:00:00. > :00:00.sports. You know, talent will always shine through and take you... Take
:00:00. > :00:12.you as far as you want to go. Thank you very much. Thanks. Thank you.
:00:13. > :00:17.Tonight, on Newsnight Scotland: Scotland's deficit grows, and a drop
:00:18. > :00:23.in North Sea taxes is the main culprit. What does that mean for the
:00:24. > :00:26.independence debate? Good evening. The gap between money earned in
:00:27. > :00:31.taxes and public spending in Scotland is growing. A cut in tax
:00:32. > :00:34.receipts from North Sea oil is the main cause in the increase of the
:00:35. > :00:37.deficit. Somewhat predictably, both Yes and No camps are claiming the
:00:38. > :00:45.figures support their case, as Huw Williams reports. Brace yourself
:00:46. > :00:50.there are lots of facts and figures coming up. I'm at the People's
:00:51. > :00:53.Palace to show it's about balancing the books. The results you get will
:00:54. > :00:59.depend on what you put on either side. How you count Scotland's
:01:00. > :01:05.income. And expenditure. How much weight you give to all the different
:01:06. > :01:09.elements. As an example of that, look at the impact of the way you
:01:10. > :01:13.share out taxes from North Sea oil and gas for the last financial year.
:01:14. > :01:19.Divide them up by population and gas for the last financial year.
:01:20. > :01:26.figures are huge. Share them out gee graphically and the statistics look
:01:27. > :01:31.better for Scotland. Looking at the financial year 2 12-2013 in
:01:32. > :01:37.isolation, Scotland's deficit was worse than the previous year. And,
:01:38. > :01:45.worse than the rest of the UK's as a percentage of national out put. All
:01:46. > :01:51.that allowed both sides of the independence debate to draw their
:01:52. > :01:55.own conclusions. No surprises there. The gap between what we raise and
:01:56. > :02:00.what we spend is ?500 greater for every single person in Scotland last
:02:01. > :02:05.year. That is expected to rise to be ?1,000 greater for Scotland than the
:02:06. > :02:09.rest of the UK in 2016. An independent Scotland will be off
:02:10. > :02:12.rest of the UK in 2016. An a bad start financially. We would
:02:13. > :02:17.have businesses damaged by the new border that the SNP want to erect on
:02:18. > :02:20.this small island. For people thinking that they can vote for
:02:21. > :02:23.independence and have all these unfunded promises by the SNP, the
:02:24. > :02:29.truth is Scotland couldn't afford it. Our opponents started the
:02:30. > :02:34.campaign by saying they wouldn't question Scotland's ability. The
:02:35. > :02:37.14th most prosperous country in the world to be an independent,
:02:38. > :02:42.economically viable nation. They will question it as the campaign
:02:43. > :02:46.goes on, that is their underlining message, a message of fear. Most
:02:47. > :02:50.people look at the common sense position. A country with great
:02:51. > :02:55.national resources and outstanding people is more than capable of being
:02:56. > :02:58.an economically successful country. The through the recession we would
:02:59. > :03:01.have been better off. Through recovery we will be even better off.
:03:02. > :03:05.have been better off. Through The figures reveal a drop in revenue
:03:06. > :03:13.from the North Sea of more than 40%. Down from more than ?11 billion in
:03:14. > :03:20.the previous year to just over ?6. 5 billion in 2 #0 -12013. It's a huge
:03:21. > :03:25.mistake to have an economy over dependant on a single comodity which
:03:26. > :03:29.is highly volatile like oil. What allows us to keep our economy stable
:03:30. > :03:33.has been part of that bigger economic unit, the United Kingdom.
