May 2007 marks the 300^th anniversary of the Union and coincides with the Scottish Parliament elections at which the SNP will advocate ending that Union; a position that would trade significant union benefits for an irrationaa risky gamble on volatile oil revenues.

The benefits of the Union are many. In economic terms the United Kingdom provides its constituent territories with the opportunity to pool risks, revenues and resources. In addition, 300 years of market and institutional integration allow the free flow of labour, capital and knowledge to locations where returns are maximised. The UK economy is stronger as a result.

Scotland is now transcending its long history of emigration, declining traditional industries and the more recent global downturn in electronics. Today, Scotland exhibits its highest ever employment rate (near the top of the EU league), low unemployment, above trend growth rates and core strengths in financial and business services.

Rather than seeking to embrace the imperatives of interdependence in an increasingly global economy, the Nationalists perversely advocate putting up barriers at a time when the rest of the world is pulling them down.

Nevertheless the SNP have a perfect right to advocate independence. But what cannot go uncontested is their claim that the break up of Britain would be economically advantageous to Scotland.

The Nationalist’s economic rationale has changed over the years. In the 70s it was “Scotland’s Oil”, and in the 80s/90s “Scotland in Europe.” Today they stress the purported economic advantages of small nation states lubricated by the expected possession of oil. Neither argument is convincing.

A cursory glance at the high growth rates of leading US states and European regions explodes the economic argument for independence and the SNP myth that size is inversely related to economic performance. Tell that to California, or India and China!

By inviting the Scots to emulate decisions taken by the Irish or Norwegians close to a century ago, the Nationalists simply ignore the upheaval, uncertainty and decades of relative economic underperformance that followed.

The second strand of the Nationalists argument is the promise of 95% of North Sea oil revenues and an Oil Fund.

On Monday the Scottish Executive published its annual Government Expenditure and Revenues Scotland (GERS) report, for 2004/05.

This National Statistics publication reveals that in every year since devolution (1999) there has been a shortfall between total revenues, and total expenditure in Scotland, rising from £4bn to over £11bn. This sizeable gap is the current Union Dividend, a reversal of the position in the 1980s when Scotland ran budget surpluses sending a dividend to the rest of the UK.

But those days of both high oil prices and high production are gone. Hence, in 2004/05, even including all oil revenues, the shortfall still amounts to £6bn, 4.8% of Scottish GDP and above the 3% Maastricht criterion. Meeting that condition would require finding £2.25bn – almost the entire science, universities, and industry budget for Scotland.

Despite this, the SNP want to gamble Scotland’s future on the price of a barrel of oil. Revenues that are notoriously volatile, are in decline, and forecast to run out by 2030.

The Nationalists know this yet they advocate an Oil Fund, claiming it could amount to £90bn in ten years time. In truth there would be no ‘oil fund’. In an independent Scotland all the oil revenues would be required to plug the gap that would be left by abolishing the Union Dividend. Moreover, this ignores the need to fund the additional costs of SNP plans for the abolition of the council tax, reducing business and corporate taxes, higher education debt write offs and additional pension entitlements. And beyond this are the costs of establishing a new state.

Wishful thinking is no substitute for the facts. Yet the SNP continue to talk about an Oil Fund when they should be telling Scots how they would balance the books.

None of this is to suggest that Scotland’s economic performance or her fiscal arrangements cannot be improved. But the fallacy is to suggest that Scotland’s performance would be improved by secession, which of necessity would cause economic uncertainty. Companies based in Scotland would see their home market cut to one tenth of its current size, two regulatory regimes would inevitably follow and the SNP’s planned entry to the Euro would create a currency barrier within the present UK.

So, the choice for Scotland in May is between a demonstrable Union Dividend that has served us well for 300 years and a risky bet on unpredictable oil revenues.