Chamber and committees

The Scottish Government works to identify and deliver the reinforcement and further development of Scotland''s grid network that will connect and transport Scotland''s energy potential, deliver a low carbon generating mix and ensure security of future energy supply.

Our Second National Planning Framework highlights a range of energy generation, infrastructure and grid developments of national importance to Scotland. Proactive use of our powers on spatial onshore and offshore planning and consenting has resulted in a step change in planning, consenting and developing Scotland''s energy future.

http://www.scotland.gov.uk/Publications/2009/07/02105627/0.

We work closely with UK, EU Governments, the GB system regulator Ofgem and transmission system operators in a number of strategic groupings envisaging future gird network at UK and EU level; including the Electricity Networks Strategy Group on future onshore and offshore GB reinforcement, and EU level groupings on future interconnected grid development in the Irish and North Seas.

The Scottish Government does not hold detailed information on levels of committed and planned grid investment. This is a regulated activity by Ofgem and the three transmission system operators (National Grid Electricity Transmission Limited, Scottish Hydro Electric Transmission Limited and Scottish Power Transmission Limited). Decisions on specific grid projects and investment plans are part of this regulated process.

The transmission system operators are responsible for developing their networks in line with their licence obligations. The revenue network companies can earn in doing so is determined by the regulatory price control process. This process provides the companies with future revenue levels and incentives to take forward efficient investment and running their systems.

The transmission system operators develop projects to upgrade and reinforce transmission infrastructure within their area based on their assessment on what is required to run their network in an efficient manner. They submit these proposals to Ofgem for assessment and funding approval. Ofgem considers cost, and other factors such as need, for the electricity networks investment proposals put forward by network companies.

The current transmission price control process (a Retail Price Index based process) runs from 2007-12. In that period Ofgem has agreed the transmission system operators can invest £3.8 billion in grid and network development. Detail is at:

http://www.ofgem.gov.uk/Networks/Trans/Archive/TPCR4/Pages/TPCR4.aspx.

In addition, on 25 January 2011 Ofgem also announced a £95 million investment package over the next two years to increase the capacity of Scotland''s power networks. Detail can be found at:

http://www.ofgem.gov.uk/Pages/MoreInformation.aspx?file=ScotlandUpgrade25012011.pdf&refer=Media/PressRel.

This price control period has been extended to 2013 as Ofgem transitions to an output performance-based approach to regulate energy networks. This RIIO model (Revenue = Incentives + Innovation + Outputs), covering eight year periods, will set regulatory price controls beyond 2013.

The two Scottish transmission licensees are required by their licence obligations to assist National Grid, as System Operators of the National Electricity Transmission System, in preparing detail on the timing and scope of planned grid investment (as opposed to funding). Specific detail is available in the resulting Seven Year Statement at http://www.nationalgrid.com/uk/Electricity/SYS/current/.

Scotland''s remaining North Sea oil and gas reserves are estimated to have a potential wholesale value of £1 trillion and act as a significant source of tax revenue for the UK Exchequer. In the next six years alone, the North Sea is forecast to generate £60.5 billion in tax revenue for the UK Exchequer. This compares to the expected £2 billion net cost of all the UK Government''s financial sector interventions forecast in the June 2010 Emergency Budget.

With responsibility for this vast resource, and the opportunity to determine the best approach to financial regulation in Scotland, the Scottish Government would be able to ensure financial stability in the banking system.

The Scottish Government has set out how full fiscal responsibility in the UK - also referred to as devolution max - could operate in the National Conversation White Paper Your Scotland, Your Voice and the accompanying discussion paper Fiscal Autonomy in Scotland: The Case for Change and Options for Reform.

Your Scotland, Your Voice is available from: http://www.scotland.gov.uk/Publications/2009/11/26155932/0.

Fiscal Autonomy for Scotland: The Case for Change and Options for Reform is available from http://www.scotland.gov.uk/Publications/2009/02/23092643/0.

