Fuelling the Budget

Will the high earners threaten to take their money abroad?

Income tax rates have dominated George Osborne's third Budget. There's no doubt that increasing the starting threshold for tax represents a big giveaway.

Although it's more than £3bn into people's pockets, it's thinly spread.

And of course, re-ordering the winners and losers from tax inevitably leads to the losers making a lot more noise about it than the winners. So expect to hear lots from pensioners over the frozen allowances quickly dubbed the 'granny tax'.

The noise of protest is also a way to judge the Chancellor's claim that high earners and the wealthy are going to pay as much as five times the amount that the 50% top rate of tax has taken off them.

If he's right, you'd expect them to make a lot of noise complaining about it, and threatening to take their money abroad.

But there are other big losers from the Budget - the public services.

The big event in the Commons passed off with very little attention paid to the impact of cutting back public spending on an unprecedented scale, with by far the larger part of the spending cuts yet to come.

That's partly because he'd already set out his plans.

But we also learned that another £10bn is to be taken out the welfare budget from 2014. It's already been required to take a lot of the strain, and there's no detail of which bit of welfare is going to take more of it.

Dash for Gas

For Scotland, the distinctive parts of the Budget were around energy. George Osborne further poured his scepticism on the green agenda, declaring that environmental sustainability had to be fiscally sustainable as well.

He signalled another 'dash for gas', with a review of the policy later this year pointed towards a lot of new turbines being commissioned.

With special tax status for investment in Dundee and Nigg fabrication yard, he embraced the offshore oil and gas industry's desire to get drilling.

This was an attempt to repair the damage he did last year to the government's reputation with the sector, when he stunned them with an unexpected £2bn tax raid.

This year he offered them highly-targeted tax breaks, much of that for deep water west of Shetland.

The difference it makes to previous Treasury assumptions is £135m over the next two years, but then raising nearly as much over the subsequent three years.

The promise of more certainty to tax planning on decommissioning of offshore equipment comes at a cost of £115m to Treasury calculations for next year. But in the years after that, the certainty comes at a high price for the industry: £1.26bn in the Treasury's favour, spread over the following four years.

Independent data

If you dig further into the small print of the energy figures - and I've done so with the help of Glasgow University economists - you find something of considerable significance to the debate about Scotland's constitutional future.

The estimated tax take from UK offshore oil and gas is very much lower than previously forecast.

This time last year, it was assumed that petroleum revenue tax and offshore corporation tax would deliver £13.4bn to the UK Treasury this year, declining to £11.1bn by 2015-16.

A geographical share of that is very important to the claims that an independent Scotland would have public finances with its deficits lower than the UK.

But that's much harder to argue with the most recent figures.

While they assume oil prices remain buoyant, they also track an unexpectedly sharp decline in production from UK waters. And because of the tax breaks now put on offer, that has an impact on the tax revenue that can be expected.

So instead of £11.1bn in 2015-16, the latest forecast from the Office of Budget Responsibility sees offshore oil and gas revenue decline sharply to only £6bn.

Assuming 80-90% of that would go to an independent Scotland, the revised figures would appear to represent quite a big gap in its future fiscal projections.