21/08/2014 Scotland 2014

How much of the black, black oil is left under the deep blue sea? That

depends on who you listen to. Tonight we will be trying to get

some straight answers for you. I am not promising we will succeed.

North Sea oil has always been at the heart of the argument

Today it was the subject of heated exchanges between

the First Minister and the leaders of the Better Together parties

during the last parliamentary session before the referendum.

So, how much of it is left and how much money is it worth?

Will we even need the oil if we can generate enough renewable

It has just been announced that the world's largest tidal energy

project is to begin in the Pentland Firth later this year.

Panama does not have its own currency and is doing very

A new report today suggests that using the pound without

a formal currency union could be a good thing.

The Scottish parliament will not meet again before the referendum.

MSPs will now be able to spend all of their time campaigning

If you were listening to proceedings in Holyrood today, you might think

campaigning is exactly what they were doing inside the chamber.

They were arguing over differing estimates about how much oil is left

under the North Sea, following the intervention by industry leader

Sir Ian Wood who suggested yesterday that Scotland could not

The first trickle will grow and by 1977 supplies from this field alone

should amount to at least a quarter of the oil we require as a nation.

This was the first oil to be filmed coming out of the North Sea. How

long will it last? An expert says Scotland's economic future is being

sold to voters using the wrong maths. The young people voting now

in 2030 will begin to see real impact on jobs, on money available

to the Scottish exchequer. By 2050, we are going to have a huge hole to

fill. With four weeks to go, you could feel how important this was to

both sides today. Scotland's greatest oil expert says

independence would be bad for Scotland. Is it not the case, Alex

Salmond does not have a plan B on currency, Europe, oil? Disport

united country of Scotland, only 16.5 billion of oil up to 2050, or

perhaps only 1.5 trillion... Alex Salmond, 1.5 trillion figure, the

value of offshore oil and gas. It is calculated on the basis that 24

billion barrels of oil will be extracted. Is that realistic? It is

the most optimistic end of the projections put forward by experts

including Sir Ian Wood. The reserves are there. The question is whether

they will get into production and that depends on whether it is

cost-effective to get it out of the ground, whether new technology will

become available and the unpredictable price of oil. Sir Ian

Wood says the most realistic figure would mean ?2 billion less for

government coffers over five years. That is why the First Minister is

being accused of using misleading figures. But today another oil

expert said the ultimate potential of 24 billion barrels appears

plausible. The next big question is, will any of this effect the way

people vote? It would probably affect my vote. It has been a

sweetener but not critical. It is not something I have looked into.

The answer on future oil revenue is it depends. Perhaps what we can do

juices have politicians use figures, whether they use caution or optimism

-- that's what we can do juices. This evening, in our Dundee studio,

we have the SNP's Treasury spokesperson, Stewart Hosie. And

in the studio, Labour's Shadow And to give us the industry

overview, the energy analyst from Thank you for joining us. Let me ask

you, Stewart Hosie, first. Alex Salmond agrees in word is a

well-respected expert -- Sir Ian Wood. Why does he not believe him

now about the number of recoverable barrels of oil? We have had the

First Minister confirm far more than the 10 billion barrel figure quoted

by the Office for Budget Responsibility. 24 billion was

quoted in the white figure. -- white paper. It does not change the figure

for the future assuming the deficiencies are there and new

technology is delivered. Sir Ian Wood who I am sure you will agree is

well-respected, he does not think it is recoverable. 16.5 billion is the

most you will get out. Another professor who is the chair of

geology and petroleum geology at Aberdeen University suggests there

might be 35 billion barrels of oil and gas. We have been told that is

running out for the last 30 years. We have found new technology, new

entrants into the market, getting out or land gas that was never meant

to happen. It is also making sure it is cost efficient. The UK Government

hiked up the supplementary charge in 2010 and was at it again this year.

Changed the tax regime. Even if there are only 15 billion barrels of

recoverable oil, it is still a great asset. What country would not want

to have that much oil? No one is arguing it is a good contribution.

