Political football

Author Toby Shelley

Oil revenues were a major battleground between pro-independence and unionist campaigners ahead of September’s Scottish referendum. Pick your forecast to determine whether an independent Scotland would have the per capita income of Monaco or Mali.

Oil revenues were a major battleground between pro-independence and unionist campaigners ahead of September’s Scottish referendum. Pick your forecast to determine whether an independent Scotland would have the per capita income of Monaco or Mali.

Five months later and Westminster’s cross-party consensus and the Scottish Nationalist Party (SNP) administration in Edinburgh continue to skirmish over the North Sea.

The Scottish secretary — that’s the Westminster minister responsible for Scotland —Alistair Carmichael took himself off to Aberdeen this week, ostensibly to discuss a tax relief package announced in early December and additional support that the London government might offer the industry in a $50/bl environment.

His department duly issued a press release — a UK government press release, not a Conservative Party press release, note — that was short on promises of fiscal beneficence but very long on SNP bashing.

First a gloat: “The drop in prices would have seen an £18.6bn black hole in the Scottish government’s assumptions on oil prices — meaning that the tax revenues on alcohol and tobacco in Scotland would put more into an independent Scotland’s budget than oil.”

Then a dig: “I am in Aberdeen today and the energy secretary is here next week… The [Scottish government’s] first minister’s plan to come to Aberdeen next month is not good enough.”

Absolved of fiscal responsibility by losing the referendum vote, the SNP was able to snipe back — in its turn using a (Scottish) government website to make political points. “Because of the mismanagement of oil and gas fiscal policy by the UK government, challenges remain and we must tackle the ongoing cost pressures and the fall in oil prices head on.”

Free of the power to tax and spend on oil, the Scottish government’s energy minister Fergus Ewing courted the industry with calls on London to enact an investment allowance for fields with higher development costs, scrap a 2011 supplementary charge, and introduce an exploration tax credit.

The last measure alone would boost investment by £20bn-£37bn/year, he claimed, rather more than the paltry £90mn/year tax boost that Deloitte estimates that the December autumn statement is worth to the industry.

Lobby group Oil and Gas UK (OGUK) is never slow to insist on the need for lower taxation and so it was no surprise that it commented: “Sharply falling oil prices are now adding to the significant challenges the UK offshore oil and gas industry was already facing. The current tax regime is one such challenge and a key factor for companies making decisions on investment and activity.” The small change promised in the autumn statement “is not enough and a significant reduction in the headline rate is required”, it added.

Caught between the deficit reduction priorities of London and the impotence of Edinburgh, OGUK members will be waiting a while.

For more information please contact OilBlog@argusmedia.com

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