UK has 'mitigated' oil drop impact on Scots – Carney

Scotland protected from full shock of drop in oil prices by economic and financial union of UK 

By Dods Group

14 Jan 2015

Scotland remaining a part of the United Kingdom has "substantially mitigated" the impact of the tumbling oil price on the nation's finances, Mark Carney has said.

The price of Brent crude oil has plummeted to a near six-year low in recent weeks, prompting first minister Nicola Sturgeon to urge support for the North Sea oil industry which plays a major role in Scotland's economy.

Facing questions about the drop from MPs on the Treasury Committee this afternoon, the governor of the Bank of England said the shared arrangements between Scotland and the rest of the UK had so far helped it to weather the storm.

"While it is net positive for the United Kingdom economy, the change in the oil price, it is a negative shock to the Scottish economy," he said.

"But it is a negative shock to the Scottish economy which is substantially mitigated by the fiscal arrangements that exist in the United Kingdom, the automatic stabilisers that exist, less revenue taken out of Scotland, more spending into Scotland, and by the nature of the economic and financial union that exists in the United Kingdom."

However, Mr Carney stressed that the central bank would not be making estimates of the impact of the oil price drop on individual UK nations.

"We make monetary policy for the United Kingdom as a whole and we conduct macro-prudential policy for the United Kingdom as a whole," he said.

The governor added: "I would reiterate that our view - let me make it my personal view - is that the net impact of the decline in the oil price at this stage is net positive for growth in the United Kingdom. But the precise numbers and estimates around that will come with the next MPC [Monetary Policy Committee report]."

The future of the North Sea industry was the subject of heated debate ahead of last year's vote on Scottish independence.

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