I have sent this reply
Sir, with reference to today’s letter from Professor Andrew Hughes Hallet “Scottish Oil and the case of the missing 45%”, I’m afraid that the esteemed professor has failed to understand a rather fundamental point. North Sea oil revenues included in the Government Expenditure and Revenue Scotland (GERS) figures to which your editorial referred are generated by taxes on production profits, not revenue.
The only mystery is therefore not why they’ve declined so dramatically, but how a member of the SNP’s Fiscal Commission Working Group (FCWG) could be ignorant of this basic fact.
Kevin Hague
MD, M8 Group
*****
I kept it brief to increase chances of publication - with the freedom this blog affords me I'd add:
This is shocking not just because a member of the FCWG should be aware of this basic point, but that he chooses to leap to the erroneous conclusion that our national accounts must be flawed. It's almost as if he's trying to help the SNP by offering voters an excuse to ignore the hard economic facts.
Coming hard on the heels of fellow FCWG member Prof Joseph Stiglitz's admission that "Independent Scots currency union plan 'may have been a mistake', you have to hope that even Yes supporters are starting to realise that Sturgeon's "Council of Economic Advisors" might not be the infallible seers that she would have us believe.
****
** UPDATE **
A slightly edited version of my brief letter was published in the FT on 01/09/2016.
As an aside: the original FT piece he refers to mentioned factors which had “reduced Scotland’s notional share of British oil revenue from £9.6bn in 2011-12 to £60m in 2015-16”
A passing familiarity with these numbers would make it clear that these figures are government tax revenues, but one possible explanation for the Prof's confusion is he thought the decline reported related to value of output or GDP contribution.
A quick glance at GERS shows us that from 2013-14 to 2015-16, Scotland's oil generated GDP declined from £18.2bn to £9.7bn, a drop of 47%. This squares well with the prof's "price down 54% offset by modest production increases" logic - so no mystery there.
The only alternative explanation I can see is that - as I assume in my letter - he knew the figures were taxes but was unaware those taxes are raised on profits not gross output. An easy mistake to make perhaps, but certainly not grounds to assume that the UK's national accounts do not conform with the European System of National Accounts (which, see below, they of course do)
** UPDATE ENDS **
For confirmation that the UK national accounts do in fact conform with the European System of National Accounts see (for example) the ONS statement here
