John Swinney reveals oil fund plan

An independent Scotland could borrow, save and reduce debt simultaneously without raising taxes or cutting public services if it puts some money into an oil fund, according to Finance Secretary John Swinney.

An expert working group commissioned by ministers has said the Scottish Government does not have to wait until the budget is in surplus to establish an oil fund.

Norway was in deficit when it established its fund in 1990 and it is now worth £470 billion, the Scottish Government Fiscal Commission Working Group’s report on stabilisation and savings funds points out.

Deficits are not unusual, according to the experts, who point to official predictions that the UK deficit will last 50 years and indicate that 28 of the world’s 35 most advanced economies are forecast to be in deficit next year.

The Better Together campaign to keep the union argues that Governments “can’t save money while you are borrowing money” and say that an oil fund would “wipe out one third of the health budget”.

But Mr Swinney said it could be done without extra taxes or cuts as revenues saved when the oil price is high would be deferred for the years when it falls.

Speaking at the launch of the report at Heriot-Watt University’s Institute of Petroleum Engineering in Edinburgh, he said: “The commission envisages the creation of two funds. The first is a stabilisation fund to deal with the short-term fluctuations based on a cautious oil price in our budget forecasts. Our view of a cautious forecast is 113 a barrel.

“The second argument is for a long-term savings fund which you contribute to when the financial circumstances arise.”

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