The most recent edition of Government Expenditure and Revenue Scotland was published in June 2010, and is available on the Scottish Government website:

http://www.scotland.gov.uk/Publications/2010/06/22160331/0.

At the time of publication, officials notify key stakeholders of new updates and where they can be accessed on the Scottish Government website.

 

At its ninth meeting the Council of Economic Advisers considered many issues related to increasing Scotland''s sustainable economic growth rate, including fiscal autonomy. The minutes of that meeting can be found at:

http://www.scotland.gov.uk/Topics/Economy/Council-Economic-Advisers/Meetings/2009-meetings/2010-meeting9.

 

The most effective way to reduce public sector borrowing is to promote sustainable economic growth. Faster economic growth will boost tax revenues, protect jobs and make addressing the legacy of debt left by the previous UK Government that much easier. However, the current UK Government''s proposals to cut public spending too far and too fast risks undermining the recovery and threatens the very efforts to restore the long-term sustainability of the UK fiscal position.

Greater fiscal responsibility would allow the Scottish Government to manage the pace and priorities of fiscal consolidation to ensure that vital public services are protected and that the economic recovery is not damaged. Fiscal responsibility would also give the Scottish Government maximum opportunities to use the full spectrum of key economic policy levers to promote sustainable economic growth over the long term.

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Under independence, Scotland would have the opportunity to determine the best approach to regulating financial services in Scotland - including making decisions on partnerships with regulators in other countries - to provide an efficiently functioning market, financial stability and consumer protection.

 

Estimates of the tax revenue which could have been raised in Scotland, and the associated level of public sector expenditure, under alternative fiscal frameworks would depend upon a number of factors, including the policy decisions at that time.

Government Expenditure and Revenue Scotland (GERS) demonstrates that, under the current fiscal framework, Scotland ran a cumulative current budget surplus, including a geographical share of North Sea revenue, worth £3.5 billion over the four years to 2008-09. Over the same period, the UK ran a cumulative current budget deficit worth £72.3 billion. This demonstrates that Scotland stands on a firm financial footing. With full fiscal responsibility, Scotland could build upon this, promote growth and create opportunities for all.

The fiscal frameworks in the Basque Country, Canada and the USA demonstrate the additional economic levers and opportunities that more ambitious levels of fiscal responsibility can provide. For example, the Basque Country has used its responsibility for the tax system to introduce a lower corporation tax rate than the rest of Spain. As of September 2010 the Basque Country also had a stronger credit rating than the Federal Spanish Government.

In the USA and Canada, devolving responsibility for natural resource taxation, has allowed States and Provinces to tailor the tax system to maximise long term production rates, and invest a proportion of the resulting tax revenue in an ˜oil fund'', to provide a permanent benefit for future generations, such as those in Alberta and Alaska. State and Provincial governments in the USA and Canada also have the opportunity to borrow to manage the pace and priority of investment in infrastructure and to manage volatilities in tax revenues.

All of these examples offer useful experience of how fiscal responsibility would benefit Scotland.

 

Under independence, the Scottish Government would have an opportunity to establish a regulatory regime that ensured sufficient safeguards were in place to address the weaknesses of the regulatory regime established by the previous UK Government. As highlighted in the National Conversation discussion paper Fiscal Autonomy in Scotland: The Case for Change and Options for Reform, under full fiscal responsibility within the UK, certain elements of economic policy could remain reserved “ including financial regulation “ with the exact division of responsibility dependent on the specific framework put in place.

Independence would also allow the Scottish Government to put forward an enhanced and better targeted stimulus package which met the priorities of the Scottish economy. For example, the temporary VAT cut implemented by the previous UK Government in 2009 was estimated to have supported 5,500 direct jobs in Scotland. If Scotland''s share of that cut had been used to increase capital expenditure, it is estimated that approximately 10,000 jobs would have been supported.

Fiscal Autonomy for Scotland: The Case for Change and Options for Reform is available from http://www.scotland.gov.uk/Publications/2009/02/23092643/0.