Author: johnredwood

UK consumers pay dearly for their fuel, mainly thanks to the very high rates of tax on petrol and diesel, and substantial tax on domestic fuels through company tax and VAT  as well.  In the debate on Scotland’s future the issue of oil and gas tax revenue is more narrowly focused on Petroleum Revenue Tax, a tax on production, and on corporation tax on the producing companies. So what has been happening to this?

The trend of tax revenues on production from the North Sea has bee downwards for sometime. This is another area where the Treasury has been too optimistic in recent years.  In June 2010 the Treasury forecast £1.8bn of Petroleum Revenue Tax in 2013-13, and £1.7bn in 2013-14.

Instead they received £1.7bn in 2012-13 and £1.1 bn in 2013-14. Current forecasts are for much lower figures from here than the 2010 estimates.

On June 2010 the Budget forecast £8.7bn of offshore corporation tax revenue in 2012-13 in total, and £8.9bn in 2013-14. Instead the Treasury collected just £4.4 bn in 2013-13, and £3.6bn in 2013-14, or 60% less than the 2010 forecast.

As the oil province declines, so the tax take will reduce substantially. The government is having to offer more tax offsets and lower rates to encourage more marginal production, whilst total volumes decline. Once again past forecasts have been far too rosy about higher tax rates and definitions, forcing not only lower estimates but also a change of policy to a less penal regime.

I am often asked how bad would a Scottish exit be for the UK economy?

I reply by stating that I would like Scotland to stay in the union. It is important it is their choice, and even more important that they then unite behind the democratic decision they are about to make, whichever way it goes. I still expect Scotland to vote to stay in.

The facts are straightforward. Scotland has 8.3% of the UK population. At current rates of economic growth it would take three years to replace the lost Scottish output. At current rates of inward migration it would take  a generation to replace the lost numbers of people,  but as the aim is to bring the rate down more it would take a  couple of generations. I am not recommending that we have to seek to replace the lost people, merely trying to give a sense of relative size.

Scotland receives 9.3% of total UK spending. Whilst the Scottish government and the UK Treasury disagree about some of the detail, they say that Scotland receives somewhere between 122% and 116% of the public spending per head of the rest of the UK.

Scotland contributes 7.3% of the Income Tax revenue of the UK, 2% lower than her share of the public spending. Other taxes are variable, from the 14.1% of total UK spirits duty the Scots pay, down to  5% of Stamp Duty.

The SNP point out that Scotland contributes the lion’s share of production and company taxes on oil and gas output. As we have seen , these tax revenues are now in decline, reducing the Scottish total tax contribution.

One of the big arguments is over how quickly this will decline. If it does so with no obvious replacement, then Scotland in the UK will need to draw more money from the rest of the UK to make up the shortfall.

The English case to keep Scotland in  the Union is based on history, politics and sentiment. It is not an economic necessity from England’s point of view.

The sudden deaths of the passengers on the airliner over the Ukraine has come as a dreadful shock. If it was mass murder we need to know who did it and why. The families of those who have lost loved ones have our deepest sympathy.

The first requirement is for the establishment of an authoritative and independent enquiry to see if the airliner was shot down as most assume and if so how it was shot down and by whom. If not we need to know why it crashed.

This is a dangerous situation which will only be made worse if states comment and act on rumour or suspicion before we know the truth of what happened.

Lord Hill has to run the gauntlet of the European Parliament endorsement hearing. They will want him to be loyal to the Treaties Conservatives have opposed, loyal to a federally inclined Commission which we oppose, and keen on the project of ever closer union which the UK cannot accept. He will doubtless use language to get through his test which will upset Eurosceptics.

As Commissioner he will lead a split life. One part of him will have to judge, decide and discuss policy and actions from a federal viewpoint, carrying out the wishes of the majority  in the EU. The other part will have to remember that the UK wants none of this remorseless drive to greater union and has different interests and a different viewpoint. It’s becoming an impossible job, as the UK slips away from the EU in mood and rhetoric.

He has to help the UK government  secure him a decent job within the Commission. I think there is too much emphasis on this issue. Many of the EU Commission jobs are important because the EU now has so much power. The UK Commissioner is only going to be able to do one of them. Within reason it does not matter that much which it is.

Thereafter, what matters is how strongly and well our Commissioner represents the UK case. Whilst under the theory of the EU he has to swear an oath for the great good of the EU and co-operate with the federal drive of the institutions, in practice he will be judged at home by how well he defends the UK’s interest and  prepares for the UK renegotiation. He is unlikely single handedly to turn the rest of the EU round to the UK’s view that it should be a trading arrangement and not much else. Instead he should concentrate on getting a new relationship for the Euro permanent outs as the greater Euro zone presses on to political union.

Of course, were Labour to win the Election rather than  the Conservatives, his brief from the UK would change. I think whoever governs the UK  after 2015 will be forced to seek a new relationship, but Labour will not offer a referendum so they have taken away the UK’s main negotiating card that any new relationship has to pass a public test of acceptability.

This week Parliament has tried to sort out a serious legislative mess of the EU’s making. This is no way to run a serious country.  The European Court of Justice recently struck down a European Directive on Data Retention. This Directive, agreed to by the last Labour government, had been faithfully transposed into UK law. The ECJ left us not knowing what the law now is, as the UK’s enactment of EU law can itself now be challenged.

All three main parties rushed to agree a new Westminster law which they hope will now be compatible with EU law as redefined by the Court. There is, of course, no way of being sure it will do this. All the time the European Court is at war with the EU legislature we will live with an uncertain law. In addition, as the Home Secretary confirmed to me, the EU itself may have a go at new legislation, which would then require the UK to start all over again with its implementing legislation.

Civil liberty campaigners think the new law goes too far in allowing the authorities access to records of people’s phone calls and messages. The government  and Opposition point out the UK put more safeguards in our implementation of the EU law than they need do. The latest attempt to implement adds additional safeguards and requires new legislation in two years time, along with a major review.

Whatever the rights and wrongs of the judgements made about how much we need to authorise to keep us safe, surely more people can agree this is not  the right way to legislate in a democracy. Parliament should decide these matters, not the EU and the ECJ. Parliamentary law could then be more consistent, and not subject to sudden reversal by a court, which just serves to undermine the law and make enforcement difficult if not impossible.