Scotland should be shielded from low oil price, says Salmond

Scotland could be shielded by the rest of the UK from the impact of low North Sea oil revenues even if it gains the "full fiscal autonomy" demanded by the Scottish National party, former SNP leader Alex Salmond has claimed.

The suggestion that Scotland could continue to benefit from billions of pounds in fiscal transfers from the UK even if it takes full control over all its revenues is likely to outrage SNP critics south of the border.

Pro-union parties have already put pressure on the SNP over its call for devolution of all taxes in Scotland, saying that slumping oil revenues would mean a massive fiscal crunch for Scottish governments that would no longer receive a large proportion of their funding from London.

But in a column for the pro-independence The National newspaper, Mr Salmond suggested the "no detriment" principle adopted for a more limited devolution package already agreed by pro-union parties meant Scotland would not suffer any loss from fiscal autonomy.

"Whatever is devolved in taxation, an equal amount of revenue is deducted or added to the financial arrangements between Scotland and London," Mr Salmond wrote. "That would apply whether a lot is devolved, as the SNP proposes, or just a little is conceded, as the London parties suggest."

Under full fiscal autonomy, Scotland would be responsible for all its government revenues, transferring some of the money it raises to Westminster to pay for shared UK-wide costs such as defence and debt repayment.

It is generally assumed that such a sweeping reform would spell the end of the block grant that UK government currently pays to Scotland, which has considerably higher levels of public spending per capita than the UK average.

In recent decades the revenues from North Sea oil and gas have outweighed the relatively higher spending, but the slump in oil prices means that full fiscal autonomy would imply a £7.6bn a year funding gap for Scotland, according to the Institute for Fiscal Studies.

Mr Salmond said Labour's claims Scotland faced a "financial black hole" were ridiculous, since pro-union parties had agreed the "no detriment" principle as part of a devolution package brokered by Lord Smith of Kelvin last year.

Jackie Baillie, Labour's shadow Scottish finance secretary, dismissed the argument as "ludicrous".

"He appears to finally accept that the SNP's plan for full fiscal autonomy within the UK would make Scotland worse off, but wants somebody else to fix it," she said. "It would be funny if it wasn't so serious."

Analysts say the "no detriment" principle is likely to be a source of friction even under the more limited Smith devolution package, which includes control over the rates and bands of income tax raised in Scotland.

MPs on the influential Scottish Affairs parliamentary commissioned complained last month that the package contained "enormous potential" to create grievance between London and Edinburgh.

Asked about Mr Salmond's comments, an SNP spokesperson said it was "absolutely correct" to say the principles established as part of the Smith deal related to "devolution in general".

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