:03:34. > :03:37.The figures demonstrate that is by far the strongest position that
:03:38. > :03:42.Scotland could have going forward, not just into the next year or five
:03:43. > :03:47.years, but the next 200, 300 years. The Scottish Government and its
:03:48. > :03:50.allies in Yes Scotland say the fall in revenues was explained by
:03:51. > :03:54.investment, which reduced the tax take in the short-term, but will
:03:55. > :04:04.increase revenues for the future. If you look at the oil price, the oil
:04:05. > :04:07.price hardly moved $111 average. The issue has been production. The
:04:08. > :04:11.production is down to the 16 changes to the tax regime in the North Sea
:04:12. > :04:15.that the Chancellor of the Exchequer has imposed on industry. If you look
:04:16. > :04:18.at the Wood Report it calls for stability in the sector and a better
:04:19. > :04:24.management the of the resource there. The Scottish Government would
:04:25. > :04:28.be able to manage that resource better and have more stability in
:04:29. > :04:33.the oil revenues to help to support the Scottish economy. Today's
:04:34. > :04:40.statistics will tip the balance on what they think about independence.
:04:41. > :04:45.There will be plenty more who will find to use the statistics to
:04:46. > :04:51.support what they find. In the end we perhaps have to weigh up the
:04:52. > :04:55.evidence for ourselves. I'm joined in the studio by Jo Armstrong who is
:04:56. > :04:58.an economist at the Centre for Public Policy for Regions. The main
:04:59. > :05:02.reason for the worsening of the deficit, in Scotland, when you
:05:03. > :05:08.include oil revenues, is oil revenues. Why have they fallen so
:05:09. > :05:12.much? As your package showed, production has definitely reduced
:05:13. > :05:17.significantly in the last 12 months. It's reduced significantly in the
:05:18. > :05:21.last two years. As a consequences of unexpected, unplanned outages
:05:22. > :05:27.because the North Sea is an ageing asset and more of these pipe lines,
:05:28. > :05:31.these platforms need to be maintained. That is less rest
:05:32. > :05:36.production when they are shutting down to be maintained. While it's
:05:37. > :05:36.true that outages, platforms shutting down because
:05:37. > :05:42.true that outages, platforms be repaired or something happens are
:05:43. > :05:46.one office, your argument would be they are one-offs more likely to be
:05:47. > :05:51.repeated in the future? Yes. Oil and gas UK last year were anticipating
:05:52. > :05:59.the bounce back coming this year, 2013, it didn't happen. There is an
:06:00. > :06:04.expectation you will see that coming through. There is record levels of
:06:05. > :06:08.investment that should help reduce that effect and increase
:06:09. > :06:11.exploitation of fields that we wouldn't otherwise be able to get
:06:12. > :06:15.access to. The expectation of that leading to significant additional
:06:16. > :06:20.tax revenues is not yet coming through in any of the official
:06:21. > :06:25.projectionses. That ta is Alex Salmond's argument. He says, much of
:06:26. > :06:29.the fall in oil revenues is because companies can set it against - set
:06:30. > :06:35.investment against tax. There are huge levels of investment going on.
:06:36. > :06:39.That will ensure production in the future and will ensure revenues in
:06:40. > :06:44.the future. Is it as straight-forward as that? It will -
:06:45. > :06:49.it is instended to ensure proUKs d. It is intended to ensure revenues.
:06:50. > :06:57.Whether it's taxable revenues is the issue. As the Wood Review suggested
:06:58. > :07:01.we need a flexible tax regime to exploit as much of the North Sea out
:07:02. > :07:05.there. Is the point, to try and understand this, is the point that,
:07:06. > :07:09.as it being abouts more expensive in the North Sea because the stuff is
:07:10. > :07:16.running out, the stuff that's being discovered is more difficult to get
:07:17. > :07:22.out, that, for each barrel you get out you are libel one way or another
:07:23. > :07:28.through whatever mechanism to get less tax? It's more expensive to
:07:29. > :07:34.exploit, if it's more expensive it is less profitable. If it's less
:07:35. > :07:38.profitable there is less tax to make. I know there is talk of huge
:07:39. > :07:42.decommissioning projects in the North Sea I don't know if they have
:07:43. > :07:47.started yet? They have started, but not significantly. The key to the
:07:48. > :07:50.North Sea, and the key to maintaining a vibrant industry with
:07:51. > :07:54.lots of high value jobs is to maintain activity as long as
:07:55. > :07:58.possible. These tax breaks are aimed at trying to maintain the integrity
:07:59. > :08:03.of that ageing infrastructure so you can continue to exploit harder to
:08:04. > :08:08.get at more remote resources that doesn't necessarily mean more taxes.
