Westminster and the Big Lie about Scotland’s Oil

WESTMINSTER’S ‘mismanagement’ of oil since the price slump two years ago has cost Scotland tens of billions of pounds and is being falsely used to attack independence, a leading think tank has claimed ahead of the publication of the nation’s annual balance sheet.

Scotland would be an economic powerhouse if UK ministers had not mishandled North Sea wealth since the start of the oil crisis, Business for Scotland (BFS) said.

BFS said that since the crash in oil prices in 2015 when the price of a barrel more than halved, Norway has made nearly £29.33bn in oil and gas revenues, while the UK lost almost £22.8m.

Pro-independence BFS said its report showed that without the UK Government’s mishandling of the oil and gas industry, “Scotland would run a significant fiscal surplus”.

Using detailed oil price research since the price crash – which saw tens of thousands of jobs axed – BFS contrasted the North Sea tax regimes of the Norwegian and UK governments.

The findings come ahead of this week’s release of the Government Expenditure and Revenue Scotland (GERS) figures – the annual estimate of the Scottish economy.

GERS figures show the ‘net fiscal balance’ for Scotland – the difference between public sector expenditure and public sector revenue.

BFS said the findings, which are due out on Wednesday, are expected to show Scotland as part of Britain running a bigger deficit that the rest of the UK.

However, BFS claimed the UK Government’s failure to manage Scotland’s oil was being falsely used to attack the Scottish economy and the case for independence.

Commenting on the report, Gordon MacIntyre-Kemp, BFS chief executive, said: “It is deeply ironic that the UK government’s mismanagement of oil and gas taxation removes billions in revenues from Scotland’s national accounts, creating a fiscal deficit which they then present as their key economic argument for maintaining the Union.”

BFS also claimed Westminster had squandered resources on tax advantages for oil corporations rather than protecting jobs since the crisis began.

Oil giant Shell was made to pay taxes in each of the 24 countries where it extracts oil and gas – apart from the UK – since the oil price drop, the BFS research states.

It added that the UK also gave Shell £179m in tax rebates, while the multinational paid Norway £4.6bn.

A further £342m was handed out in tax rebates to BP during the same period, the report said.

In a detailed study of oil price research, it said: “It’s the UK government’s oil and gas policies and not the oil price alone that have led to Scotland’s accounts showing a deficit.”

BFS said that in the two years since the oil price dropped, the Norwegian government generated over £29.33bn in oil and gas revenues whilst the UK government is predicting it will lose £22.8million.

BFS claimed that Westminster gave tax rebates to large oil companies to decommission rigs and to explore for new oil fields.

However, it said Norway kept taxation levels on oil and gas at 78 per cent and drew on its oil revenue driven sovereign wealth fund to help workers who lost their jobs rather than subsidise oil companies.

Scotland would have had a multi-billion surplus if the UK Government had adopted the same policy as that of its counterparts in Norway, it claimed.

BFS said that “compared to the UK Government, the Norwegian approach to oil and gas resource governance has been extremely competent. It avoids the need to cut spending having protected their budget from oil price volatility and is focused on channelling oil revenues to the benefit of the public good, not bailing out large oil companies”.

The report added: “It is the UK Government’s policies that have created Scotland’s deficit and they have protected big corporations’ profits and their shareholders’ dividends whilst failing to adequately protect North Sea workers who have lost their jobs.”

The findings also included a submission from Ingrid Rasmussen, deputy director general of the Norwegian royal ministry of finance, who set out why her government did not need to reduce taxes on oil production.

Rasmussen said: “The Norwegian petroleum policy aims at ensuring a reasonable public share of the resource rent accruing from petroleum production, and at the same time extract profitable resources.

“Stable and predictable framework conditions for the companies is an important consideration in policy design. Norway did not increase the tax rate when the oil price increased. Correspondingly, the petroleum tax was not reduced when prices fell.”

The report suggests that an independent Scotland could thrive if it followed the Norwegian approach to oil and gas.

In conclusion, BFS said: “GERS therefore demonstrates the core strengths of Scotland’s economy and the weakness in revenues caused by being subject to UK Government policy.

“It would not be unreasonable to add Norway’s £11bn revenues and state that would have been possible as an independent nation.”

It added: “The GERS figures will on Wednesday probably show Scotland as part of the UK running a bigger deficit that the rest of the UK, of course it will, UK Government policy has deliberately removed one of Scotland key revenue streams.”

Last night, an SNP politician from an area of Scotland severely hit by job losses in the oil industry crisis welcomed the BFS findings.

SNP Aberdeenshire East MSP Gillian Martin said: “It’s no secret that oil and gas revenues have been mismanaged over decades by the UK government.

“The Tories were happy to use Scotland’s oil industry as a cash cow when it suited them, but in the industry’s time of need in recent years, they have idled while thousands of jobs have been lost.

“They’ve squandered billions in revenues instead of investing wisely in Scotland’s future.”

A Scottish Government spokesperson added: “Oil and gas production has generated around £330 billion in tax revenues for the UK exchequer over the last five decades.

“It is clear the UK Government missed the opportunity to manage these resources properly and ensure they provided a lasting benefit to the UK and Scotland, while Norway on the other hand set up an oil fund now valued at over £750 billion.”

However, Scottish Conservative shadow finance secretary Murdo Fraser, hitting back, said the industry’s crisis had wrecked the case for independence.

He said: “Pro-independence campaigners need to make up their mind on what their message is on North Sea oil.

“SNP politicians spent many years calling for cuts in the tax burden on oil to help recovery and yet here we see their fellow travellers in Business for Scotland rubbishing that very policy response.

“The uncomfortable fact remains for advocates of independence that the collapse of oil reserves means an independent Scotland would face a very substantial blackhole.”

However, a UK Government spokesperson disputed the BFS claims that Westminster ministers had mismanaged oil and gas.

The spokesperson said: “These accusations are simply false. The oil and gas sector has faced exceptionally challenging conditions but continues to deliver significant economic benefits for Scotland and the UK as a whole by supporting around 300,000 jobs and providing energy security.

“The UK Government’s priority has been to maximise the long term economic benefits of the sector, including decommissioning, and has provided fiscal support worth £2.3bn to safeguard the future of this vital national industry.”

Source: www.heraldscotland.com