The problem for Alex Salmond and the SNP is that all of their case is

predicated on 24 billion barrels being extracted. That is what the

white paper is based on, the high end of the projections. Would-be

assassin and assumption and exaggeration to get to the 1.5

trillion figure and presenting it as though it is revenue when it is

wholesale value. The marginal fields, the cost to get the oil out

is higher and the technology needed is more intense. It comes with added

cost. To suggest somehow all of this can be based on the 24 billion

barrels of oil, the high and optimism scenario, it is a real flaw

in the SNP's argument, particularly as their own fiscal commission says

they should be cautious. Cautious and credible estimates would be

better rather than the overblown and highly optimistic ones in the white

paper. That is a problem in terms of the credibility. You have the

unenviable task of telling us who is telling us the truth. What does the

industry think? Sir Ian Wood is a respected figure and he cannot know

for certain. He came up with a wide range of possible scenarios. 24

billion is possible but towards the more optimistic end clearly. The

ultimate answer is that people do not know and it relies on a number

of different variables, from taxation regime to global

competition, also cost in the industry. Last year alone costs went

up 15% on the continental shelf for production and it makes a huge

difference where oil companies invest. It is clear there will be a

lot of revenue to come out of the North Sea, but it is the rate at

which it comes out and declines. Certainly it is in long-term

decline. Stewart Hosie, with all of the variables, it is difficult to

know what the revenues would be and how much can be extracted because we

do not know what the price will be in the future. You cannot really

make such precise estimates. The report of a couple of years ago

suggested something in the order of 400 billion of revenue. That seems a

fairly reasonable estimate over the lifetime. A good estimate. How can

you estimate it given the variables? Scotland is, as the First Minister

said, it cannot be a burden for us, discovering oil. We have to make the

best estimate we can on a range of factors productivity, cost, fiscal

regime, all of these things. We think an independent Scotland can do

it better. We understand the oil sector better than the UK. We would

not tax it to death. We would allow marginal fields to be profitable, to

work, instead of treating it like a cash cow which is what the UK

Government have done for the last 40 years. You are hoping to form the

next UK Government in the Labour Party. Would you do anything

different with the oil industry in Scotland? Everything he said would

be fine if they had not made all of their assertions in the white paper

on the high-end of the scenarios. That has consequences for people I

represent in Lanarkshire because it is about the amount of money

available to spend on public services. It is real to people in

terms of the debate. When we talk about the North Sea, Sir Ian Wood

made it clear in his report, we are talking about a largely maturing

basin and that there will be new discoveries but they are small

compared to the other fields close to being exploited. We are still

talking about something which is very often marginal in terms of

economic activity and we cannot base all of our economy on the highest

end assumptions and projections because if we are doing that we are

opening ourselves up to eight -- to a place where we have real Robinson

stop stay with me. It was announced earlier this evening that the

construction of one of the world's largest tidal energy projects is

going to begin in the Pentland Firth.

It is claimed the MeyGen scheme will ultimately be capable of producing

enough electricity to meet the needs of 175,000 households.

Earlier I spoke to David Miller, the BBC's environment correspondent, and

This is being seen as highly significant for the sector. We

learnt today a ?50 million funding package is now in place to pay for

phase one A of the project. It will see four turbines being installed in

the Pentland Firth as -- along with a grid onshore. This will be the

first of many. The scheme is for as many as 269 turbines to be

installed, leading to a generating capacity of 175,000 households. It

is a big project and the industry is delighted that finally this funding

package is in place. It will not all be plain sailing. No, there will be

tough times ahead, no question of that. The ?50 million has come in

part from the Scottish gunmen, Scottish enterprise, the Department

of Energy and Climate Change in London and also from the crown

estate. The Scottish Energy Minister said that the successful harnessing

of ocean power, as he describes it, will take hard work and persistence.