:08:09. > :08:14.The Scottish Government also argues that if you include oil revenues
:08:15. > :08:17.Scotland has been in better fiscal position than the UK over the last
:08:18. > :08:21.five years. Should we take that at face value? We have been looking at
:08:22. > :08:25.these numbers for quite some considerable time. We would be
:08:26. > :08:38.prejebthing we thought there would be a flipover that in some point in
:08:39. > :08:41.the not so distant future Scotland future. It might not have flipped
:08:42. > :08:47.over and continue in that way? Again, the projections for any kind
:08:48. > :08:51.of official projections of North Sea taxes is for them to continue to
:08:52. > :09:03.stay low. Maintained, but stay low. Given that you have a fairly steady
:09:04. > :09:08.rising expenditure per Capita. Much has been made today by both sides of
:09:09. > :09:13.the argument about independence about the difference between the
:09:14. > :09:18.deficit for the UK, the UK as a whole and Scotland. Which rather
:09:19. > :09:23.ignores that both of them are absolutely horrendous? Yes. We are
:09:24. > :09:28.talking about relative deficits. The UK and Scotland both have fiscal
:09:29. > :09:32.deficits. The budget coming up next week is going to continue to suggest
:09:33. > :09:36.we will have to keep facing budget cuts. So that we can continue to get
:09:37. > :09:41.fiscal austerity measures to get that fiscal deficit down. Scotland
:09:42. > :09:46.isn't going to escape from that. We have as bad a fiscal deficit as the
:09:47. > :09:51.UK. The other side is, given the deficit is much the same, one of the
:09:52. > :09:58.points sland made today, this was a particularly bad year for North Sea
:09:59. > :10:04.oil receipts, he argues, we are the same deficit as the UK it backs up
:10:05. > :10:07.the argument, it is a deficit that needs to come down, it is not in
:10:08. > :10:11.much a different position if independent than the rest of the UK.
:10:12. > :10:14.It's not radically different to the rest of the UK. The outlook is the
:10:15. > :10:18.challenge here. We have spending levels that we know are relatively
:10:19. > :10:22.fixed and we would expect them to rise. We have revenues looking like
:10:23. > :10:26.they are likely to fall. The fiscal position for Scotland looks like it
:10:27. > :10:31.will deteriorate not improve against the UK unless you have a significant
:10:32. > :10:36.bounce back in oil prices. That has negative affects on the economy. It
:10:37. > :10:38.is not an upside. Thank you very much.
