Independent Scotland would face currency dilemma - Soros

Wednesday 12 March 2014 12.52
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George Sorros says independent currency for Scotland would be 'very inefficient and potentially dangerous'
George Sorros says independent currency for Scotland would be 'very inefficient and potentially dangerous'
Scotland's deficit comes in above the UK's for the first time in recent years
Scotland's deficit comes in above the UK's for the first time in recent years

Billionaire financier George Soros said today it would not be practical for an independent Scotland to keep sterling but that a separate currency would be "potentially dangerous".
              
"I don't think that Scotland leaving and becoming independent and yet remaining part of sterling and (the) Bank of England is actually practical," Soros said in London.
              
He said an independent currency would be "very inefficient and potentially dangerous", adding that the alternative was for Scotland to become a member of the euro zone.
              
Several business leaders have recently expressed concern about a vote for independence.
            

Meanwhile, plummeting oil revenues have contributed to a reversal in Scotland's economic fortunes relative to the UK in the last year, official figures show.

Oil revenues dropped by more than two-fifths in 2012/13, pushing Scotland's deficit above the UK's for the first time in recent years, according to government Expenditure and Revenue Scotland (Gers) figures.

An unplanned stoppage in the Elgin oil field and the oil industry's shift from revenue-gathering towards investment was cited as the cause of the sharp drop by First Minister Alex Salmond.

The Elgin shutdown was a "one-off event", according to Mr Salmond, who said he does not expect unplanned stoppages every year.

A shift in Scottish government spending towards capital investment, such as building schools and roads, and investments in national water board Scottish Water also helped to push Scotland's deficit to -5.9%.

The UK ran a deficit of -5.8% in the same period after lagging behind Scotland in recent years, Gers figures show.

Scotland's relative economic strength over the UK has been a key plank in the independence campaign.

Mr Salmond said it is important for the electorate to focus on Scotland's economy over the last five years as they prepare to vote in the independence referendum on September 18.

The average five year deficit was -4.3% in Scotland compared with -5.9% across the UK, according to Gers.

The fact that Scotland maintained an "almost identical" deficit to the UK despite a sharp drop in oil revenues also underlines the "underlying strength of the Scottish economy", Mr Salmond said at a press conference in Edinburgh.

But his opponents say today's publication is a "landmark" moment in the independence campaign, insisting the size of last year's deficit would have made Scots £500 per person poorer rising to £1,000 by 2016/17.

"North Sea revenue fell by 41% between 2011/12 and 2012/13. This, in part, was caused by unplanned disruption to production and above average levels of spending on development," Mr Salmond said.

"Capital investment by the oil and gas industry reached a record £14 billion last year, and of course that reduces receipts in the short-term because of capital allowances which will substantially increase tax returns for the future," he added.

He said the main stoppage for this year was the Elgin-Franklin field where the pipeline for the Elgin field came down. This affected the whole transmission system of a number of other gas fields. 

"It had a significant effect on the overall production and therefore revenue. Elgin-Franklin is now back in production, so it's a one-off event which affected the 12/13 figures," he said.

"I would argue that if you can have a decline in oil revenue of over 40% in single year but still have a current balance which is identical to the UK, that indicates the underlying strength of the Scottish economy. In the last five years, Scotland would have been relatively better off by £8 billion, or almost £1,600 per head."

The SNP's plan for two oil funds, one to stabilise Scotland's heavily oil dependent economy and another to save for the future, would shore up Scotland's budget against future oil shocks like the one seen in 2012/13, he added.

He predicted Scotland would start paying into the fund in 2016/17 when the deficit falls to -3%. 

"We don't expect to have disruptions to pipelines every year. We do expect very strongly that if you invest £14 billion in the North Sea then that pays off in higher production, higher returns and higher revenues in several years time," he said.

Former UK Chancellor Alistair Darling, leader of the Better Together campaign, said: "This is a landmark moment in the debate. This is the day that Alex Salmond's own figures made the case against independence".

"If Scotland was independent today we would have no option but to cut spending on services like schools and hospitals or put up taxes - or probably both. Today as part of the UK we don't have to do that," he added.