But he also made clear the Scottish Government was prepared to stand by

the industry in the years ahead, as it continues to mature. We have had

a similar message from the UK Energy Secretary, Ed Davey, who is saying

tonight that Scotland and the UK is now in pole position and could in

the years ahead be in a position to export this technology around the

world. The significance of today's news I think is that we are now

beginning to see the tidal energy sector move away from research and

development work, from demonstration projects, towards deployment on a

commercial scale. Thank you. Asda have my guests with me. David

Hunter, is Scotland at the cutting edge of making tidal power work on a

commercial basis? -- I still have my guests with me. Scotland shows

competitive advantage. It is encouraging we are investing. It is

the kind of technology we should be investing subsidies in to build

upscale and what you should see over time is the cost of that technology

falling. Clearly, we have the natural resources for it. Looking at

technologies like offshore wind, it is more difficult overtime because

it is not new technology but we are still heavily subsidising these

projects and the costs are very sticky. Technology is where we have

competitive advantage. That has got to be good news. Are you excited

about the potential for tidal power? At this stage, it will still be very

expensive compared to other forms of renewable technology. If it is more

cost competitive, it can deal with issues around intermittent sources

we currently have. Can you see a day when it is more cost-effective than

wind power? When we have the critical mass in a green

technology, the cost comes down and it is a good thing. I am really

excited about this project. It has the potential to power many homes in

one location. Given Scotland's green potential, we will not just be

powering Scotland, but the whole of the island. I am sure exporting

further afield as well. Thank you. Now, you have probably heard many

Better Together campaigners describing the idea of an

independent Scotland using the pound sterling without a formal currency

union as the "Panama solution". As though there could be nothing worse

than having an economy similar to Panama's. Actually they are doing

quite well, and a new report out today suggests that

"sterlingisation" could strengthen Scotland's financial system. The

economic think tank, the Adam Smith Institute, says not having a lender

of last resort would mean banks This is to propose would make the

Scottish financial sector more stable and risk averse than it is

now and indeed then the UK is right now. In the long run it would mean

fewer financial crises. That is what we saw last time Scotland had a

system like that. There is no reason we can't have that again. Where do

you want your money? In a stable financial environment or one that

leads to repeated financial crisis? The Adam Smith Institute used Panama

as a key example in this report, so when our Economics Correspondent

Colletta Smith was here earlier, I began by asking her, what's so great

about the Panamanian economy? Colletta Smith was here earlier, I

When most people think of Panama, they think of oversized hats or a

canal. This report goes deeper than that. It points out that Panama has

been using the dollar without the permission of the United States for

more than 100 years and things seem to be going pretty well. Scotland

could do essentially the same thing. Because the print money here, it

would be easy to change the system. Basically, to use the pound anyway.

For banks to keep reserves in the box and be able to lend out. It

would be up to them to take the risk on that. Panama do not have a lender

of last resort. The Adam Smith Institute point out that has made

them risk averse. The system has been very stable over the last 100

year. The economy has grown very quickly. Things seem to be going

well for Panama. Is it a fair comparison? Scotland is different

and the crucial question is how intertwined is it with the UK. That

is skirted over in this report. We have banks based in Edinburgh. The

report says both those institutions would probably move to the City of

London. It skirts on by saying jobs may well remain in Scotland. But I

imagine a lot of people would take issue with this. That could affect

the whole financial system in Scotland. What has been the reaction

to this report? The SNP seem surprised, pleasantly surprised by

Today's report. They are not natural bedfellows with the Adam Smith

Institute. They are further to the right of the political spectrum than

the SNP. And Panama is a developing nation, not really comparable

Scotland and not necessarily something we should be aiming for.

And there are economists disagreeing with the report. They say that banks

are not the right people to trust when it comes to regulating

themselves. Joining me tonight are two economic

commentators and authors. In Edinburgh we have George Kerevan and

here in the studio is Peter Jones. We are delighted to have you both.

This is the same panel we had when they discussed another report two

weeks ago. They said sterlingisation would be problematic. Now the Adam

Smith Institute are saying the opposite. Is sterlingisation what

Plan B is? Well, we had to think tanks. One on the left and one on

the right. Both saying, actually, Scotland should keep the pound. But

disagreeing about what the underpinning should be. We have had

The National Trust Institute seeing if we do not get plan A, a

partnership with the Bank of England, if English politicians talk

themselves into that corner, then we need a lender of last resort. What

the Adam Smith Institute is saying is to go back to the old Scottish

system whereby we make the banks responsible. We then limit what the

banks can borrow themselves and therefore they cannot get into the

difficulties they got into in 2008. Peter Jones, the problem is that

whilst politicians may see this as an attractive solution, it answers

the question of what is Plan B and means you never have to bail out

banks, so good for taxpayers, but the banks will not like this. They

will probably not remain here under those circumstances. The period the

Adam Smith Institute bases its model on is very interesting. That golden

age, as they describe it, Scottish banking. By the end of that period,

in the mid-19th century there were only 17 of the several hundred banks

left. Some had closed their doors because they weren't doing a

terribly good job. Some went bust in spectacular fashion. In one case,

the Glasgow bank, the directors were put on trial for fraud and sent to

jail. The whole thing, the banking system, depends on confidence. One

of the problems with that system is that there is no depositor

insurance. They are effectively bailed out by shareholders. They

were forced to do that because liability was unlimited. For

example, a shareholder with ?500 in one bank had to stump up more than

?2000 in order to pay off all the depositors. When you look at what

the Adam Smith Institute are seeing, is this a picture that the SNP will

find attractive? The Scottish Government wants to have a

partnership with the rest of the UK. A common Bank of England to manage

the currency and to supervise the banks. It seems bizarre to me, and

too many economists, while model would be rejected. I do not think

the model being pursued by the Adam Smith Institute is the best one.

