SCOTLAND could follow the example of Ireland in setting up a sovereign wealth fund by setting aside "windfall" money for the future, an expert has suggested.

Professor Paul de Leeuw, director of the Robert Gordon University Energy Transition Institute, said while Scotland could not match the scale of the Irish investment, it could start putting away funding for the future by using one-off money.

He pointed to the example of the £700 million recently generated from the ScotWind offshore wind leasing round sale as an example and said the creation of such a fund for Scotland was a question of “surplus, not independence”.

Ireland has announced it is planning to set up a sovereign wealth fund next year, which aims to channel around €65 billion in budget surpluses expected between now and 2025 into tackling long-term pressures such as pensions.

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The boom has come after the country attracted US tech giants such as Apple and Google to set up bases through low tax rates, with one area of Dublin nicknamed "Silicon Docks". 

But Ireland’s finance minister Michael McGrath has cautioned the soaring revenue being generated from corporation tax receipts could be “potentially transitory”.

De Leeuw said: “Ireland is in a unique position – it is of a similar population size to Scotland but of course it is an independent country and it has a period of budget surpluses – so that is money there to be spent, which is always a good position to be in.

“So basically, what are you going to do with the surpluses – they have actually been putting it away anyhow in the previous years, but now because of all the surplus that is coming out in the next couple of years, it does make sense to put in into a sovereign wealth fund.”

A number of countries have some form of sovereign wealth fund, with the most well known in Norway reaching $1.4 trillion generated from oil and gas revenues and investment.

De Leeuw said they could be used by countries for the benefit of future generations, help take out economic “bumps” such as those caused by the financial crisis, Brexit and Covid, as well as form strategic or national initiatives.

He said Scotland had a different starting point to Ireland as it records a budget deficit in the UK, rather than surplus, making it more difficult to set up.

But he added: “There are events in Scotland where there is money becoming available which wasn’t planned for, particularly in the recent past when Scotland issued the ScotWind licences – quite a lot of money became available as a one-off.

"One of the arguments at the time was to use that one-off money – which otherwise it would not have got – to do exactly what Ireland is doing now, on a smaller scale, but actually start putting something away for the future.

“But it only works if you have either money becoming available which you didn’t expect or surpluses which you can use for the future – if you have a deficit, it is very difficult to create this.”

He added: “I don’t think it’s an independence question, I think it is a surplus question.

“It is a question around 'is a sovereign wealth fund helpful' and the answer is yes, it really is. So any country that can create a sovereign wealth fund either big or large will benefit from it.

“Should Scotland have it? Yes, but then if you have to take money away from other activities, then that becomes a political choice and that is the tricky bit.

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“Is it going to be used for day-to-day priorities or do you put it away for the longer term? That is a political discussion.”

In the third paper setting out its vision for independence, the Scottish Government outlined plans for a "Building a New Scotland Fund", using oil and gas revenues for a “green, fair and net zero economy” in the first decade after leaving the UK.

“Choices over the use of oil revenues following the Building a New Scotland Fund would be for the government of the day, but the Scottish Government would retain the option of diverting revenues into a sovereign wealth fund,” it added.

A Scottish Government spokesperson said: “Our world leading ScotWind leasing round is a key part of supporting Scotland’s just transition to a net zero economy.

"We strongly welcome commitments made by the successful developers to invest an average projection of £1.4 billion in the Scottish supply chain per project, which equates to more than £28 billion across the 20 projects and will help create thousands of new jobs.”