Campaigners and politicians challenge Scottish and UK Government consensus on oil tax cuts


Scottish finance minister claims North sea oil tax cuts “long overdue”

“THERE is a deeply misguided consensus” in cutting taxes on oil companies due to low prices, according to Patrick Harvie, Green MSP, in the wake of chancellor George Osborne’s budget announcement.

While George Osborne and the Scottish Government support swingeing cuts to North Sea taxes, the Green Party and environmental campaigners have criticised the move.

Petroleum Revenue Tax will be reduced from 50 per cent to 35 per cent, while the chancellor cut the supplementary charge on oil transactions from 30 to 20 per cent.

Harvie, co-convenor of the Scottish Greens, said the rush to cut taxes on North Sea oil was not the right way to tackle the problem, as an energy shift to green renewables was needed for the long-term stability of the economy and sustainability of the planet.

“There is a deeply misguided consensus from both governments on trying to flush out every last drop of oil despite our climate commitments,” Harvie told CommonSpace, “but further reducing public income from the North Sea only makes it harder for governments to invest in the low-carbon alternatives to fossil fuels.”

Representatives of the North Sea oil industry, Oil & Gas UK, welcomed the decision, saying that Osborne had made a “decisive move to restructure the North Sea tax regime to promote investment in our considerable oil and gas resource”.

Scottish finance minister John Swinney described Osborne’s oil tax cut as “long overdue”.

“Measures to safeguard the North Sea are a step in the right direction for our oil and gas sector,” Swinney added.

Last week Swinney said the UK Government should create a “permanent shift” in its budget to a low-tax North Sea oil regime.

The support from the UK and Scottish Government to cut oil taxes comes as ministers on both sides of the border scramble to deal with a collapse in oil prices to less than $50 a barrel.

The Office for Budget Responsibility cut its oil revenue forecasts on Wednesday by PS9.6bn over the next five years. Labour has claimed there is now a PS12.7bn “black hole” in the SNP’s plans for full fiscal autonomy, with reductions in oil revenue significantly hitting Scotland’s overall revenue contribution to the public purse.

At First Minister’s Questions Nicola Sturgeon hit back, claiming that fiscal autonomy gives Scotland the power to improve its national economy.

Friends of the Earth Scotland director Richard Dixon condemned the tax cut, saying that instead “the UK and Scottish Governments should work together to lead a serious discussion on how we plan the transition from fossil fuel jobs to renewable energy jobs”.

Dixon added: “With climate indicators flashing red, and growing calls to divest from gas and oil, the chancellor should be pulling the plug on fossil fuels, instead of propping it up.

“Clean, secure renewable power should be at the heart of future energy policy, rather than an afterthought.”

Jim Sillars, former SNP MP and prominent campaigner in the campaign for independence last year, said he was in favour of taking advantage of Scotland’s oil resources, but he favoured a nationalised “Scottish National Oil Corporation”.

“The basic problem is that very few in Scotland know anything about the oil industry – how many fields, what do the fields produce, what is the level of investment, what is the pattern of ownership, and so on.

“If Scotland is to get to grips with this industry and know what policies to pursue in the national interest, as distinct from the policies the oil companies tell us are needed, we require to create a Scottish National Oil Corporation – we are probably the only nation that doesn’t have one.”

Sillars said that a nationalised oil company would take shares in all of the existing oil companies to “open up a window” for the government to understand north sea oil.

“It is not enough, in terms of the national interest, for us to receive just taxes from the industry – we need to get a hold of the black stuff itself,” Sillars added.

The Scottish Government proposed devolution of oil and gas in its submission to the Smith Commission consultation on more devolved powers for Scotland. This was excluded from the final agreement.

Eighty per cent of world oil supplies are owned by governments, up from 20 per cent in the 1970s.

The UK Government is one of the few worldwide not to have an oil fund in place. The Norwegian oil fund is worth trillions of dollars and funds Norwegian state pensions. The oil fund has made loans to the World Bank in the past.

Picture courtesy of Stig Nygaard