What is interesting is that it shows that there are both economists on

the right and left who still think that keeping a common currency is

something we need to trade. That is the basic argument. It is the No

campaign who, for political campaign reasons, have tried to break up the

currency argument. We have had eminent economists this week saying

he thinks the Westminster Government would change its mind in the event

of a No vote. Is there any need to discuss Plan B or will there be a

plan A in the end? There are two things happening. One of the

economic argument. He argued about trade is respectable. In terms of

trade, a currency union is a good idea. That then you have the problem

of bank liability. Collapsing banks. How do they get bailed out

Iraq and secondly, the problem of sovereign liability. The sovereign

bank or state goes bust, how do you build them out? There are those

arguments there. Then there is the question of controlling deposits.

How do you stop them flying south of the border. It did not matter in the

19th century because it was not physically possible to do it but

nowadays you can do that at the click of a button. It is difficult

to stop now. Confidence in the banking sector is essential. We saw

that with Northern Rock. Confidence one day, none the next. Everybody

queued up to withdraw their thank you.

Now here's a few stories making the headlines

The New York Times reports demands of a multi-million dollar ransom

prior to the merger of James Foley. Al Jazeera confirms the commanders

were killed. From BBC online, to USA workers infected with a bowler have

been discharged from hospital. -- the ball a virus.

Now, to talk about some other news of the day I'm joined by Stephen

Gethins, former special advisor to Alex Salmond and Mary Galbraith, who

is standing for Labour in Argyll Bute in next year's general

An interesting tweet: A senior SNP source had told him "this will be

one of Salmond's last FM queues". I think he has been looking at the

polls closer and closer and think they will be talking about the end

use. He is hinting he might not be the leader of the SNP. I don't take

it seriously. You cannot believe everything that is written in the

newspapers. Except that the First Minister himself... I really think

this is tittle tattle. Out of the horse's mouth this week, Alex

Salmond himself said he would stand only be thought it was the way to

guarantee independence for Scotland. What he said, and it is quite

telling, was the referendum is bigger than everybody. It is bigger

than Alex Salmond, the SNP and the Labour Party. What he was saying was

that if somebody could guarantee independence if he stood down, he

would take that in an instant. There is nobody in the SNP who would not

take that in an instant. There is speculation at Westminster that

David Cameron would have to resign in the event of a Yes vote. It would

be such a crushing embarrassment. If there is a No vote, will be called

Alex Salmond to step down? We agree that this is not about individuals.

It is not about David Cameron. It is about issues. Do we keep the

currency? Do we stay in the EU? What we do about the ?1400 per person?

That is what people care about. They do not care about the personality or

cult that is running around the place. But come the 19th of

September in the event of a No vote, there will be no more questions

about currency or other issues. They will be questions about the person

who led the campaign. We're in uncharted territory there. The whole

campaign is an chartered. It would be dangerous to speculate. What is

interesting to speculate is that there are people already in the SNP

who are gunning for Alex Salmond. It would be interesting to know if it

is the same people who had the knives out after the Alistair

Darling debate a couple of weeks ago when his performance fell below

expectations. Can I say that Alex Salmond has positive approval

ratings. You cannot say that for the leaders of the Labour, Conservative

or Liberal Democrats partys. After seven years in Government, it is

unprecedented to have positive approval ratings. That tells you a

lot. He did not get that for his performance in the debate two weeks

ago. He is going to have to do better in Munday Bois might debate.

On the debate, a lot of people have asked about weird does it go? A poll

showed that there was an increase in votes from women. You're going for a

Yes vote on the day. I think he did quite well. He reached the audience

is needed to. The debate on Monday will be crucial in the campaign.

Expectations were low of Alistair Darling before the last one and he

exceeded them. It is a different game this time. They will expect him

to improve. Can he do that? I think he was always going to be a solid

performer. He is a top Edinburgh lawyer. A lot of people expected him

to deliver arguments and deliver on substance. And not on style. He went

for real issues that mattered. Those were currency. That is why people

rated his performance and rated the fact that we were trying to get

underneath the bluster we hear about getting our own way. We will demand

everyone else does what we say. That is just not something Alex Salmond

can promise to deliver. Thank you very much for coming in to talk to

That's all from us tonight. Thank you for watching.

I will be back on Monday night at the earlier time of ten o'clock,

straight after the Alex Salmond / Alistair Darling debate, with all

the reaction to what they said and how they both performed.

I hope you join me then. Good night.

Welcome to Newsnight, live on stage at the Edinburgh Festival.

Four weeks today, Scotland votes to stay in the Union or to go it alone.

Tonight, with a stellar cast of performers, writers, and thinkers

from both sides of the border, including the actor Simon Callow,