EDINBURGH: Scotland’s fiscal deficit stood at about a tenth of its economy in the year to March 2016, hammered by a slump in oil and gas revenues and potentially dampening arguments for Scottish independence.

Scotland’s share of North Sea oil revenues crashed 97 per cent to 60 million pounds in the year to March from 1.8 billion pounds a year ago and 8.2bn ten years earlier.

Data released by the Scottish government on Wednesday showed lower oil prices – which reduce government tax revenues – and higher public spending mean that the country still needs to address how to expand its economy beyond oil, First Minister Nicola Sturgeon said.

She said Britain’s decision to leave the European Union in a referendum in June, which was not supported by voters in Scotland, was threatening prospects for the Scottish economy.

The 9.5 per cent gap in Scottish public finances as a percentage of its economy is more than twice the size of Britain’s overall 4pc deficit, including North Sea oil, and is up from a gap of 9.1pc in the previous year.

The data also showed growing onshore revenues offset by increased spending on health and education – one of the key tenets of the devolved nationalist government’s campaign to offer a contrast to austerity in the rest of Britain.

“Scotland’s challenge is to continue to grow our onshore economy. However, Scotland’s long-term economic success is now being directly threatened by the likely impact of Brexit,” Sturgeon said.

Scotland voted against independence in 2014, and one of the reasons behind that is thought to be fears of unhooking its economy from the rest of the UK, where the tax take helps fund Scottish public services.

However Britain’s vote to leave the European Union, known as Brexit, has rekindled the cause of independence once again because Scotland as a single nation voted to stick with the EU.

Including a geographical share of North Sea revenue, the net fiscal balance – the balance of all that is spent and received by public departments – stood at 14.8bn pounds ($19.6bn) in the twelve months to March 2016.

The Scottish government argues that the economic uncertainty caused by Brexit means that it can no longer be said that the UK as a constitutional structure provides stability.

However the UK government’s minister for Scotland, David Mundell, noted that Scotland was able to withstand the economic cycle because of the strength of the overall UK economy.

“Scotland weathered a dramatic slump in oil revenues last year because we are part of a United Kingdom that has at its heart a system for pooling and sharing resources across the country as a whole,” he said in a statement.

Published in Dawn, August 25th, 2016