Scottish independence: Life beyond oil in Texas and California

http://www.bbc.co.uk/news/uk-scotland-scotland-politics-28250713

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Whether or not Scotland votes for independence in the referendum in September, there is an attempt taking place to broaden out the economy and ensure it is not over reliant on the oil industry.

Two states in the USA, which have taken very different approaches to the same problem, could offer lessons for Scotland.

Texas

Texas suffered badly during the 1980s oil shocks.

Their whole economy was so dependent on the industry that falls in oil prices gave them the wake-up call they needed to do something radical.

They scrapped income tax.

People living here pay no state income tax at all, which is proving an attractive idea.

The plan was to attract companies and workers to grow the economy, and it seems to be working.

Five of the top ten fastest growing cities in the US are in Texas. Around 110 people move to Austin every single day.

In 1981 a quarter of the state's taxes came from the oil and gas industry but by 2012 that figure had dropped to 7%.

However, the oil and gas industry has not been getting smaller. With the fracking revolution it is undergoing a boom.

But other sectors of the economy have been getting comparatively bigger.

More than half the jobs created in the United States in the last seven years have been created in Texas, by companies like HID Global, who make secure ID cards for countries across the world.

The company has just moved its headquarters from California and opened a massive new factory on the outskirts of Austin.

Manager Jason Bohrer said the thought of their workforce not having to pay income tax struck a chord.

"Undoubtedly it's a component as it allows our employees to live at a rate that's difficult in other states that assess a state income tax," he said.

Doing something similar in an independent Scotland could solve the issues around the relatively low numbers in the working age population, and broaden out the economy so that government takes in more taxes from industries other than oil and gas.

However, lowering taxes is not without a cost.

VAT and property taxes, which are seen to disproportionately affect the poor, are higher and the state spends a lot less on public services.

Regina Rogoff runs the People's Community Clinic in Austin, which gets no direct state funding and relies on charitable giving.

"Nobody loves taxes, but people want the roads paved, and they want good schools," she said.

"There's something wrong when fully 25% of our population in Texas is not even in the queue to get healthcare and so that's the challenge we have: how do we make sure that we are not leaving such a high percentage of our population just out in the cold?"

Although it is certainly tough for those with less money to spend on healthcare and education, low taxes are part of the Texan DNA, and so many people are now being drawn in from elsewhere in the United States that neighbouring states are having to follow suit.

If an independent Scotland were to do something similar, it would have a big impact on the rest of the UK too.

California

On the West coast of America they have taken a very different approach to life beyond oil.

It is surprising to many to think of California's economy being linked to oil at all, but it one of the top four oil producing states in America.

At the peak of the industry in 1985 it was producing one billion barrels a day, but as production dipped the state refocused its efforts on alternative sources of power.

Californians have a lot of pretty obvious reasons be grateful for the sun: beautiful surf, golden beaches and ripening vines.

There is another reason too: they are the world leaders in renewable solar power.

More than 50,000 people are now employed in high skilled jobs in the solar industry, which has become one of the driving forces of the economic recovery.

The state gives a tax rebate to people who install solar panels on their roof, and hundreds of thousands of homes and businesses have had panels installed.

The federal government in Washington funds some of the installation costs, but in two years' time that funding will come to an end.

In California, just like in Scotland, they are finding it difficult to have a renewable industry without some kind of government funding.

Brad Heavner, from the California Solar Energy Industries Association said: "We're still dependant on that federal tax credit and if that were to go away tomorrow it would be big trouble for the industry.

"So we have two and half years before that expires to further drive down costs so that we'll be able to survive with that subsidy."

But he added that, thanks to huge amounts of cheap imported solar panels and technical advances, they will be ready to compete.

"We've reached the economy of scale that will allow us to continue to produce cheap solar panels," he told me.

In fact the costs of solar panels have more than halved over the past five years, with tons of cheap solar panels being shipped into San Francisco bay.

The state has also decided that 33% of all the energy has to come from renewables by 2020, which has meant the world's largest solar ranches springing up in California's deserts.

But even though it has been getting cheaper to buy solar technology, it has not been getting cheaper to use electricity.

Prof Severin Borenstein, from the Energy Institute at the University of California, Berkeley, said the state has one of the highest electricity prices in the US.

"Right now there's no question that renewable power costs more than conventional power, if you don't count the environmental costs.

"So as you put more renewable power onto the grid it does drive up the cost. The cheapest places in the country are the places that are burning a lot of coal."

California's mature solar industry shows that renewables can provide a big economic boost and can reach the tipping point of surviving without government funding, which is the long-term goal of Scotland's rapidly growing wind and wave industries.

But if Scotland wants to follow California's lead, a lot of technical developments would be needed.

Scotland's renewable industry is currently subsidised by utility users across the UK.

If that extra funding was to be removed in an independent Scotland, the extra costs of renewable power may well be added onto Scottish bills.