:10:39. > :10:43.I'm joined now from Dundee by the SNP's Treasury spokesman, Stewart
:10:44. > :10:49.Hosie, and from Edinburgh by Conservative Finance spokesman,
:10:50. > :10:51.Gavin Brown. Presumably, you would have preferred to go into the
:10:52. > :10:54.Gavin Brown. Presumably, you would referendum with a set of figures
:10:55. > :11:01.showing the deficit was lower than the UK? Any one year figures can be
:11:02. > :11:07.better or worse than the previous and I think the key thing is the
:11:08. > :11:12.package needs to be explained carefully and was the reasons we
:11:13. > :11:16.have those numbers. A substantial amount of tax deductible investment
:11:17. > :11:23.in the North Sea which is due to begin tax return dividends in three
:11:24. > :11:26.years and the Scottish government capital expenditure programme
:11:27. > :11:32.investing in infrastructure nine and keeping many thousands of people in
:11:33. > :11:36.jobs during that downturn. It does not change the long-term prognosis
:11:37. > :11:40.or the arguments we have been making about the relative position being
:11:41. > :11:47.better, but just for five years but 30 years. I am quite relaxed and
:11:48. > :11:51.better, but just for five years but basic arguments do not change. Gavin
:11:52. > :12:00.Brown, they do not? Especially if Alex Salmond and Stewart are correct
:12:01. > :12:04.in arguing that there were one of factors with the 40 present fall in
:12:05. > :12:08.revenue and part of that is investment which will mean more
:12:09. > :12:13.revenues in the future? They are not one-off, we heard in the package
:12:14. > :12:19.that this does not lead necessarily to greater revenues next year. We
:12:20. > :12:23.know from the oil and UK gas report that next the tax take is predicted
:12:24. > :12:28.to be 20 percentage aware than the figures we have just seen, under ?5
:12:29. > :12:33.billion. When the Scottish government published figures, they
:12:34. > :12:35.said it would be over ?7 billion so they are ?2 billion out, even though
:12:36. > :12:40.they had all of the facts they are ?2 billion out, even though
:12:41. > :12:45.and given that production costs are up by 15% and projected to rise
:12:46. > :12:50.again and given the asset integrity of existing assets needs to be
:12:51. > :12:54.invested in, it does not flow at all that you get greater tax revenues
:12:55. > :12:59.and the Scottish government needs to publish updated figures for all
:13:00. > :13:05.revenue because most other analysts seem to think they will decline over
:13:06. > :13:12.time. If you click ?53 billion in tax, and collect 7 billion pounds
:13:13. > :13:18.you have a big problem. Part of the UK, losing ?5 billion is not quite
:13:19. > :13:22.as big a problem. Whatever the problem with Jo Armstrong, it might
:13:23. > :13:28.be that the Scottish deficit is slightly worse than the rest of the
:13:29. > :13:34.UK but the basic point is both figures are horrendous? Both figures
:13:35. > :13:38.are very poor but the Scottish government argument has been that we
:13:39. > :13:44.were the better of independent and that the Scottish deficit is lower
:13:45. > :13:48.than the rest of the UK. They can still argue it is much of a
:13:49. > :13:55.muchness? They are not arguing that and in a leaked paper, Mr Swinney
:13:56. > :13:58.said it would flip by 2016. It is projected to remain that way because
:13:59. > :14:05.we know that the oil tax will be lower next year and is projected to
:14:06. > :14:13.remain low and we know Scottish -- Scotland has a demographic issue
:14:14. > :14:17.greater than the rest of the UK and as the Institute for Fiscal Studies
:14:18. > :14:21.said, we have greater medium-term and longer-term challenges but the
:14:22. > :14:25.Scottish government is trying to pretend we would be that of
:14:26. > :14:33.independence and that is clearly not the case. Again, this point that if
:14:34. > :14:35.we forget about the differences, it is horrendous everywhere and to give
:14:36. > :14:43.people some perspective, the Maastricht criteria called for a
:14:44. > :14:48.deficit ratio of 3% and were talking somewhere between 7% and over 8% in
:14:49. > :14:56.the case of Scotland. I do not notice any programme in your White
:14:57. > :15:00.Paper to get that down? Or a number of things and firstly, you are
:15:01. > :15:04.right, the deficit needs to come down but it is worth pointing out
:15:05. > :15:10.that it was the collapse of the banking sector which led to this but
:15:11. > :15:13.nevertheless, we are where we are and the case made in Westminster is
