together website, Alistair Darling said an oil fund was unaffordable without "big tax rises or big cuts".

He is right, the current setup doesn’t bode well in the nirvana tale of how wonderful everything will be, you will be paying more tax; you will see bills rise and possibly food prices, as everyone jumps on the bandwagon to skin Scots.

The SNP should have gone nuclear on power and missed the boat due to stupidity as per the norm of the woolly hat tree hugging mentality set in.

Danny Alexander, the Chief Secretary to the Treasury, said:

"The Scottish Government appears to want to put one half of oil revenues in a short-term stabilisation fund and the other half in a long term fund for future generations, upon independence it would need the whole lot just to keep the country running."

The short fall has to be dealt with, you can’t run a debt and get away with it long term, look at Greece, it is chaos there, an entire country torn apart.

And the last thing you want is the kind of ‘help’ that the Greeks got; they need to leave the Euro and the sooner the better for the sake of their people.

Currency union with England leaves Scotland out on a limb, as much as things are bad now with a union, they can get a damn sight worse without proper planning.

The tragic figure that is Blair Jenkins, head of the pro-independence Yes Scotland campaign welcomed the Oil Fund idea, well he would, it’s part of the ‘nirvana project’, his part of the ‘positive message’ was to blame England for the failure to create an oil fund in the 1980s, when revenues were at their height.

In case he missed it, the money was used to prop up daily spend, he probably never noticed that when he was parked at the BBC on a massive salary.

Oil Fund good idea, application suspect, and the total lack of planning makes such a fund unworkable in the short term and suspect in the long term.

It is just more of the same fro Alex Salmond and Scotland’s unpopular Deputy First Minister Nicola Sturgeon, say anything and promising everything for the vote.

One the casualties of this Scottish independence campaign will be John Swinney’s reputation as Finance Minister, he is having to look upbeat selling this rubbish which he must know is bogus claptrap.

Yours sincerely

George Laird
The Campaign for Human Rights at Glasgow University  

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