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An Oil Fund for Scotland: Taking forward our National Conversation

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Foreword by the Cabinet Secretary for Finance and Sustainable Growth

Scotland has been blessed with an abundance of energy resources. For 40 years our economy has been a major producer of oil and gas and today we are fast becoming a major force in renewables. Energy is at the heart of Scotland's future prosperity and a cornerstone of our economic strategy.

Scotland's oil and gas resources confer a tremendous economic opportunity. The North Sea supports around 195,000 jobs in Scotland, and Aberdeen is one of the world's largest energy hubs. The industry has also generated huge revenues for the public purse. Already some £230 billion of oil and gas revenue from Scottish territorial waters have flowed into the UK Exchequer.

Scotland's remaining oil and gas reserves are substantial. Between 15.5 and 25 billion barrels of oil equivalent are estimated to remain in the North Sea, and the final figure could be even higher. Based on current trends these reserves could provide a significant economic windfall and with good management, will provide a further thirty to forty years of production.

The Scottish Government proposes that a proportion of Scotland's oil and gas revenues are invested directly into a Scottish oil fund. We believe strongly that an oil fund will help raise sustainable growth in Scotland, provide greater macroeconomic stability, and support our transition to a low carbon economy.

As this paper illustrates, many economies already operate oil funds. Some, such as Norway, enjoy both substantial benefits today and the assurance of security tomorrow. Scotland can do the same. Norway started transferring revenues into its oil fund just 13 years ago. Now these investments are worth £214 billion. These resources have allowed Norway to offset the impact of the global downturn without incurring the large debts other countries will be repaying for generations. They will also ensure that Norway's energy windfall provides a lasting benefit for the country's economy.

Devolved governments, such as Alberta in Canada and Alaska in the US, have also successfully used their responsibility for natural resource taxation to establish oil funds. These decisions are currently the responsibility of the UK Government. However, successive UK Governments have failed to take the action necessary to ensure that future generations benefit from the economic windfall from Scottish oil and gas. Devolving control of North Sea taxation and production to the Scottish Parliament would allow Scotland to control its own natural resources and ensure that they provided a lasting benefit for the country.

This Government believes that independence with full responsibility for all the economic levers available to other independent nations is the right option to enable Scotland, and her people, to fulfil their potential. There is now consensus that Scotland will benefit from gaining substantial fiscal autonomy. A Scottish oil fund is a prime example of the policy choices fiscal autonomy would allow Scotland to make. The Scottish Government believes an oil fund is strongly in Scotland's long-term economic interest and, as part of our National Conversation, we invite views on how to take this proposal forward.

John Swinney MSP
Cabinet Secretary for Finance and Sustainable Growth