:15:14. > :15:18.you needed a medium-term strategy to tackle the deficit while growing the
:15:19. > :15:24.economy and what we are faced with is just stare territory on top of
:15:25. > :15:29.hostility, which is not helping. Witness the fact that the UK deficit
:15:30. > :15:34.is to rise to somewhere over ?1.5 trillion so we can take if granted
:15:35. > :15:40.that any Scottish government, SNP or the other 1... But in your White
:15:41. > :15:47.Paper you forecast that in 2016 to 17, the figure will be somewhere
:15:48. > :15:51.between 2.5 and 3.2%. Whether they have worked or not, at least Gavin
:15:52. > :15:56.Brown can say the British government has a strategy for reducing the
:15:57. > :15:59.deficit. You appear to have no strategy in the White Paper. Just
:16:00. > :16:05.all sorts of plans and we think the Times could be difficult but you
:16:06. > :16:08.only have plans to spend money. What we needed is
:16:09. > :16:11.only have plans to spend money. What austerity, which has intensified the
:16:12. > :16:17.difficulties, but we need to grow our way out of these problems. So
:16:18. > :16:20.there is no need for any programme of fiscal discipline at all? Should
:16:21. > :16:28.these figures be what you inherited? Quite the reverse, I have
:16:29. > :16:33.argued that there needs to be fiscal discipline I am happy to make is if
:16:34. > :16:36.you are going to tackle the deficit problem of the extent the UK has,
:16:37. > :16:40.you need to do it over the medium-term, you cannot slash and
:16:41. > :16:46.burn over one Parliament over four years, which the other party
:16:47. > :16:49.suggests, because that leads to no room to manoeuvre when times get
:16:50. > :16:55.worse, which is precisely what we saw, apricots and austerity. And not
:16:56. > :17:05.a decrease in the deficit or debt, but an increase. What would you say
:17:06. > :17:11.to people? Under your lot, we still have horrendous debt after you have
:17:12. > :17:15.been in power since 2010. Why not give Stewart Hosie and his friends a
:17:16. > :17:20.chance to do something different? They ignore the reality on the
:17:21. > :17:24.ground which is that growth has returned and is projected to
:17:25. > :17:29.increase and unemployment is down, employment is at its highest level
:17:30. > :17:34.ever, both in Scotland and the rest of the UK and the deficit is due to
:17:35. > :17:41.be zero by 2018 and we have projected to be... You will find it
:17:42. > :17:47.was forecast to be lower now than it actually is! Excuse us if we take
:17:48. > :17:53.this with a pinch of salt. You cannot ignore the European crisis a
:17:54. > :17:58.couple of years ago and if you compare us to our competitors and
:17:59. > :18:02.trading partners, we are doing far better than most and our growth
:18:03. > :18:07.projections and employment projections, while we are not out of
:18:08. > :18:10.the woods, are looking better than others and the deficit itself, I am
:18:11. > :18:15.sure Stewart Hosie once the plan, and there is one and it is projected
:18:16. > :18:21.to be small, a small surplus in 2018. We have to leave it there. Now
:18:22. > :18:28.a quick look at tomorrow's front pages. The Telegraph, Scottish
:18:29. > :18:33.finance is weaker than the UK. The story we have been talking about.
:18:34. > :18:42.Alex Salmond challenged to say hi he would finance the country after
:18:43. > :18:47.these figures. The Guardian, NHS told to spend billions on reform or
:18:48. > :18:53.face oblivion. This is retiring Chief Executive. And a great mental
:18:54. > :18:56.health betrayal in the Independent. That's all from me. More news is
:18:57. > :18:59.always on BBC Scotland's website and Good Morning Scotland is on Radio
:19:00. > :19:05.Scotland tomorrow morning at 6.00am. Goodnight.
:19:06. > :19:10.It is a cold night and there are some foreground and that could be an
:19:11. > :19:13.issue by the morning across England and Wales, and particularly
:19:14. > :19:18.low-lying areas. It should disperse others some places would stay grey
:19:19. > :19:22.but the vast majority is bright with sunshine. Different story across
:19:23. > :19:31.parts of Northern Ireland and Scotland, with a weather front
:19:32. > :19:35.brings more cloud. Generally, in decline for and as we head south,
:19:36. > :19:38.was the forecasters burst, another stunning day for many parts of
:19:39. > :19:43.England and Wales and after that chilly start, temperatures bounced
:19:44. > :19:50.back into the five teams. Along the coastal fringe, there could be mist
:19:51. > :19:51.lapping onto the shoulders but head any distance inland